QIB maintains healthy asset quality as NPL ratio improves

Asset quality of Qatar Islamic Bank (QIB) remains at healthy levels as the bank’s NPL ratio improved from 1.34 percent in 2020 to 1.28 percent in 2021, QNB Financial Services (QNBFS) has said in its recent company report.
QNBFS said, “QIB posts record-high bottom-line and beats our estimate on lower-than-expected provisions. The bank reported a net profit of QR1.03 billion in 4Q2021, exceeding our estimate of QR855.3 million, a variation of +20.4 percent.”
“The bank’s net profit gained by 21.4 percent year-on-year (YoY) and 10.8 percent sequentially. Net interest and investment income came in line at QR1.24 billion against our estimate of QR1.29 billion. Moreover, total net operating income was also in-line at QR1.16 billion against our estimate of QR1.19 billion,” the report said.
“Increase in costs offset the small growth in revenue YoY. Total revenue increased by only 1.2 percent YoY due to strong fees as net interest and investment income remained flattish. On the other hand, opex jumped 7 percent YoY, leading to flat net operating income,” it said.
As such, the report said, a 57.4 percent drop in provisions and impairments lead to a 21.4 percent increase in the bottom line. Sequentially, net profit increased by 10.8 percent due to a 56 percent drop in provisions and impairments as net operating income was subdued.
“Management proposed a higher-than-anticipated dividend per share (DPS), which is a positive surprise. The company proposed a DPS of QR0.575 per share beating our estimate of QR0.425 per share, which translates into a yield of 2.8 percent. Dividend payout came in at 41.5 percent for 2021,” the report said.
QIB remains cost-efficient and generated positive JAWS. The bank’s C/I ratio remains at strong levels although it slightly moved up from 18.9 percent in 4Q2020 to 19.9 percent in 4Q2021 (17.6 percent in 3Q2021). Moreover, in FY2021, QIB generated positive JAWS of 10.7 percent YoY, driven by cost containment and robust revenue growth.
Net loans ticked up sequentially. Net loans increased by 1 percent QoQ (+7.8 percent YoY) to QR128.4 billion, while deposits followed suit and climbed up by 1.8 percent to QR131.1 billion (+11 percent YoY).
“Net credit provisions dropped YoY and sequentially, which was a positive surprise. Net credit provisions declined 56.4 percent YoY (-52.9% sequentially) to QR131.7 million. Moreover, CoR decreased slightly from 105bps in FY2020 to 103bps in 2021. Capitalisation remains strong. The CAR remained robust at 18.9 percent,” the report said.
Given the impressive annual financial results for 2021, QNBFS said, “We maintain our price target of QR19.696 per share and Accumulate Rating for the time being on QIB.”Proposal of higher-than-anticipated cash dividend distribution to investors a positive surprise: QNBFS