Growing Ethically: Q&A with Qatar National Bank Acting Group CEO Abdulla Mubarak Al-Khalifa

Abdulla Mubarak Al-Khalifa, Acting Group CEO Qatar National Bank (QNB), talks about the bank’s performance, compliance and expansion plans.

Global Finance: What were the main drivers behind QNB’s increase in net profits in 2018?

Abdulla Mubarak Al-Khalifa: The group experienced the highest profit in its history, with a 5% growth in net profit to $3.8 billion in 2018. This was driven by operating income, which increased to around $6.7 billion, up by 7%. Moreover, we continue to maintain high asset quality, with a nonperforming loans ratio at 1.9% and a cost-to-income ratio at 25.8%—both among the best for financial institutions in the region.

The global macroeconomic backdrop has been broadly supportive of QNB, despite headwinds in some markets. Egypt’s economy outperformed, supported by increased investments and exports; while Turkey experienced pressures on inflation, currency and its fiscal position. We continued to experience strong growth in our international network. For example, in Egypt and Turkey, net profits increased by 18% and 13%, respectively, in USD terms year-on-year.

GF: QNB’s capital-adequacy ratio was very high at end 2018. Is this in preparation for further acquisitions, or is it just more buffer?

Al-Khalifa: Our approach has always been to ensure our capital-adequacy ratio is above the Qatar Central Bank [QCB] and Basel III minimum requirements. This allows us to sustain our future growth and provides capital cushion against any stress scenarios. The minimum capital requirement, as per QCB, for 2019, is 16%; QNB reported a capital ratio of 19% for the year ended December 2018.

GF: The aim is to become a global bank by 2030. Does this mean a bigger footprint in developed markets going forward? What potential new markets is QNB looking at?

Al-Khalifa: Today, QNB Group is positioned as the gateway to the Middle East and Africa, facilitating economic growth as a financial intermediary. We stand out as a strong international bank, operating as a full-service financial institution in our core markets of Qatar, Turkey and Egypt, and as a wholesale commercial bank across a range of frontier and emerging markets in MEASEA [the Middle East, Africa and Southeast Asia]. We also have a growing presence in more-developed economies. We will continue to establish business origination centers in both developed and high-potential developing markets that complement our regional hubs. We plan to open a branch in Hong Kong and have already submitted our license application to the Hong Kong Monetary Authority.

GF: The bank decided in 2018 to increase its foreign-ownership limit. What was the rationale, and has foreign ownership increased?

Al-Khalifa: The increase in the foreign-ownership limit of domestically listed issuers is one of the key initiatives espoused by the Qatar Stock Exchange. At QNB, we continue to drive to augment our status as a global financial institution. Consequently, the shareholders in 2018 approved increasing the foreign-ownership limit from 25% to 49% and also the single-ownership limit from 2% to 5%. This allows us to attract a broader spectrum of institutional and individual investors, which we are already witnessing.

GF: Given that QNB is already diversified internationally, there must be enormous pressure on risk management, oversight and compliance. How is the bank managing this?

Al-Khalifa: In 2018, we continued to invest in governance standards, frameworks and tools to enhance our risk management. These range from increasing the number and proficiency of credit risk staff to improved risk modeling to new enhancements in cybersecurity.

We have zero tolerance for breaches of laws and regulations and consistently strive for the highest levels of ethical and professional behavior. We see good governance as vital to our prosperity and reputation, especially as we continue to expand into new jurisdictions. We strive to create a risk culture in which every employee is responsible for potential risks in the course of his or her work, ultimately protecting the bank and delivering sustainable value to all our stakeholders.