Half Yearly Report

Commercial Bank of Qatar

Financial Results for the half-year ended 30 June 2013

Commercial Bank delivers solid half-year net profit of QAR 1.024 billion

Wednesday 23 July 2013, Doha, Qatar: Commercial Bank of Qatar ("Commercial Bank" or "the Bank") announces its financial results for the half-year ended 30 June 2013. The Bank delivered a solid first half net profit of QAR 1.024billion, up 1% against the same period in 2012. Net profit for the second quarter of 2013 was up by 2.5% to QAR 518 million compared with the first quarter of 2013.

Key financial highlights

·; Net profit up 1% at QAR 1.024 billion

·; Total assets up 16% to QAR 85.4 billion

·; Customer loans and advances up 18% at QAR 52.0 billion

·; Customers' deposits up 16% to QAR 46.9 billion

·; Earnings per share of QAR 4.14 compared with QAR 4.11

His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of Commercial Bank said, "Commercial Bank, through both its Retail and Wholesale businesses, is positioned to capture the opportunities offered by Qatar's rapidly changing economy as it transitions away from its traditional hydrocarbon-based growth. The Bank's acquisition of Alternatifbank in Turkey underpins our strategy of diversifying our revenue streams and will facilitate growth for all of the banks in the Commercial Bank Alliance. We look forward to Alternatifbank making a positive contribution to Commercial Bank's growth strategy."

Financial Performance

Mr. Hussain Al Fardan, Commercial Bank's Managing Director, added "Commercial Bank delivered a solid set of results in the second quarter of the year continuing the growth seen in its underlying business during the first quarter. Despite the continued competitiveness of Qatar's banking sector, the Bank improved its profitability in the second quarter by 2.5% compared with the first quarter of the year, and has grown lending and deposits by 7% and 13%, respectively, since the end of last year."

Net operating income increased by 14% to QAR 1.6 billion in the first half of 2013, up from QAR 1.4 billion achieved in the same period in 2012.

Net interest income was QAR 914 million for the half-year ended 30 June 2013, 3% lower than in the same period in 2012, reflecting growth in lending to customers offset by the impact of a reduction in the net interest margin which declined to 2.54% in the second quarter of 2013 compared with 2.64% forthe first quarter. Although the average cost of funds for both deposits and other borrowed funds reduced in the period, a further decline in average lending yields due to market pricing pressure led to the lower net interest margin.

Non-interest income was up 47% to QAR 684 million in the first half of 2013 compared with QAR 464 million for the same period in 2012. The higher level of non-interest income reflected improved net fee and commission income up by 17% mainly due to higher levels of loan-related and trade service fee income, an increase of 8% in foreign exchange income and the realisation of gains from the Bank's investment portfolio which were up by QAR 122 million compared with the first half of 2012.

The Bank's total operating expenses were up by 11% to QAR 503 million in 2013 compared with QAR 455 million in the six months ended 30 June 2012. Staff costs were 7% higher than the first half of 2012, and up by 3% in the second quarter compared with the first quarter of 2013. General and Administrative expenses, and Depreciation, were also up reflecting investment made in the Bank's infrastructure.

The Bank's net provisions for loans and advances were QAR 194 million for the six months ended 30 June 2013, up from QAR 32 million provided in the same period for 2012. Net provisions and non-performing loans have been impacted in the second quarter of 2013 by a prudential provision taken on a domestic real estate loan; the first half of 2012 included the recovery of provisions of QAR 89 million. The non-performing loan ratio has increased to 3.49% at 30 June 2013 compared with 1.39% at the end of March 2013 due, mainly, to the newly provisioned domestic loan.

Provisions for impairment on the Bank's investment portfolio were QAR 21 million for the half-year ended 30 June 2013 compared with QAR 27 million in 2012.

Net profit was up 1% to QAR 1,024 million in the first half of 2013 from QAR 1,017 million for the same period in 2012 with the second quarter's profit also up, by 2.5%, compared with the first quarter of the year.

The Bank's total assets increased by 16% to QAR 85.4 billion at 30 June 2013 compared with QAR 73.6 billion at the end of June 2012, and up by 7% since the end of December 2012. The increase in total assets from the end of 2012 was due to growth of QAR 3.4 billion in lending to customers and QAR 1.2 billion in balances due from banks and financial institutions.

Loans and advances to customers were up by 18% to QAR 52.0 billion at 30 June 2013 compared with QAR 44.2 billion at the end of June 2012, and up by 7% from QAR 48.6 billion at 31 December 2012. The growth in lending since 30 June 2012 has been generated, mainly, in the Services, Commercial, Contracting and Real Estate Sectors across both the Wholesale and Retail businesses. Due from banks and financial institutions increased due to higher placements with, and lending to, banks.

Customers' deposits were QAR 46.9 billion at 30 June 2013, an increase of 16% compared with the end of June 2012 and up 13% since 31 December 2012, as the Bank continues to manage its balance sheet to optimise its funding mix and reduce cost of funds.

The Bank's capital position remains strong with the capital adequacy ratio at 15.7% as at 30 June 2013 compared with 17.0% at the end of 2012, well above the Qatar Central Bank's required minimum level of 10%.

On 18 July 2013, the Bank announced the completion of its acquisition of a 70.84% shareholding in Alternatifbank A.S. ("ABank") in Turkey from Anadolu Endustri Holding A.S. ("Anadolu"). The completion follows approvals from the regulators in Qatar and Turkey. Commercial Bank announced its intention to acquire a majority stake in ABank in March 2013. As part of the transaction, Commercial Bank will launch a mandatory tender offer to acquire the 4.16% of ABank's shares that remain in the public domain.

The transaction is based on two times the book value of ABank at 30 June 2013 and expands Commercial Bank's international footprint to four regional markets: Qatar, UAE, Oman and Turkey. Anadolu will retain a 25% stake in ABank in addition to board representation.

Andrew Stevens, Commercial Bank's Group Chief Executive Officer, said "The second quarter of the year has seen Commercial Bank continue to deliver against its strategy. The Qatari market remains highly competitive yet our strong and diversified funding base has enabled us to target new lending and income streams.

"Our affiliate banks, United Arab Bank and the National Bank of Oman, delivered good growth with a combined profit of QAR 146 million, up 18%, compared with the first half of 2012.

"The acquisition of ABank in Turkey will increase the scale of Commercial Bank's international operations and diversify its revenue streams generating long-term growth."

Associates

Commercial Bank's associates increased their contribution to the Bank's net profit by 18% to QAR 146 million in the first half of 2013 compared with QAR 124 million for the same period in 2012.

National Bank of Oman ("NBO") delivered a net profit after tax for the six months ended 30 June 2013 of OMR 18.8 million compared with OMR 19.9 million achieved in 2012.

Operating income at OMR 50.6 million was in line with the previous year and reflected higher net interest income, up 9%, to OMR 36.2 million due to growth in lending combined with a reduction in the cost of funds, offset by lower referral fee income following the regulatory changes to personal loans introduced by the Central Bank of Oman in May 2012.

Operating expenses increased by OMR 1.0 million to OMR 23.4 million for the first six months of 2013 due, mainly, to higher staff costs. The net impairment losses for 2013 were OMR 5.9 million, up from OMR 5.2 million in 2012, with the increase related to new general provisioning requirements on loans to banks.

Loans and advances to customers grew by 11.5% to OMR 2.08 billion at 30 June 2013 whilst customers' deposits were up by 14.2% to OMR 2.09 billion compared with the end June 2012.

United Arab Bank ("UAB") delivered a net profit of AED 260 million for the first six months of the year, an increase of35% from AED 193 million achieved in the same period in 2012. The increase in net profit reflected higher total operating income, which was up by 37% to AED 478 million, partially offset by increased operating expenses.

The increase in total operating income was due to higher net interest income up 36% to AED 353 million and an increase of 40% in non-interest income to AED 125 million reflecting growth in both Corporate and Retail businesses.

The provision for impairment of loans and advances was AED 72 million for the six month period in 2013 compared with AED 50 million in 2012, and continues to reflect a prudent and proactive approach to general provisioning adopted by UAB with regard to its management of risk and growing asset portfolio.

Loans and advances to customers grew by 38% to AED 13.25 billion at 30 June 2013 and customers' deposits were up 47% to AED 12.43 billion compared with 30 June 2012.

- END -

For more information please contact:

Mona Abdallah Jon Earl

Head of Corporate Communications Managing Director

Commercial Bank F T I Consulting

Tel: +974 4449 0169 Tel: +971 4 437 2104

Email: [email protected] Email: [email protected]

Notes to Editors

About Commercial Bank

Commercial Bank has total assets of QAR 85.4 billion as at 30 June 2013. As a full service commercial bank, the Bank offers a full range of corporate, retail and investment banking services as well as owning and operating exclusive Diners Club franchises in Qatar and Oman. The Bank's countrywide network includes 29 full service branches and 151 ATMs.

Profitable every year since incorporation in 1975, continual investment in technology and human capital, together with a strong capital base, provides a solid foundation for continued growth. A successful diversification strategy has expanded Commercial Bank's GCC footprint through strategic partnerships with associated banks, the National Bank of Oman (NBO) in Oman and United Arab Bank (UAB) in the UAE. NBO, the second largest bank in Oman with total assets of OMR 2.8 billion as at 30 June 2013, has 66 branches in Oman and 1 branch each in Egypt and in Abu Dhabi. UAB is headquartered in Sharjah, with total assets of AED 18.4 billion as at 30 June 2013, and operates 18 branches across the emirates in the UAE.

Commercial Bank enjoys strong credit ratings of (A) from Fitch, (A1) from Moody's and (A-) from Standard & Poor's. The Bank is listed on the Qatar Exchange and was the first Qatari bank to list its Global Depository Receipts (GDRs) as well as bonds on the London Stock Exchange. Additionally, Commercial Bank's Swiss Franc bond issuance in December 2010, listed on the SIX Swiss Exchange, was the first public bond issuance by a Qatari bank in Switzerland.

The Bank is dedicated to supporting Qatar's community and social infrastructure through Corporate Social Responsibility programmes and sponsorship of various events. Title sponsorship of the Commercial Bank Qatar Masters and the Grand Prix of Qatar Moto GP reflects the Bank's promotion of excellence in sports and its keen interest in enhancing Qatar's international sporting reputation. To reinforce Qatar's flourishing cultural environment, Commercial Bank is the strategic partner of the Katara Cultural Village. This collaboration symbolises the Bank's commitment to supporting cultural activities in Qatar and making the country a regional arts and cultural hub.

www.cbq.qa

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