Doha Bank's H1 2024 Report: Net Profit Rises Despite Higher Finance Costs, Driven by Increased Interest Income and Other Revenue Sources
• The company's interest income grew by 18% year over year, but the net interest income margin experienced a substantial decline.
• Doha Bank’s shares declined as much as 20% during H1 2024.
• Net profit was pushed up by investment income, foreign exchange gains and reduced impairments.
Doha Bank's stock showed a notable decline throughout H1 2024. Beginning at 1.83 riyals per share, it closed the quarter at 1.46 riyals per share, marking a substantial 20% decline in value. In comparison, the QSE index dropped by approximately 8% over the same period. This indicates that the company's stock performance was below the market average. Over the same period, insiders purchased the company’s stocks amounting to 3.2 million QAR.
Here are the key numbers:
● Interest Income: 3,101 million QAR vs. 2,628 million QAR in H1 2024 (an 18% YoY increase).
● Net Interest Income: 948 million QAR vs. 1,021 million QAR in H1 2024 (a 4% YoY decrease).
● Net Profit: 432 million QAR vs. 392 million QAR in H1 2024 (a 10% YoY increase).
● Earnings per Share: 0.14 QAR/share vs. 0.13 QAR/share in H1 2024 (an 8% YoY increase).
Doha Bank witnessed a significant contraction in its net interest margin, experiencing a decline from 39% in H1 2023 to 31%. This notable reduction can be ascribed to the repercussions of escalating interest rates, leading to heightened borrowing costs that surpass the growth of interest income. The initiation of an upward trajectory in interest rates by major central banks towards the end of Q1 2022, persisting until Q2 2023, along with subsequent measures taken by central banks in emerging economies, played a pivotal role in this scenario.
Despite a substantial increase in interest income, the unfavorable trend hampered the company's ability to translate it into a corresponding uptick in profit. The escalating borrowing expenses posed a formidable challenge to Doha Bank's profitability during this period. While the positive impact on net profit resulting from the surge in interest income amounted to 184 million QAR, this gain was largely offset by a decline in net interest margin, exerting an adverse impact on the net profit, which stood at 230 million QAR.
Against the backdrop of a challenging macroeconomic environment and mounting concerns regarding an impending recession, the banking sector faced heightened credit risk. However, Doha Bank strategically opted to reduce impairments to a bit lower amount than in H1 2023.
The impact of this decision became evident in the company's financial performance for H1 2024, showcasing a positive impact on profit amounting to 28 million QAR compared to the previous year.
During H1 2024, the company increased gains from investment activities. This positive shift had a significant impact on profitability, contributing a remarkable amount of 23 million QAR. It is evident that the management's efforts in crafting an effective investment portfolio paid off handsomely. Given this success, it is imperative for the management to adopt a vigilant approach and continually monitor the performance of the investment portfolio. Market conditions can be dynamic and subject to rapid changes, necessitating proactive actions to restructure the portfolio accordingly. By remaining responsive to market fluctuations, the company can sustain its positive impact on profitability and capitalize on emerging opportunities, reinforcing its financial strength and long-term sustainability.
For more comprehensive information, please refer to the reliable financial information source, http://sahmik.com.