QNB Group: Margin Strength Carries H1 2026 Through a Turbulent Half-Year

•      A wider net interest margin did the heavy lifting once again, lifting net interest income by 9% even though interest income was almost flat.

•      QNB Group’s share price ended the first half down 8%, but stabilised in the second quarter after a 9% slide in Q1.

•      Net profit grew 3%. A stronger margin, double-digit fee growth and a lower loan impairment charge more than offset a sharply higher hyperinflation loss and tax bill.

Over the first half of 2026, QNB Group’s stock price declined by 8%, starting the year at 18.66 riyals per share and closing at 17.25 riyals per share on 30 June. Almost all of that decline came in the first quarter; during the second quarter the stock edged up 1% from 17.04 riyals, a modest but clear break from the sell-off that dominated the opening months of the year. The QSE index was down 4.8% year to date, ending June at 10,241.75 points.

Here are the key numbers:

•      Interest Income: 62,199 million QAR vs. 61,369 million QAR in H1 2025 (a 1% YoY increase).

•      Net Interest Income: 18,893 million QAR vs. 17,264 million QAR in H1 2025 (a 9% YoY increase).

•      Operating Income: 23,687 million QAR vs. 21,465 million QAR in H1 2025 (a 10% YoY increase).

•      Net Profit: 8,850 million QAR vs. 8,564 million QAR in H1 2025 (a 3% YoY increase).

•      Earnings per Share: 0.89 QAR/share vs. 0.85 QAR/share in H1 2025 (a 5% YoY increase).

A half-year defined by the macro backdrop

The operating environment deteriorated as the half progressed. The conflict in the Gulf region, which began late in the first quarter, disrupted economic activity across the country and pushed the IMF to pencil in a real GDP contraction of close to 8% for Qatar in 2026, followed by a strong recovery in 2027 as new LNG capacity comes online. The Qatar Central Bank responded with a support package that included loan deferrals, while reiterating that the banking system is operating from a position of strength on liquidity, capital and provisioning coverage.

On the rates side, the picture is largely unchanged from the first quarter. After three cuts in 2025, the Federal Reserve continues to signal a single cut in 2026, with the actual path remaining data-dependent. The Qatari central bank, in line with its GCC peers, continues to track Fed policy closely. The practical consequence for QNB is unchanged: funding costs have fallen faster than asset yields.

The margin remains the engine

The net interest margin improved from 28.1% in the first half of 2025 to 30.4%. Interest expense fell by 2% to 43,306 million QAR while interest income edged up 1%, and the combination lifted net interest income by 9%. Translated into the profit bridge, the margin improvement was worth 1,396 million QAR — by far the single largest positive contributor to net profit. Interest income itself added a further 234 million QAR.

Management has guided to a full-year group margin of 260 to 265 basis points and now expects to land at the lower end of that range, as the bank deliberately shifts short-term foreign deposits into longer-dated funding. That is a modest headwind to margin but a meaningful improvement in funding stability.

Fees, investment income and a rare tailwind from provisions

Net fee and commission income rose 18% to 2,871 million QAR, adding 434.9 million QAR to net profit and making it the second-largest positive driver in the bridge after the margin. Management described the fee run rate as broadly sustainable, with only credit card fees in consumer banking under mild pressure. Income from investment securities climbed 42% to 484 million QAR, contributing a further 142.4 million QAR.

The most notable reversal came from credit costs. Net expected credit losses on loans and advances fell 12% to 3,875 million QAR, and after accounting for higher charges on investment securities, other financial assets and other provisions, the impairment and provisioning line delivered a positive 100.0 million QAR contribution to net profit. That is a marked change of direction: in the first quarter alone, the same line had subtracted 66 million QAR from net profit. The group’s cost of risk stands at 74 basis points against guidance of 75 to 80 basis points, with the non-performing loan ratio at 2.5% and stage 3 coverage at 99%.

Where the profit leaked

Two blocks of costs absorbed most of the upside. Staff expenses grew 14% to 3,027 million QAR, reducing net profit by 382.0 million QAR. Even so, the cost-to-income ratio held at 24.1%, still among the best of any large financial institution in the Middle East and Africa.

The larger drag sits in the combined tax and other items, which cut 1,638.1 million QAR from net profit. The dominant component is the net monetary loss arising from hyperinflation, which widened from 1,513 million QAR to 2,416 million QAR — a 903.3 million QAR hit that reflects the group’s exposure to Turkey. Income tax expense added a further 403.0 million QAR of pressure as the effective tax rate rose to 23.1% from 20.8%, other expenses cost 435.6 million QAR, and foreign exchange gains slipped by 55.8 million QAR. Partial offsets came from the share of results of associates, up 32% and worth 93.6 million QAR, and other operating income at 71.8 million QAR.

Put differently: QNB generated an 11% increase in pre-provision operating income and converted it into 3% net profit growth. The gap between those two numbers is the cost of operating in an inflationary and geopolitically stressed environment, not a weakening of the underlying franchise.

Balance sheet and capital return

Loans and advances grew 8% year on year to 1.04 trillion QAR, though growth in the domestic book has been slow, at just 2% year to date, as transactions were postponed during the conflict. Customer deposits rose 4% to 973 billion QAR and local franchise deposits were up 10% year to date, helped by resident depositors and the repatriation of government-related funds. Total equity increased 10% to 130 billion QAR and the capital adequacy ratio stood at 19.8%, comfortably above both QCB and Basel III reform requirements.

The bank did not declare an interim dividend, returning to an annual distribution while keeping its payout policy unchanged. Its buyback programme had absorbed 136.3 million shares at a cost of 2.3 billion QAR by 30 June and is expected to complete in the third or fourth quarter, at which point a new programme may be put to the board. Full-year guidance was left untouched: profit growth of 5% to 7% and balance sheet growth of 6% to 8%.

For more comprehensive information, please refer to the reliable financial information source, http://sahmik.com.