2012 Moody's Ratings Review

Management Presentation2012

Management Presentation

Moody’s Investor Services

Contents

A: QIIB Overview and Strategy B: Qatar Economic / Banking Sector / Regulatory Updates C: Retail Banking D: Corporate Banking E: Investments F: Funding / Liquidity & Treasury G: Risk Management / Credit and Asset Quality H: Financial Performance / Capital

Appendices Appendix A: Risk Management Appendix B: Credit

2

A. QIIB Overview & Strategy

Sharia’ Board

Mission, Vision & Values

Mission

To be one of the most efficient Islamic Banks in Qatar and in the region, and the FIRST choice for customers, and to perform according to the best global standards

Vision

Customers: To fulfill our customers’ banking needs in compliance with Shari’a principles, through best banking practices and highest professional standards

Shareholders: To achieve fair and rewarding returns for our shareholders and depositors

Employees: To create a fair and motivating work environment for our employees

Responsibility: To be an effective corporate citizen and shoulder our responsibility to help develop our community and assist all our stakeholders

Values

Belonging: a sense of responsibility towards our customers, employees and shareholders and the Qatari society as a whole.

Distinction: Performance in accordance with best practices to realize full customer satisfaction.

Development: To enhance performance, evolve employees’ training, apply technological advances and reward distinct performance and team work.

Transparency: Ensure open and clear communications channels in regards to our performance.

Sound Planning: To manage effectively and gauge performance objectively.

Confidentiality and Information Security: In accordance with the highest professional standards

4

QIIB Overview

1997 2001 2001 2003 2005

Emiri Decree to establish QIIB and Opening of the Bank

Sponsor for Islamic Banking Conference

First credit card (M/C) issued and participation in WTO Doha

Shifted to new HQ in Grand Hamad

Issuance of Qatar Global Sukuk

Launch of Bank’s new logo

2006

Awarded Best Bank (SWIFT STP) by Wachovia Bank

Corporate Overview

1991

Equity participation, private equity, investment funds

Sukuk (Sharia-compliant bonds) investments

International finance and syndications

Large retail franchise with 15 branches; 16 branch approved by QCB

Strong brand; attracts and maintains diversified and loyal deposit base

Client segmentation to provide client-focused services

Maintain growth in distribution network Focus on sales and service quality

Major sectors served include real estate, government, oil & gas, commercial and contracting

Key partner of the public sector and continues to attract and maintain strong deposit base

Key products include: murabahah, musawamah, mudarabah, istisna, foreign trade finance and commerical finance

Retail Banking Corporate Banking Investments

Rating with Capital Intelligence

2008

5

2011 2012

Ratings assigned by Fitch and Moody’s

World Finance Award for Best Islamic Bank in Qatar

Shareholding

6

Nos Name % Ownership

1 Sheikh Thani Bin Abdullah Al-Thani Family * 22.6%

2 Qatar Investment Authority (QIA) ** 16.7%

3 Abdullah Mohammed Shmeisan Al Sada 1.7%

4 QNB Fund 3 1.0%

5 QNB Fund 4 0.9%

6 Ziad Hosny Zeidan 0.7%

Total Shareholding for top shareholders 43.6%

*Sheikh Thani Bin Abdullah Al-Thani Family holds their 22.6% stake via a series of 15 corporate entities holding between 1.1% to 1.6% each. Sheikh Thani is also the founder of the Bank, and the father of the current Chairman, Sheikh Dr Khalid bin Thani bin Abdullah Al-Thani.

** QIA is the principle investment arm of the government of Qatar.

Shareholding: Relationship

Key Shareholders

Close and long Links

Strong and established relationship

Involved in governance

and planning

Support development

and expansion

7

Board of Directors

Board of Directors

Date of Appointment: May 1996.Educational Qualifications: BA, MBA (USA), PhD (UK), Current Directorships: Qatar Islamic Insurance Company, Medical Care Group, ARCAPITA (Bahrain) and Ezdan Real Estate Company

H.E. Shk. Dr. khalid Bin Thani A. Al.ThaniChairman & Managing Director (Executive Director)

Dr. Yousuf Ahmed Al-Naama (Non Executive Director

H.E. Shk. Abdullah Bin Thani Bin Abdullah Al Thani Vice Chairman (Non Executive Director)

Date of Appointment: May 2002Educational Qualifications: BComm Current Directorships: Al Wefaq, Medical Care Group, Qatar Islamic Insurance Company and Ezdan Real Estate Company

H.E. Shk. Khalifa Bin Thani Bin Saud Al Thani Vice Chairman (Non Executive Director)

Date of Appointment: May 1996 Educational Qualifications: BA (Qatar) Current Directorships: Authority for Minors Affairs and Islamic Facilities Company

Mr. Abdullah Mohamed Abdul Raheem Al Emadi (Non Executive director)

Date of Appointment: Dec 2005Educational Qualifications: BBuss (Egypt) Current Directorships: Qatar Islamic Insurance Comp and Islamic Facilities Comp

Mr. Hisham Mustafa Mohammad Sahtari (Non Executive Director)

Date of Appointment: April 2008 Educational Qualifications: Bachelor of Architecture Current Directorships: Ezdan Real Estate Company

Date of Appointment: May 1996. Educational Qualifications: Ph.D (Law) Current Directorships: Islamic Securities Market (Qatar), Gulf Holding Company, Syrian Islamic Insurance Company and Syrian International Islamic Bank

Mr. Ali Abdul Rahman Al Hashmi (Non Executive Director)

Date of Appointment: Feb 2007Educational Qualifications: MBA (UK) Current Directorships: Makeen Holding, Islamic Securities Company and Ritaj

Mr. Abdullah Mohamed Saif Al Suwaidi (Non Executive Director)

Date of Appointment: April 2008 Educational Qualifications: Senior Matriculation Current Directorships: Qatar Islamic Insurance Company

Mr. Abdul Basit Ahmed Al Shaibei (Executive Director)

Date of Appointment: Jan 2009 Educational Qualifications: BBuss (USA) Current memberships in boards of directors: -Islamic Securities Company, Medical Care Group, and Gulf Cement Company

8

QFMA Requirement for independent directors:

• At least 3 members of the Board should be independent

Achieve a growth rate in financing assets and investments of 15% - 20% per annum for the next 5 years Achieve a growth rate in customer deposits of 15% - 18% per annum for the next 5 years Achieve a net return (payable dividend) on paid-up capital of 40% - 45% per annum for the next 5 years Achieve 1% growth in market share annually

Resources

Develop a superior customer service experience to increase customer satisfaction Expand the Bank’s geographical presence locally to provide the Bank’s customers with wider and easier access to

the Bank Be a recognised social and community development contributor in the communities in which the Bank operates

Acquire and maintain a good credit rating from an internationally recognised credit rating agency to enable wider access to international capital markets and better financing costs

Diversifying risk and widening revenue sources by identifying suitable new international markets for investment and business opportunities

Enhance the existing risk management framework and processes to support the Bank’s strategic plans Simplify and streamline workflow and operating processes for improved efficiency and control Maximise the use of existing and planned IT capabilities to meet the Bank’s business and operational requirements Implement processes to critically analyse and monitor cost utilization and investment

Support the national Qatarisation effort by achieving an average Qatarisation of 35% - 45% over the next 5 years Develop a strong corporate culture in accordance with the Bank’s core values and mission/vision statements Revise job families for alignment with the Bank’s strategy to develop the competitive skills for the Bank in support of

its strategic plans Enhance the remuneration and rewards process to ensure that high-performing staff are adequately rewarded Enhance training and development plans which, together with the rewards process, will help to improve staff

productivity

Financial

Customer

Operational

Corporate Strategy: Overview

9

Corporate Strategy: Financial & Customer

Develop Superior Customer Service

Experience

Develop cust. svc. excellence

framework

Expand Bank’s Geographical Presence

Locally

Retail BankingBusiness

Banking (SME)Corporate Banking

Develop “One Stop Shop”

banking


framework

Improve relationship

mgmt capability

Develop “One Stop Shop”

banking


framework

Improve relationship

mgmt capability

Establish market intelligence capability

Increase number of branches and

ATMs

Increase/Enhance e-

Banking services

Establish marketing team

Finance

Develop bus. support/control

function

Social / Community Development Contributor

Financial Customer

Financing Asset/Investment Growth

15% - 20% Annually

Increase Asset Portfolio > 20%

Annually

Customer Deposit Liability Growth 15%

- 18% Annually

Net Return (Dividend) on Paid-Up Capital of 40% -

45% Annually

Retail BankingBusiness

Banking (SME)Corporate Banking

International Investments

Increase Deposits > 20%

Annually


Annually


Annually

Achieve QR1mio fee & comm.

income Annually

Provisions <1% of overall credit

balance


Annually


Annually

Provisions <1% of overall credit

balance

Achieve QR20 mio fee & comm. income Annually

Revenue > QR 20-25 mio Annually

Finance

Enhance finan’l performance

mgmt function

Achieve market share growth of 1%

annually

10

Sharia’ Board

Corporate Strategy: Operational & Resources

Operational Resources

Acquire/Maintain

Credit Rating

Lead credit rating project

Diversify Risk/

Revenue Sources

Enhance Risk Mgmt

Risk Mgmt OperationsInformation Technology

International Investments

Finance

Enhance risk monitoring /

diversification

Re-engineer processes for

greater efficiency

Automate manual workflow

pocesses

Lead credit rating / expand

int’l network

Process re-

engineer

Automate Processes

Cost / Investm’nt Controlling

Diversify int’l investment

portfolio

Diversify through international expansion

Develop / enhance MIS

function

Establish cost / investm’t control

functions

Upgrade risk management

framework

Qatarisation at 35% - 45%

Develop corporate culture from core values

Develop Competitive

Skills

Human Resources

Create motivating & supportive work

environment

Ensure commensurate remuneration &

rewards

Enhance training & development

Establish an integrated performance

management system

Develop HR strategic systems to enhance

competency/leadership

Increase national manpower (Qataris)

Realise highest return on investment in

training

Modernise HR dept. with latest HR

concepts, trends

11

Organization Chart – Board Level

Staff Numbers: The bank current employs on a fulltime basis c. 360 people.

BOARD OF DIRECTORS

MANAGING DIRECTOR

CHIEF EXECUTIVE OFFICER

SHARIA

SUPERVISORY

COMMITTEE

RISK

COMMITTEE

INTERNAL AUDIT,

COMPLIANCE &

GOVERNANCE

COMMITTEE

PAST DUE &

RESERVES

COMMITTEE

POLICIES &

DEVELOPMENT

COMMITTEE

SECRETARIATE

BOARD OF DIRECTORS EXECUTIVE

COMMITTEE

RISK

MANAGEMENT

INVESTMENT AUDIT

OPERATIONAL AUDIT

CORPORATE GOVERNANCE

COMPLIANCE &

AML

SELECTION &

COMPENSATION

COMMITTEE

FINANCIAL

ADVISOR

INTERNAL

AUDIT DEPT.

SHARIA AUDIT

CEO

COMMITTIES

LIMITS COMMITTEE

ASSETS & LIABILITIES

COMMITTEE

INFORMATION SECURITY

12

Organization Chart – CEO Level

INFORMATION

SERVICES

CHIEF EXECUTIVE OFFICER

PROGRAMMING

INFORMATION

SERVICES MANAGER

BOD SECRETARIATE

FINANCIAL

SECTOR

SUPPORT

SERVICES

OPERATIONS NETWORKS HELP DESK

TREASURY &

CORRES. RELATIONS

ENGINEERING

AFFAIRS &

PROJECTS

COMMUNI-

CATIONS ADMIN .

SERVICES

EXTERNAL

INVESTMENTS &

Portfolio

LEGAL

AFFIARS

HUMAN

RESOURCES

INVESTMENT

SECTOR

DEPUTY CEO

13

Organization Chart – Deputy CEO Level

DEPUTY CEO

CORPORATE BANKING SERVICES

CHIEF OPERATING OFFICER

DEVELOPMENT, POLI-

CIES & PRODEDURES RETAIL BANKING

SERVICES

BRANCHES & RE-

TAIL BANKING

PHONE BANKING

FOLLOW UP &

COLLECTIONS CALL CENTRE

COMMERCIAL

FINANCE

MARKETING &

CUSTOMER RELATIONS

14

Corporate Governance

Strong Corporate

Governance

Committee Level

Executive

Past Due and Reserve

Compliance and Governance

Selection and Compensation

Policy and Development

Risk

Sharia Supervisory

ALCO

Investments

Provisions

Finance

Board Level

Board of Directors

Sharia BoardExecutive Level

Chief Executive Officer

Deputy Chief Executive Officer

Chief Financial Officer

Chief Risk Officer

Internal Audit

Line Managers

15

Banking Products: Overview

Most Popular

Murabaha

Musawama

Ijarah

Ijarah

Murabaha / Musawama

Istesna / Mudaraba

Musharaka

Wakala

Note: These products are provided to Retail, Corporate and Commercial (SME’s) customers

16

Branch Network

15 branches across Qatar: Al Kharaitiyat New Al-Rayyan Old Al-Rayyan Al Gharrafa Bin Omran Al-Ahli Hospital West Bay Al-Merqab Al-Muntazah Main Office / Grand Hamad Al-Emadi Hospital Al-Hilal Doha Airport Al-Wakra (not marked on map) Salwa Road

Supported by 60+ ATMs

17

B. Qatar Economy / Banking Sector /Regulatory Updates

Supported by the Natural Gas Sector and growth in the Non-oil and Gas sector Qatar’s economy is expected to witness continued strong growth in 2011 and 2012

(US$ million) 2009 2010 2011*

Oil & Gas Sector 43,809 65,864 ***

Non-Oil & Gas Sector 53,989 61,468 ***

Total Nominal GDP 97,798 127,332 172,000

% Change (year-on-year) -15.2 30.2 35.1

Real GDP growth rate 12.0% 16.6% 18.2%*

Source: Qatar Statistics Authority.* Estimates

Qatar Economic Update

19

Comprised of six local conventional commercial banks, four Islamic institutions, seven branches of foreign banks and one development bank

Steady growth in assets and lending, fueled by increased economic activity in recent years

According to the IMF, the local banking sector has relatively good asset quality, is well capitalized and has maintained good profitability

“Stable” outlook provided by Moody’s, S&P and Fitch

Proactive assistance by local authorities further enhances already strong health of banking sector

Lending concentration limits and robust borrower qualification framework

Short term liquidity facilities in place through Qatar Central Bank to address potential market disruptions

Financial support provided by the State of Qatar via equity injections and purchase of investment portfolios

Strong liquidity and capitalization comfortably above regulatory requirements

Sound and Healthy Banking Sector

Segment 2008 2009 2010 2011

Total Assets (US$ bn) 111.4 129.4 157.0 191.8

Finances & Advance (US$ bn)

66.7 74.4 86.4 110.9

NPL Ratio (%) 1.2% 1.7% 2.0% 1.7%

Deposits (US$ bn) 58.4 67.9 84.3 99.9

CAR (%) 15.4% 16.1% 16.1% 20.6%

Source: Qatar Statistics Authority

Qatar Banking Sector Overview

Key Features Qatari Banking Sector Snapshot

20

Type of Bank InstitutionAssets as at31 Dec 2011

(QR millions)% Share of Total Banking Assets

Islamic Banks

Qatar Islamic Bank 58,286 8.4

Masraf Al Rayan 55,271 8.0

Qatar International Islamic Bank 23,358 3.4

Total Listed Islamic Banks 136,915 19.7

Total Islamic Banks’ Assets 161,226 23.2

Conventional Banks (selected)

QNB 301,955 43.5

Commercial Bank 71,540 10.3

Doha Bank 52,420 7.6

Al Khaliji 27,003 3.9

Ahli Bank 17,734 2.6

Others 28,229 4.1

Total Conventional Banks 498,881 71.9

Foreign Banks (Aggregate) Total Foreign Banks 34,194 4.9

Total Banking Sector* Total Assets 694,301 100.0

Competitive Environment

21

(Source: KPMG FY 2011 Banking Sector Results Snapshot; Qatar Central Bank Dec 2011 Quarterly Statistical Bulletin)

*Excludes Qatar Development Bank

Major Events

Continued Strong Growth

Pay-rise for Qataris (Q3/Q4 2011)• 60% Increase for

Qataris• 120% for military

officers

Accelerating infrastructure development• World Cup 2022• Qatar National Vision

2030

Olympics 2020Strong Bid, September

2013 Decision

22

Regulatory Environment

Regulator Details Relationship

Qatar Central Bank

Supervises and controls the activities of QIIB and also manages and operates QIIB’s clearing and settlement processes

The QCB requires QIIB to maintain a minimum reserve requirement of 4.75% and a capital adequacy requirement of 10.0% in line with the Basel II guidelines

QIIB is required to have their annual accounts audited by QCB’s approved independent auditors and to obtain prior approval from the QCB to appoint senior management

QCB imposes certain exposures on QIIB, i.e. no more than 20.0% of any bank’s capital and reserves may be extended to a single customer in the form of credit or investment facilities and no more than 25.0% of any bank’s capital reserve may be extended to a single customer in the form of credit facilities combined with investment vehicles

Establishment of credit bureau

Follows regulations

Professional working relationship

Proactive reporting

Qatar Financial Markets Authority

Shareholders registry and corporate governance rules

Follows regulations

Professional working relationship

Qatar Exchange

Market updates, quarterly / annual financial reporting

Ministry of Finance

Taxation requirements – non-local vendor services/supplies (5% tax); social support (2.5%)

Ministry of Business & Trade

Company registration, municipality requirements

23

Regulatory Developments

• On-going development• Pending guidance and clarity from QCB• IFSB development for Islamic financial

institutions?

Basel III

• US tax legislation• Affects banking operations, business• Operational review – decision to comply?

Foreign Account Tax Compliance Act (“FATCA”)

• Change in credit ratio limit from 90% to 100%

• Increase in Risk Reserve ratio to 1.75% by end-2012, and 2.0% by end-2013

Regulatory Ratio Changes

24

Accounting Standards & External Audit

Auditor

AAOIFI

IFRS

Unqualified

Central Bank

5 year rotation basis (QCB mandate): Deloitte & Touche final year 2012 audit (previously Ernst & Young)

Accounting & Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) review of its accounting standards and application thereof

New accounting standard FAS 25

Deferment of IFRS 9 Convergence with Basel III requirements – loss provisioning, disclosures

QIIB has never received a qualified audit opinion

The central bank also performs an audit on QIIB No major audit / inspection issues

25

Internal & Shari’a Audits

Internal Audit rates each areas/activities of the Bank based on a scorecard Comprises a series of financial and non-financial factors Factors are scored according to Internal Audit’s assessment Final summary score determines rating as Low, Medium or High Risk

IA Risk Scaling

QIIB’s independent internal audit function conducts a rolling programme of audits based on internal risk assessments of the Bank’s operations and activities

Internal Audit

The criteria for rating audit points / grading audit reports is based on a Board-approved policy rating scorecardCriteria

Audit reports are graded in the same manner as the risk scaling Audit work results in update to the scoring of the factors (or inclusion of new

factors) Final summary score (post-audit) then determines whether findings are Low,

Medium or High Risk

Audit Report

Grading

Shari’a Audit

Products / services vetted by Shari’a Supervisory Committee prior to release to market

Regular Shari’a audits to ensure compliance with vetting decrees Compliance certificate issued annually (with annual report publication)

26

C. Retail Banking

Primary Activities

Business Model

Management

Distribution

Retail Banking: Overview

Individual customers’ deposits, financing facilities (automobile, shares, personal loans, etc) and credit cards

Assistant General Manager reporting to the Deputy CEO

Segment-targeted best value products backed by sales and service excellence Fully-fledged range of Islamic retail banking products Providing and enhancing customer service excellence, including “one-stop shop” banking Constantly expanding physical and consumer presence through branch and ATM network and

social engagements Close monitoring of credit and related risks Segmented targeting of customers and developing market intelligence

15 Branches across Qatar to increase by 3 annually starting in 2011 67 ATM’s to increase by 6 annually starting in 2011 E-Banking channels including 24/7 call centre, internet and mobile banking for bill payments,

exchange rates, remittances, etc 145 staff?

28

QR 3.6 Bn Retail

Commercial (SME)

Corporate

Investment & Treasury

14.8%

QR 3.4 Bn

Musawama

Ijarah

Estesna

Musharka

Invest.Under Execution

93.0%

QR 239.0 mio

Retail

Commercial (SME)

Corporate

Investment & Treasury

21.1%

Retail Banking: Contribution

Gross Segment Assets (Dec 2011) – Segment Contribution Gross Revenue (YTD Dec 2011) – Segment Contribution

Gross Retail Assets (Dec 2011) – Financing Type Gross Retail Assets (Dec 2011) – Islamic Product Type

29

Total Retail Assets QR 3.6 Bn (as at 31/12/11)

Total Segment Assets QR 24.4 Bn (as at 31/12/11) Total Revenue QR 1,133.9 mio (YTD 31/12/11)

Total Retail Assets QR 3.6 Bn (as at 31/12/11)

QR 1.6 BnQR 1.5 Bn

Vehicle Financing

Furniture Financing

Real Estate (Purchase)

Real Estate (Construction)

Other Consumer Financing

41.5 %44.8 %

Retail Banking: Products

Products & Services

Current, savings and term deposits (unrestricted investment accounts)

Consumer financing (refer to below table) Automobile household goods residential property shares tawaroq

Electronic cards (debit, credit)

e-Banking channels Internet Mobile Phone call centre

Safe deposit lockers

Private Banking (under development)

30

Average facility size c. QR 200k per

customer

Average deposit size c. QR 200k per

customer

Average products per customer (cross-sell

ratio): 2.7

Retail Banking: Customers

Current Accounts Savings Accounts Fixed TermDeposit Customer

Base / Total Deposits

Number of Clients 40,296 58,468 6,937 87,377

Amounts (QR ‘000) 3,968,016 4,447,529 9,514,072 17,929,617

31

Vehicle Financing

Furniture Financing

Real Estate Purchasing

Real Estate Construction

Other Consumer

Finance

FinancingCustomer Base/Total Facilities

Number of Clients 20,352 42 229 2,282 11,305 17,597

Facilities (QR ‘000) 1,512,560 3,116 104,235 391,035 1,634,748 3,645,694

QR 3.3 Bn

QR 3.3 Bn

Current Savings Term

23.5%

23.2%

QR 14.1 Bn

Retail Commercial (SME)

Corporate Investment & Treasury

78.4%

Retail Banking: Funding Success

Total Deposit Liabilities (Dec 2011) – Contribution Retail Liabilities (Dec 2011) – Distribution

Retail deposits consistently >60% of Bank’s customer deposits

Mitigates funding concentration

Customer (depositor) loyalty

Current accounts > 20% of retail deposit book

Savings (low cost) accounts >20% of retail deposit book

Total low cost accounts circa 40% of retail deposits

Improves profitability (0% and low cost, enhanced profit sharing to shareholders)

32

Total Deposit Liabilities QR 17.9 Bn (as at 31/1211)

Retail Banking: Growth Objectives

Increasing assets 20% annually

Increasing deposits 15 - 18% annually

Develop and implement customer service excellence

framework

Enhance e-Banking channels and

implement “one-stop shop” banking

Increase distribution network by

increasing branches and ATMs

Establish a marketing team to undertake market

research

33

Call centre revamp/over

-haul

Increased to 67 ATMS

(from 60 in 2010)

Hired Business

Development Manager

2011 targets achieved

“One-stop shop” training rolled out to all branches

Established Quality

Control Unit

Product / Market

RevenueFocus

Customer and Brand

Product Innovation: by undertaking market research and fulfilling customer needs with unique and customer focused products, e.g. installment credit cards, investment products etc.

New Segments / Sectors: identify and exploit new market segments such as Non-Arab expatriates, youth, education, etc

Expand Distribution: by adding 3 branches and 6 ATM’s per year E-Banking: by introduction of outbound calling and developing mobile banking applications

Customer Service Excellence: through increased focus on customer needs and match expectations with product and service offerings

Enhance Brand Equity: through consistent branding via marketing and advertising campaigns, with further reinforcement via strong community-based PR and engagement initiatives

Distribution

Increased Customers and Sales: through new / enhanced products, closing of conventional banks Islamic windows, outbound calling, expat segment

Increase Cross Selling: optimize customer profitability through service excellence and segment-targeted bundling, packing of products rather than monoline, singular product offering

Competitive Profit Rate Pricing: ensure depositor profit rates are competitive and not running above market average

Retail Banking: Growth Strategy

34

Retail Banking: Growth Journey

Intended Destination

2010

2011

2012

2013

· Product development· Increasing services (e-

Channels)· Expanding physical and

community presence· Developing market intelligence· Developing service excellence

· Extended/Full product suite· Extended/Full functioning e-

Channels· 17 Branches, 66 ATMs +

continuing increase· Segment targeting, social

programmes, market branding· Established service excellence,

increased customer retention

· Full/Mature product suite· Full/Mature functioning e-

Channels· Expanded presence, seeking

geographical diversification· Established segments,

recognised social contributor· Sustainable, increasing

customer base and profitable growth

Product development Increasing services (e-Channels) Expanding physical and community

presence Developing market intelligence Developing service excellence

Extended / full product suite Extended / Full functioning e-Channels 17 Branches, 66 ATMs + with further

growth Segment targeting, social

programmes, market branding Established service excellence,


Extended / full product suite Extended e-Channels Expanded presence, seeking

geographical diversification Established segments, recognised

social contributor Sustainable, increasing customer

base and profitable growth

35

D. Corporate Banking

Primary Activities

Business Model

Management

Distribution

Corporate Banking: Overview

Lending to government entities, large corporate’s via ijarah, murabaha, musawama, mudarabah, istisna and foreign trade finance products

First Assistant General Manager reporting directly in to the Deputy CEO

Close relationship management & critical risk monitoring under a customer service excellence framework Develop close / strong commercial relationships with private and government sectors Utilise relationship network and market intelligence to promote financing Close monitoring of credit and risks Done through service excellence with increasing product/service capabilities (eg e-Banking)

Client Coverage: via relationship managers and through branch network Staff: 12 Chairman, CEO, Deputy CEO and upper management all use closing relationships with

government , large family companies and HNWI

37

QR 6.1 Bn

Retail

Commercial (SME)

Corporate

Investment & Treasury25.0%

QR 5.1 Bn

Industry

Trade

Contracting

Housing

Other

83.6%

QR 1.9 Bn

QR 3.3 Bn

Murabha

Musawama

Ijarah

Estesna

MudarAba53.8%

31.3%

QR 516.9 mio

Retail

Commercial (SME)

Corporate

Investment & Treasury45.6%

Corporate Banking: Contribution

Gross Segment Assets (Dec 2011) – Contribution Gross Revenue (YTD Dec 2011) – Contribution

Corporate Gross Assets (Dec 2011) – Financing Segment Corporate Gross Assets (Dec 2011) – Islamic Product Type

38

Total Corporate Assets: QR 6.1 Bn as at 31/12/11

Total Segment Assets QR 24.4 Bn (as at 31/12/11) Total Revenue QR 1,133.9 mio (YTD 31/12/11)

Total Corporate Assets: QR 6.1 Bn as at 31/12/11

Corporate Banking: Distribution

Products & Services

Murabaha (cost-plus) Musawarma (negotiated cost-plus) Mudarabah (project financing) Istisna

Foreign trade finance (LCs, LGs, Documentary Credits etc)

e-Banking channels (electronic transaction capabilities)

Sector Real-Estate Commercial Industrial Services Contracting Others Total

Corporations 11 41 13 22 29 16 132

HNWI 107 0 0 0 0 0 107

Total Clients 118 41 13 22 29 16 239

Direct Facilities (QR '000) 5,101,502 311,910 59,431 119,346 517,513 4,876 6,114,578

Customer Base

39

Corporate Banking: Growth Objectives

Increasing assets 20% annually

Increasing deposits 20% annually

Achieve not less than QR 20 million fee & commission income

for year 2011

Provisions and late payments to be not more than 1% of the overall credit balance

Develop customer service excellence

framework

Develop small medium enterpise (SME) segment

Establish market intelligence capability to

identify corporate business opportunities

40

Infrastructure projects release

slower than expected in 2011

Growth of 32.5% in SME

financing in 2011

Hired Business

Development Manager

“One-stop shop” training rolled out to all branches

Achieved QR 36.3 million

for 2011

2011 targets achieved

Data Processing: Improve data processing and operations, where appropriateOperational efficiencies

Key Contracts: Continue to seek out and win Qatari Govt. & Semi Govt. financial transactions with emphasis on projects related to Oil & Gas, Utility, Telecom, Aviation, Health, Education and Railway

Monitoring: Monitor market and competitors to create new opportunities

Target Government

Contracts

Major Contracts: Increase focus on the financing of major contracts awarded to the private corporate clients / family businesses (local or international) by the Qatari Government

Bespoke Services: Provide bespoke service to these entities to tailor service requirement to match expectations

Focus on Private

Corporates

Approvals: Enhance credit approval / administration process Methodology Management: Improve and implement additional risk management methodologies

of cashflow, customer valuations, feasibility studies of projects, profitability and adequate colleteral

Enhance Credit

Monitoring

Corporate Banking: Growth Strategy

E-banking: Increase efforts towards marketing of the electronic banking products & servicesE-Banking

Targeting SME Segment: Increase efforts towards marketing of the electronic banking products & services. Strong government support to develop SME sector within Qatar.

Focus on SME

41

Corporate Banking: Growth Journey

Intended Destination

2010

2011

2012

2013

· Product development· Increasing services (e-

Channels)· Expanding physical and

community presence· Developing market intelligence· Developing service excellence

· Extended/Full product suite· Extended/Full functioning e-

Channels· 17 Branches, 66 ATMs +

continuing increase· Segment targeting, social

programmes, market branding· Established service excellence,


· Full/Mature product suite· Full/Mature functioning e-

Channels· Expanded presence, seeking

geographical diversification· Established segments,

recognised social contributor· Sustainable, increasing

customer base and profitable growth

Increase relationship management capacity

Close monitoring and management of credit quality

Improve customer service excellence framework

Develop market intelligence for financing new opportunities

SME focus

Market intelligence MIS with targeted marketing plans

Increased channels through full e-Banking

Client contact management system, increased staffing

Reducing / stagnant non-performing financing facilities (NPFF) development

Established intelligence team with internal research reports

Full-fledged e-Banking services and products

Client grading with regular contact, established CRM system

NPFF development remains controlled at < 1% of portfolio

42

E. Investment, market sales and capital markets

Investments: Portfolio Breakdown

Sukuk Investment Majority of sukuk investments are long term government

investments with good returns (QR 2.75 Bn Qatari government sukuk)

Trading Portfolio Opportunistic buying / selling

44

Financial Investments(By Type )

FMV at 31 DEC 2011 QAR'000

Qatar Exchange Equities 24,621

Sukuk Investments 3,589,297

Equity Participation 17,477

Investment Funds 16,961

Private equity 109,349

Sukuk Trading 505,455

Provision (4,100)

TOTAL 4,259,060

QR 3.6 Bn

Qatar ExchangeEquities

Sukuk Investments

Equity Participation

Investment Funds

Private equity84.3%

Staffing: Recruit experienced and skilled people / Provide training to staff to ensure they understand systems and processes / Develop appropriate remuneration and incentive programs to motivate staff / Retain staff through high morale and good rewards / Provide an attractive working environment for staff

Systems: Develop hardware, systems and data packages appropriate to the business / Develop a robust and secure platform for the management of information

Stakeholders: Provide transparency and strong governance standards to gain the confidence of all stakeholders, including contributors and regulators / Manage the risk of the portfolio to ensure a robust financial performance over the long term

Strategy

Investments: Strategy & Policies

Valuation Policy

Listed Equities / Sukuks: for regularly traded listed securities fair value is generally the latest market value being the last traded price or the bid/offer where no trades occurred on the particular valuation day

Unlisted Securities: the fair value is the probable realisation value. This is generally established on unlisted securities by reference to, but not limited to; cost price; current earnings review and forecasts; recent capital transactions or events and the price of any recent market transaction

45

F. Funding / Liquidity & Treasury

Funding: Strategy

• Deposits (Customer – 75%) • Capital (Majority Shareholder(s), Government)Core

• Sukuk• Syndicated Murabaha• Wakala Agreements (interbank)

Wholesale

Long Term Funding Requirements: At present the Bank has sufficient capital but if additional funding is needed it may choose core or wholesale funding options when the time is needed

Existing or Planned New Funding: With an assessment of market conditions the Bank may issue an Islamic debt instrument later in the year

47

Funding: Profit Sharing Investment Accounts

Reliance on PSIA

•The majority of customer deposits (>75%) are PSIA

Restricted / Unrestricted

•Unrestricted and restricted available•Only unrestricted presented on-balance sheet

Remunerated methodology

•Profit sharing methodology determined by Shari’a requirements and QCB•Based on PSIA’s proportion against total liabilities and shareholders’ equity•Taking into account Mudarib’s (Bank’s) fee before profit allocation

Contractual clauses

•Investment contract in original documentation which states must legally share profit and losses equally

Accounting Treatment

•In accordance with AAOIFI and QCB requirements with profit allocation every 3 months and fixed amount after final year-end audit.

48

Funding: Deposits

Top 20 Depositors

Nos NAME BALANCE (QR)

1 1200&187185 MIN. OF FOREIGN 486,218,485

2 108595&39139&6565

Ezdan 542,739,094

3 33617 MAHMOD HAIDOS 245,030,128

4 312443 SHK.SAOUD A.H. 207,605,428

5 6001 ISLAMIC FINANCE 191,617,085

6 590009 PUPLIC PROSECU 148,452,846

7 100209 MINORS AFFAIRS 142,479,559

8 244855 R.STATE.INVST.C 96,670,745

9 532941 SHK-ABDULRHMAN 93,596,341

10 34963 SOULIEMAN 87,072,019

11 24027 A.AZIZ ABDULLA 85,758,447

12 183783 SH.KHALID THANI 85,756,296

13 49499 ISSA ALKUWARI 84,020,140

14 44155 AISHA ALSOWAIDI 81,104,079

15 31841 AL-MAHMOUD 79,692,048

16 23027 QATAR INVSTMENT 77,107,797

17 21129 MOHD R MAADEED 76,598,154

18 411711 SULTAN FAKHROO 75,160,502

19 2200 MUBARAK ALMALKI 71,483,475

20 430033 ALTARIQ CO. 71,122,408

3,029,285,077

Deposit Base Overview

Primarily Qatar based Divided between:

High net Wealth Individuals Government departments Qatar Sovereign Wealth Fund Qatar Corporate Entities

Top 20 are long term deposit holders in bank / minimal switching / loyal

Top 20 represents <20% of total deposits Deposit base is well diversified Long term holding

Interbank deposits

As at 31 Dec 2011 it represents QR 1,345 m from banks with top 3 being – CBQ-Al Safa USD 125m, Qatar Central Bank QR 316m and Arab Monetary Fund QR 115m

Single Name Concentrations Minimal concentrations

49

Funding: FOREX

Prudent FOREX

Management

No Open Positions

c. 10% Assets / c. 6% Liabilities

with FOREX exposure

Current position is to cover daily

exposures

Regulatory requirement min

100% of FCY Assets vs Liabs.

50

Funding: Contingent Liquidity

Internal Minimum Liquidity Buffers: Follow QCB requirements of 100% which is monitored on a daily basis. Review / Monitoring: Internally it is monitored by Treasury (a) Daily – reports to CEO (b) Weekly – management

meetings/reports (c) Monthly – ALCO (d) Stress testing – quarterly

Qatar Central Bank

1: QR 1,000m Term Facility

2: QR 500m Repo

Government

1: QR 1,500m Sukuk

QR 3 Billion in Contingent

Funding Sources

(c. 30% of Total Financing Assets

51

Funding: Liquidity Management

Strong Liquidity

Framework

ALCO / Treasury Shared responsibility

Management

on a daily, weekly and monthly basis

Qatar Central Bank

In line with QCB regulations

Contingent Liquidity

Strong lines with QCB and Government

52

Risk Monitoring

Nostro Accounts (Bank Balances) Money Market Maturity List Current FX trading profit and loss FX currency position report Overnight FX position revaluation Summary of FC dealing and foreign currency assets Bank limits and utilisation (manual)

TreasuryOperations

Management local currency liquidity / liquidity management Controlling Nostro / Vostro accounts Issuing exchange rates to departments within bank Tracking FX exposure Covering all domestic issues, including sukuks, equities, retail product funding Propriety trading, covering vanilla-based products of FX, cover FX products only

for current bank customers Close open position Opportunities for risk identified through diligent market views with appropriate

parameters for profit and loss and risk management applied Risk limit adherence overseen by risk management

Treasury: Activities

Treasury is the funding arm of QIIB and does not actively trade any positions in the market

53

Alco Pack: Summary for Dec 2010

QIIB actual performance in comparison with budget 2011 Features of QIIB Performance 2009 – 2010 Bank figures 2000-2010 Bank performance analysis 2009 – 2010 Balance sheet as 31/12/2010 Statement of income Dec 2010 Income from Investing activities Banking services Daily financial position as at 31 Dec 2010 Statement of income (including Branch performance) Investment in associates Return of investments Return on investment properties Average cost of funds Efficiency ratio’s Non performing facilities Average rates on metal and commodities and deposit with Islamic banks during 2010 Provisions

The follow reports are reviewed in the monthly ALCO meeting:

54

G. Risk Management and Credit

Credit Risk

Market Risk

Operational Risk

Legal Risk

Liquidity Risk

Regulatory, legal and reputational risks through compliance and risk frameworks with counsel from legal advisers

Risk Management

Risk Committee

Shari’a Committee

ALCO Committee

Late Payment and Provision Committee

Equity Investment Committee

Investment Limits Committee

Finance Committee

Internal AuditCommittee

Risk Management: Overview

Diversification of investments, capital markets and lending and financing activities – avoid concentration Collaterals (cash, real estate and equity) used when appropriate Exposure skewed towards high credit quality entities (rated A- or better in 2009) Credit policy driven by Group Credit Committee which reviews credit applications/limits and approval authority Appropriate monitoring of credit risk – robust provisioning policy and recovery processes

Regular scenario and stress analysis to manage and monitor market risk Robust risk management system

Diversification of funding base Broad portfolio of high quality liquid assets and readily marketable securities Constant monitoring of liquidity position

Comprehensive operational risk management policy augmented by sophisticated risk management software (in progress)

Key risk indicators monitored and risk/loss database maintained Strong IT infrastructure and detailed contingency plans/procedures with two Disaster Recovery sites supporting main

data center

56

Risk Management: Committees / Executive

Committees1. Executive2. Past Due and Reserve3. Compliance and Governance 4. Selection and Compensation 5. Policy and Development 6. Risk7. Sharia Supervisory 8. ALCO 9. Investments 10. Provisions 11. Finance

Executive1. Board of Directors2. Sharia Board2. CEO3. Exec Committee4. Chief Risk Officer5. Experienced Line Managers

Effective Risk

Mitigation

57

Credit: Products

Personal Finance

Vehicle Finance

Housing Finance

Credit Cards

Retail Customers Overdraft Facilities

Commercial Finance

Trade Finance

Contractor Finance

Project Finance

Syndications

Treasury Products

Working Capital

Corporate Customers

58

QIIB Overview

Credit: Approval Process

Overview and general information on the credit (i.e. name, address, etc)

Financial Analysis

Internal Risk Rating

Previous exposures

Industry sector

Purpose of finance

Sources of repayment

Collaterals

Proposed recommendation

Terms and conditions

Key risks have been mitigated against

Exceptions and / or signs of weakness in the credit and are properly mentioned

Requirements / information necessary for the preparation of credit proposal are applied consistently

Detection of weak credit and identify problems as quickly as possible

Complies with QIIB and QCB policies and best practices

Credit Committee Up to QR 17mChairman, MD and CEO More than QR 17m to QR 25m Executive committee More than QR 25m to QR 150m

Board of Directors More Than QR 150m

Step 1: Relationship manager receives a credit proposal memorandums (CPM ) that includes the following:

Step 2: Risk management reviews the CPM ensuring that the following areas have been assessed:

Step 3: The CPM is then passed onto the credit committee for approval:

59

Credit: Internal Risk Rating System

QIIBRating

Definition QCB Rating

1 High credit quality – risk-free

Low risk2 High credit quality approximating risk-free

3 Very low credit risk

4 Low credit risk

5 Acceptable credit riskSpecially-mentioned

6 Credit risk approximating acceptable

7 Requires credit risk monitoring

8 Not acceptable credit risk Sub-Std

9 High risk, non-performing Doubtful

10 High risk, doubtful collection Bad

60

Credit: Internal Risk Rating Profile

61

QIIB Rating

Definition 31/12/2010 31/12/2011

1 High credit quality – risk-free 20.28% 17.34% 2 High credit quality approximating risk-free 5.17% 4.72% 3 Very low credit risk 10.80% 11.79%

4 Low credit risk 26.16% 26.95% 5 Acceptable credit risk 29.33% 31.57% 6 Credit risk approximating acceptable 5.72% 5.24%

7 Requires credit risk monitoring 1.46% 1.40%

8 Not acceptable credit risk 0.58% 0.52%

9 High risk, non-performing 0.40% 0.36%

10 High risk, doubtful collection 0.10% 0.11%

Credit: Top 20 (Single Obligor) Exposures

62

Total

Sr.#Customer

Basic No.#Cutomer Type Product Type

Granted

Outstanding amounts

Mortgage Cheque Insurance Others CollateralsInternal Rating

1 44415 Real Estate Co. Corporate - Real Estate 1,760,411 1,760,411 1,760,411 1,760,411 0 0 1,600,000 3,360,411 Excellent2 87 Contracting Co. Corporate - Real Estate Investment 1,200,000 1,200,000 1,200,000 0 0 0 1,200,000 1,200,000 Standard3 484999 Real Estate Co. Corporate - Real Estate 601,069 601,069 601,069 0 585,000 0 0 585,000 Standard4 298408 Government Government - Other 631,492 631,492 631,492 0 0 0 0 0 Excellent5 29979 Financing Co. Corporate - Real Estate Investment 400,000 400,000 400,000 0 0 0 400,000 400,000 Standard6 244855 Real Estate Co. Corporate - Real Estate 357,708 357,708 357,708 0 0 0 0 0 Standard7 476647 Real Estate Co. Corporate - Real Estate 378,495 378,495 378,495 322,079 450,140 0 2,700,560 3,472,779 Standard8 105510 Individual Individual - Real Estate 337,346 337,346 337,346 617,336 0 0 0 617,336 Excellent9 290229 Individual Individual - Real Estate 220,687 214,377 220,687 447,414 435,715 0 11,867 894,996 Excellent10 22015 Financing Co. Corporate - Trading 318,863 318,863 318,863 133,217 227,159 0 300,000 660,376 Standard11 102899 Individual Individual - Real estate & Trade 225,280 184,036 225,280 352,239 354,205 190,440 0 896,884 Standard12 110050 Individual Individual - Real Estate 151,470 151,470 151,470 253,804 0 0 0 253,804 Excellent13 170800 Society Organization Corporate - Real Estate 135,000 135,000 135,000 Standard14 56912 Oil & Gas Corporate - Real Estate Investment 81,454 81,454 81,454 Standard15 236070 Vehicle & Parts Corporate - Trade & Service 95,234 95,234 95,234 137,500 111,600 0 763,000 1,012,100 Standard16 172994 Individual Individual - Real Estate 80,013 80,013 80,013 Standard17 33367 Individual Individual - Real Estate 96,280 96,280 96,280 109,977 110,000 215,762 0 435,739 Standard18 9111 Individual Individual - Real Estate 85,845 85,845 85,845 Standard19 2434 Trading Corporate - Other 77,097 77,097 77,097 Standard20 103127 Publishing & Printing Corporate - Other 69,375 69,375 69,375 Standard

* No indirect facilities for listed customers 7,255,565

Pending updated information

Pending updated informationPending updated informationPending updated information

Top 20 Single Credit Exposures 2011Direct Facilities('000)

Total * Type Of Collateral

Pending updated informationPending updated information

Credit: Top 20 Group Exposures

63

Total

Sr.#Customer Basic

No.#Cutomer Type Granted

Outstanding amounts

GrantedCommitted Exposures

Cash Mortgage Cheque Insurance Others CollateralsInternal Rating

1 Real Estate Co. 1,777,080 1,777,080 240,475 240,475 2,017,555 0 2,856,295 2,492,032 0 1,600,000 6,948,327006565/044415/039139 Corporate - Real Estate 1,776,443 1,776,443 147,290 147,290 1,923,733 0 2,852,561 2,492,032 0 1,600,000 6,944,593 Excellent108595/036669/030411 Corporate - Car 637 637 93,185 93,185 93,822 0 3,734 3,734 Excellent

2 Contracting Co. 1,200,000 1,200,000 0 0 1,200,000 0 0 0 0 1,200,000 1,200,00087 Corporate - Real Estate Investment 1,200,000 1,200,000 0 0 1,200,000 0 0 0 0 1,200,000 1,200,000 Standard

3 Real Estate Co. 958,777 958,777 0 0 958,777 0 0 585,000 0 0 585,000484999 Corporate - Real Estate 601,069 601,069 0 0 601,069 0 0 585,000 0 0 585,000 Standard244855 Corporate - Real Estate 357,708 357,708 0 0 357,708 0 0 0 0 0 0 Standard

4 Government 631,492 631,492 0 0 631,492 0 0 0 0 0 0298408 Government - Other 631,492 631,492 0 0 631,492 0 0 0 0 0 0 Excellent

5 Individual 499,689 499,689 0 0 499,689 0 254,144 617,336 0 389,616 1,261,096105510/110050/35535 Individual - Real Estate 499,509 499,509 0 0 499,509 0 253,804 617,336 0 389,616 1,260,756 Excellent

44005 Corporate - Car 180 180 0 0 180 0 340 0 0 0 340 Excellent6 Individual 409,345 409,345 0 0 409,345 0 347,026 481,407 0 2,700,560 3,528,993

164800 Individual - Other 2 2 0 0 2 0 88 108 0 0 196 Standard476647 Corporate - Real Estate 378,495 378,495 0 0 378,495 0 322,079 450,140 0 2,700,560 3,472,779 Standard484005 Corporate - Other 30,848 30,848 0 0 30,848 0 24,859 31,159 0 0 56,018 Standard

7 Financing Co. 400,000 400,000 0 0 400,000 0 0 0 0 400,000 400,00029979 Corporate - Real Estate Investment 400,000 400,000 0 0 400,000 0 0 0 0 400,000 400,000 Standard

8 Individual 401,263 357,084 3,420 3,420 404,683 0 623,466 680,394 190,440 907,585 2,401,885102899 Individual - Real estate & Trade 225,280 184,036 0 0 225,280 0 352,239 354,205 190,440 0 896,884 Standard123969 Corporate - Trade & Service 6,000 3,328 0 0 6,000 0 0 12,000 0 12,000 24,000 Standard280037 Corporate - Car 1,366 1,103 0 0 1,366 0 1,366 1,680 0 3,360 6,406 Standard236070 Corporate - Trade & Service 95,234 95,234 0 0 95,234 0 137,500 111,600 0 763,000 1,012,100 Standard21335 Individual - Other 8,929 8,929 0 0 8,929 0 3,368 19,536 0 15,239 38,143 Standard35433 Corporate - L/G 0 0 3,420 3,420 3,420 0 0 3,420 0 13,680 17,100 Standard4008 Individual - Real Estate 63,988 63,988 0 0 63,988 0 128,993 177,260 0 99,591 405,844 Standard

485963 Individual - Other 466 466 0 0 466 0 0 693 0 715 1,408 Standard9 Financing Co. 318,863 318,863 0 0 318,863 0 133,217 227,159 0 300,000 660,376

22015 Corporate - Trading 318,863 318,863 0 0 318,863 0 133,217 227,159 0 300,000 660,376 Standard10 229,657 223,347 0 0 229,657 0 458,249 436,945 0 13,097 908,291

290229 Individual - Real Estate 220,687 214,377 0 0 220,687 0 447,414 435,715 0 11,867 894,996 Excellent44047 Individual - Real Estate 8,970 8,970 0 0 8,970 0 10,835 1,230 0 1,230 13,295 Standard

Top 20 Group Credit Exposures 2011

Direct Facilities('000) Indirect Facilities('000) Total

Type Of Collateral

Credit: Top 20 Group Exposures (contd.)

64

Total

Sr.#Customer Basic

No.#Cutomer Type Granted

Outstanding amounts

GrantedCommitted Exposures

Cash Mortgage Cheque Insurance Others CollateralsInternal Rating

11 Individual 394,000 220,860 335,775 308,017 729,775 25,746 73,462 6,000 0 3,294,244 3,399,45210565 Corporate - Industry 137,751 212,587 719,000 16,582 73,462 0 0 2,748,244 2,838,288 Standard

362223 Corporate - Contractor 83,109 86,679 0 0 0 0 0 540,000 540,000 Standard3978 Corporate - L/G 0 0 7,775 7,775 7,775 9,164 0 0 0 0 9,164 Standard

375720 Corporate - L/G 0 0 3,000 976 3,000 0 0 6,000 0 6,000 12,000 Standard12 Engineering Co. 346,924 99,564 196,246 196,246 543,170 546 109,977 200,591 215,762 4,837,768 5,364,644

381216 Corporate - Tade & Contractor 165,249 2,944 195,555 195,555 360,804 0 0 0 0 4,551,268 4,551,268 Standard33367 Individual - Real Estate 96,280 96,280 0 0 96,280 0 109,977 110,000 215,762 0 435,739 Standard

130140 Individual - L/G 0 0 546 546 546 546 0 0 0 0 546 Standard26955 Corporate - Trade & Contractor 85,055 0 145 145 85,200 0 0 90,000 0 286,500 376,500 Standard9653 Individual - Other 340 340 0 0 340 0 0 591 0 0 591 Standard

13 Individual 94,704 55,260 1,531 1,531 96,235 0 112,399 119,361 0 88,648 320,408296464 / 24443 Individual - Real Estate 3,405 3,405 0 0 3,405 0 10,037 10,751 0 0 20,788 Excellent

228892 Individual - Car 175 175 0 0 175 0 0 299 0 14 313 Standard395519 Corporate - L/G 0 0 101 101 101 0 0 0 0 0 0 Standard24893 Corporate - Car 664 664 1,380 1,380 2,044 0 2,000 3,005 0 8,027 13,032 Standard30319 Corporate - L/G 0 0 50 50 50 0 0 40 0 50 90 Standard

522331 Corporate - Contractor 162 162 0 0 162 0 0 372 0 372 744 Standard228388 Individual - Real Estate 14,173 14,173 0 0 14,173 0 20,300 24,783 0 0 45,083 Standard396957 Individual - Other 86 86 0 0 86 0 0 0 0 0 0 Standard260974 Individual - Car 50 50 0 0 50 0 0 111 0 45 156 Standard44899 Corporate - Car 41 41 0 0 41 0 62 0 0 140 202 Standard4234 Individual - Real Estate 75,948 36,504 0 0 75,948 0 80,000 80,000 0 80,000 240,000 Standard

14 Individual 34,102 34,102 190 190 34,292 0 81,826 146,148 0 13,408 241,382005005/260230 Individual - Real Estate 32,238 32,238 100 100 32,338 0 76,536 140,522 0 0 217,058 Excellent289131/421259 Corporate - Car & Other 1,754 1,754 90 90 1,844 0 5,099 5,399 0 12,954 23,452 Excellent

421259 Corporate - Car 110 110 0 0 110 0 191 227 0 454 872 Excellent15 Individual 21,482 19,909 500 500 21,982 0 33,117 44,398 0 15,000 92,515

183783 Individual - Real Estate & Car 18,290 18,290 500 500 18,790 0 30,117 41,094 0 0 71,211 Excellent291950 Corporate - Real Estate & Contractor 3,000 1,427 0 0 3,000 0 3,000 3,000 0 15,000 21,000 Standard364001 Individual - Car 192 192 0 0 192 0 0 304 0 0 304 Standard

16 Individual 11,279 11,279 0 0 11,279 0 12,317 14,288 0 0 26,605264600 Individual - Other 498 498 0 0 498 0 0 0 0 0 0 Excellent300275 Individual - Car 1,591 1,591 0 0 1,591 0 417 2,488 0 0 2,905 Excellent38889 Individual - Car 249 249 0 0 249 0 0 0 0 0 0 Excellent

43 Individual - Real Estate 7,994 7,994 0 0 7,994 0 11,900 11,800 0 0 23,700 Excellent6029 Individual - Shares 947 947 0 0 947 0 0 0 0 0 0 Excellent

17 Individual 9,922 4,065 7,672 4,604 17,594 100 593 15,870 13,215 28,600 58,378418918 Individual - Other 10 10 0 0 10 0 0 0 0 0 0 Standard416222 Corporate - Trade & Industry 1,500 215 300 25 1,800 0 593 2,720 2,500 0 5,813 Standard89418 Corporate - Trade & Industry 5,628 2,157 3,372 3,101 9,000 0 0 6,300 7,500 25,200 39,000 Standard89000 Corporate - Trade & Industry 650 280 0 0 650 0 0 850 715 3,400 4,965 Standard

136580 Corporate - Trade 2,000 1,269 4,000 1,478 6,000 0 0 6,000 2,500 0 8,500 Standard28909 Corporate - Contractor 134 134 0 0 134 100 0 0 0 0 100 Excellent

18 Individual 3,684 3,684 0 0 3,684 862 1,234 4,879 0 4,021 10,996353999 Individual - Other 516 516 0 0 516 331 65 449 0 0 845 Standard154783 Individual - Real Estate 1,826 1,826 0 0 1,826 331 1,076 2,433 0 0 3,840 Standard23477 Corporate - Other 83 83 0 0 83 0 93 120 0 240 453 Standard2817 Corporate - Contractor 295 295 0 0 295 0 0 465 0 637 1,102 Standard11661 Corporate - Car 843 843 0 0 843 0 0 1,239 0 2,478 3,717 Standard

378444 Corporate - Contractor 121 121 0 0 121 200 0 173 666 1,039 Standard19 Individual 1,777 1,777 0 0 1,777 700 0 0 0 0 700

299277 Individual - Other 1,777 1,777 0 0 1,777 700 0 0 0 0 700 Excellent20 Individual 1,769 1,769 0 0 1,769 0 3,160 938 0 0 4,098

152160 Individual - Real Estate 1,769 1,769 0 0 1,769 0 3,160 938 0 0 4,098 Excellent

7,227,946

325,000394,000

Direct Facilities('000) Indirect Facilities('000) Total

Type Of Collateral

QIIB Overview

Credit: Provisioning Policy

Policy: Follow QCB regulations and IFRS

QCB provisioning regulations are stated as followings :

Banks should estimate appropriate provisions on the credit facilities according to the IFRS, provided that such

provisions are not be less than the following ratios calculated on the outstanding credit facilities after deducting the suspended interest (return) and value

of the collaterals as mentioned below:

Committed Credit Facility According to Bank’s Management

Substandard 20%

Doubtful: 50%

Bad:100%

65

Credit: Collateral Policies

• Retail: mortgage over residential properties and securities, recovery of assets

• Corporate: mortgage over real estate properties, inventory, cash, securities, corporate guarantees

• Securities: cash or securities• Islamic: transfer of title

Protection

• Real Estate: transfer of title deed• Listed Equities: sale of assets• Automobile: joint title with Ministry of Transport

Enforcement

66

Credit: NPFFs

Top 20 Non Performing Financing Facilities

Sr.# Customer Acc.# Overall Liability (QR) Category

1 484005 30,847,712 Substandard2 022015 18,870,394 Doubtful 3 286086 5,747,663 Doubtful 4 470047 3,330,683 Bad5 033381 2,968,329 Substandard6 024727 2,103,882 Bad7 366292 2,022,535 Substandard8 554557 1,830,194 Substandard9 084343 1,588,780 Substandard

10 432620 1,224,811 Substandard11 590043 1,199,392 Bad12 331227 1,186,771 Doubtful 13 001515 1,185,567 Substandard14 020747 976,516 Bad15 003726 965,051 Substandard16 044451 935,495 Substandard17 208190 918,892 Bad18 023063 817,355 Substandard19 457667 753,775 Substandard20 351015 711,074 Substandard

67

Credit: NPFFs

Time Series of Year End Nonperforming Assets Over the Past 5 Years

QR '000s FY07 FY08 FY09 FY10 FY11

Required Provision (%) NP-IFF Provision NP-IFF Provision NP-IFF Provision NP-IFF Provision NP-IFF Provision

Substandard (1-20%) 40,655 9,830 51,999 9,204 98,943 13,366 261,865 14,753 73,239 12,542

Doubtful (21-50%) 16,519 8,260 13,678 6,839 13,741 6,350 10,581 5,083 12,310 5,581

Bad (51-100%) 49,654 49,654 60,817 51,695 77,003 62,258 86,760 78,061 102,614 98,477

TOTAL 106,829 67,744 126,494 67,737 189,687 81,974 359,206 97,897 188,163 116,600

Note

Where necessary financing facilities are re-negotiated and if an agreement is reached, a new facility is provided, with the old extinguished

Any customer may choose to approach the Bank and re-negotiate an existing facility.

If an agreement can be reached, the existing facility is extinguished and a new facility provided on the newly agreed terms and conditions

Under these circumstances, the facility is “re-structured”

There are no specific conditions in regards to restructuring a finance facility– any customer can choose to do it

68

Credit: Off-Balance Sheet Items

QAR '000 2010 2011

Deferred or contingent Commitments

Acceptances 19,663 39,245

Letters of guarantees 681,054 913,115

Documentary credits 290,928 305,389

Collection notes 9,632 11,062

1,001,277 1,268,811

Other contracts and commitments

Commitments and unused credit limits 395,415 67,902

Restricted investment balances 12,659 -

408,074 67,902

TOTAL 1,409,351 1,336,713

69

Related Party Transaction

QCB regulations require full collateralisation of related party facilities Collaterals can be cash, bank guarantees (internationally rated, sound ), personal assets (investments, real

estate, securities etc except personal residence) Facilities limited to 7% of capital and reserves for a single director’s borrower group (35% for all directors)

70

Board of

directors

Others Board of directors

Others

QR’000 QR’000 QR’000 QR’000

Balance sheet itemsAssetsMurabaha & Musawama 33,989 28,721 194,431 74,930 Istesna 75,948 - - Ijarah 49,828 115,460 134,750

159,765 28,721 309,891 209,680

Liabilities Current account balances 5,583 29,883 49,268 82Unrestricted investment deposits 101,816 285,258 159,112 91,001

107,399 315,141 208,380 91,083

Off balance sheet items:Letter of credits, letter of guarantees and acceptances

600 6,637 4,987

Income statement items Fees and commission income 10,385 1,867 22,002

2011 2010

H. Financial Performance / Capital

Balance Sheet: Highlights

Commentary

Sustained asset growth of 18.5%, 29.1%, 20.9%, 17.1% from FY06 to FY10 respectively, notwithstanding the global financial crisis

As at 31 Dec 2011, total assets increased by 28.5% from Dec 2010

Strong balance sheet backed by quality credits; minimal provisioning

Sustained deposit growth through customer loyalty

Continued strong asset growth in 2011, bright outlook for 2012

Improving / strong economic growth

Islamic window opportunity

Infrastructure development (2022)

QAR ‘000 2006 2007 2008 2009 2010 2011

Financing Portfolio 3,556,943 4,190,847 7,487,200 9,070,011 9,177,747 10,588,963

Investing Portfolio* 4,371,994 4,965,692 3,553,742 5,255,072 2,339,936 5,500,206

Total Assets 8,397,934 9,951,209 12,842,464 15,520,911 18,178,941 23,357,626

Current Accounts 1,625,773 2,033,327 2,326,867 2,451,729 2,836,131 3,952,019

Unrestricted Investment A/Cs 5,070,434 5,184,551 6,812,280 9,101,563 11,197,751 14,138,758

Equity 1,425,193 2,356,384 2,780,290 3,799,349 3,817,298 4,893,260

Dividends Bonus Shares 50% 80% - - - -

Cash - - 40% 40% 37.5% 35%

Year on Year Growth

Financing Portfolio n/a 17.8% 78.7% 21.1% 1.2% 15.4%

Investing Portfolio n/a 13.6% -28.4% 47.9% (55.4)% 125.3%

Total Assets n/a 18.5% 29.1% 20.9% 17.1% 28.5%

Current Accounts n/a 25.1% 14.4% 5.4% 15.7% 39.4%

Unrestricted IA n/a 2.3% 31.4% 33.6% 23.0% 26.3%

Equity n/a 65.3% 18.0% 36.7% 0.5% 28.2%

72

* 2010 figures re-stated due to new classification in 2011

Un-restricted Investment Accounts

QR’0002009 2010 2011

(a) By type

Saving accounts 2,176,137 2,833,180 4,447,529

Time accounts 6,799,263 8,215,600 9,514,072

Current Account's 2,473,819 2,936,241 3,968,016

11,449,220 13,985,021 17,929,617

(b) By sector

Government and Government institutions 942,033 1,071,794 1,348,292

Individuals 6,547,070 8,801,493 12,911,296

Corporate 2,011,976 3,236,046 2,308,668

Financial institutions 1,948,141 875,688 1,361,361

11,449,220 13,985,021 17,929,617

Key Performance Indicators

Saving accounts (Year on Year) -13.1% 30.2% 60.0%

Time accounts (Year on Year) 59.7% 20.8% 15.8%

Current Accounts (Year on Year) 5.2% 18.7% 35.1%

Government (Year on Year) 36.0% 13.8% 25.8%

Individuals (Year on Year) 3.6% 34.4% 46.7%

Corporate (Year on Year) 14.9% 60.8% -28.7%

Financial institutions (Year on Year) 455.4% -55.1% 55.5%

73

Profit & Loss: Highlights

Commentary

Consistent profitability from FY07 to FY10; FY 2011 profitability achieving targets

Fallout of global financial crisis impacted Middle East later in 2009 – income from investment activities declines sharply in 2009; credit slowdown effect felt in following year with 2010 income from financing activities growing at a markedly slower rate

Impairment effects felt in 2010 provisioning, situation improved in 2011

Improved profit sharing differential for the Bank due to lower financing costs

Benefit of global slowdown is controlled expense growth

QAR ‘000 2006 2007 2008 2009 2010 2011

Income from Financing Activities 378,763 397,883 529,308 782,971 855,020 851,081

Income from Investing Activities 219,379 335,404 353,551 86,594 127,638 205,440Other Operating Revenues 81,831 72,685 49,892 88,375 102,723 77,400

General and Admin Expenses 85,026 94,090 129,267 149,175 153,513 181,945

Depreciation and amortisation 7,511 7,104 8,457 10,047 11,690 12,986Impairment of financial investments 11,047 26,752 86,954 0 41,045

1,821

Impairment of receivables and financing activities 10,555 0 0 16,500 16,064 19,343Impairment of investment properties 0 0 2,477 0 0 0

Other Income 11,555 0 0 0 25,228 0

Share of URIA in Net Profit 170,245 193,411 204,438 270,881 329,470 264,790

Net Profit Due to Shareholder's 399,024 479,995 501,158 511,337 558,827 653,036


Financing Activities (Year on Year) n/a 5.0% 33.0% 47.9% 9.2% -0.5%

Investing Activities (Year on Year) n/a 52.9% 5.4% -75.5% 47.4% 61.0%

Other Op Revenue (Year on Year) n/a -11.2% -31.4% 77.1% 16.2% -24.7%

G&A Expenses (Year on Year) n/a 10.7% 37.4% 15.4% 2.9% 18.5%

URIA Net Profit (Year on Year) n/a 13.6% 5.7% 32.5% 21.6% -19.6%

Net Profit (Year on Year) n/a 20.3% 4.4% 2.0% 9.3% 16.9%

74

Earnings Quality: Highlights

Commentary

Strong core earnings – not reliant on asset sales

For 2007, 2008, non-core earnings increased significantly due to asset sales – taking advantage of increased asset valuations in the run-up to the global financial crisis

Core earnings in 2011 impacted by QCB’s monetary policy (eg consumer lending rate restrictions, reference rate reductions)

(QR 000') 2006 2007 2008 2009 2010 2011

NPAT 577,389 678,026 705,596 782,218 888,297

917,826

Less: Non-Recurrent Earnings

Gain on sale of investments 30,040 84,649 67,392 2,928 -1,890 2,098

Dividend Income (from investments) 24,769 38,079 57,498 32,493 63,167

170,436

Provision for investments 11,047 26,752 86,954 0 41,045 1,821

Other non-core earnings (Real Estate, associates income) 5,722 24,068 124,894 15,850 58,839

14,051

Core Earnings

Core Earnings NPAT 527,905 557,982 542,766 730,947 809,226 733,062

Non-core Earnings NPAT 49,484 120,044 162,830 51,271 79,071 184,764


Core Earnings / NPAT 91.4% 82.3% 76.9% 93.4% 91.1% 79.9%

75

398529

783855 851

335

354

87

128205

64

80 88

10077

13

-25

6

97

2007 2008 2009 2010 2011

Income from Financing Activity Income from Investing Activity

Commission and Fee Income Trading Income

810 938 964 1,092 1,140

Revenue: Analysis

Source: QIIB Financial Statements

Commentary

Financing activity core revenue source for the Bank and has grown strongly from FY07 to FY11

Income from investing activities stable from FY07 to FY08 with subsequent reduction in FY09 and FY10 due to the impact of the global financial crisis

Commission and fee income relates to revenue earned on upfront, transactional, establishment and commitment fees, which has grown from FY07 and remains strong

Trading income represents a small part of the revenue base of the bank, primarily FX and since 2011, augmented by limited Sukuk trading.

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Expenses: Analysis

Source: QIIB Financial Statements

Commentary

G&A represents the largest expense line item in the P&L and this has grown in line with bank balance sheet growth

QIIB apply a prudent approach to expense management

Commission and fee expenses from FY07 to FY11 represent a small part of total expenses

Depreciation and amortisation has grown moderately between FY07 to FY10, and has remained stable from FY09 to FY10 to FY11

Global financial crisis has cooled expense growth significantly from FY09 to FY10, but FY11 cost increases partly due to Qatari pay-rise

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4 5 6 6 7

94

129149 154

1827

8

10 12

13

0

50

100

150

200

250

2007 2008 2009 2010 2011

Commission and Fee Expenses General Administrative Expenses

Depreciation And Amortization

105 142 165 172 202

Profit Sharing Cost

78

(QR '000s) 2009 2010 2011

Average Balances 10,324,672 12,714,920 15,957,319

Profit Sharing Cost 270,881 329,470 264,790

Deposit Financing Rate 2.6% 2.6% 1.7%

Capital Adequacy

Commentary

Extremely strong capital base, sustaining at the circa 20% mark between FY08 to FY09, and with capital adequacy at 24.76% as at 31 December 2011

Capital quality is very high with Tier 1 capital adequacy ratio at 23.77% as at 31 December 2011, consistent with historical levels

Total capital ratios from FY06 to FY11 have consistently ranged between 20% - 25%, which is above the average capital adequacy ratio for the Qatari banking sector

(QR ’000) 2006 2007 2008 2009 2010 2011

Tier 1 capital 1,383,787 2,290,013 2,440,024 2,491,390 3,002,300 3,922,756

Tier 2 capital 28,401 42,369 42,410 10,460 107,478 163,160

Total capital 1,412,188 2,332,382 2,482,434 2,501,850 3,109,778 4,085,916

Total risk weighted assets 5,746,384 9,302,122 12,347,022 12,613,803 12,961,891 16,502,178

Tier 1 capital ratio 24.08% 24.62% 19.76% 19.75% 23.16% 23.77%

Total capital ratio 24.58% 25.07% 20.11% 19.83% 23.99% 24.76%


Tier 1 capital (Year on Year) n/a 65.5% 6.6% 2.1% 20.5% 30.66%

Tier 2 capital (Year on Year) n/a 49.2% 0.1% -75.3% 927.5% 51.81%

Total capital (Year on Year) n/a 65.2% 6.4% 0.8% 24.3% 31.39%

Total risk assets (Year on Year) n/a 61.9% 32.7% 2.2% 2.8% 27.31%

Total capital ratio (Year on Year) n/a 2.0% -19.8% -1.3% 21.0% 3.20%

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Dividend Approach

• Transfer of profits (10%) to statutory reserve up to 100% of paid-up capital

• Basel II capital requirements• Central bank approval required

Regulatory requirements

• Capital requirement for growth, expansion• Capital adequacy planning: Basel III implementation• Management / board consensus• Up-streaming from subsidiaries/associate investments

Internal / business

requirements

• 40% - 45% payout annually• Manage shareholders’ expectations vis-à-vis

internal/business requirements• Majority shareholders representation on Board of

Directors

Shareholders expectations

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Ratios

Commentary

Loan loss reserve to gross loans at circa 1% is supported by risk reserve at 1.75% of gross financing facilities

Non-performing loans ratio remains low at 1.6%, below banking sector average

Liquidity improving and stable Strong capital base has

resulted in reducing ROE from 19.5% in FY08 to 14.7% in FY10, but improving in 2011 with growing profitability to achieve 15.0% ROE

Stable efficiency ratio at circa 20% mark

2008 2009 2010 2011

Assets Quality Ratios

Loss Reserve to Gross Islamic Financing Facilities 0.7% 0.7% 0.9% 1.0%

Non-Performing IFFs to Gross IFFs 1.4% 1.7% 3.1% 1.6%

Loss Provision Charged to Gross IFFs 0.0% 0.2% 0.1% 0.2%

Capital Adequacy Ratios

Total Equity to Total Assets 21.7% 24.5% 21.0% 20.9%

Total Equity to Gross IFFs 33.4% 41.5% 41.2% 42.1%

Free Capital Funds (Riyals) 2,279,306 3,236,024 3,373,287 3,804,517

Liquidity Ratios

Net IFFs to Total Deposits 90.1% 78.4% 64.9% 58.5%

Liquid Asset Ratio 23.4% 30.2% 40.5% 43.5%

Profitability Ratios

Return on Average Assets 8.2% 6.8% 6.6% 5.5%

Return on Average Equity 19.5% 15.5% 14.7% 15.0%

Cost/Income 18.9% 23.2% 21.2% 22.4%

EPS 3.97 3.89 4.03 4.38

Cash Dividend Payout 40.00% 40.00% 37.50% 35.00%

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Performance Review and

Forecast

Regular reviews of performance Regular forecasts to supplement budget and performance monitoring

Bottom up Approach

Top Down Review

Individual business and operating units prepare a unit-level budget Drawn from the strategic plans Financial budget developed from non-financial aspects as well

Overall objectives communicated to units Review of budgets by business and operating units Managed top down development vs Board of Directors expectations Final approved budget communicated to all units

Financial Planning Process

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DISCLAIMER

Acceptance by recipients of a copy of this document will be deemed to constitute an acknowledgement and agreement that:

• this document has been prepared by QIIB and accepts no liability, express or implied, to any other parties or recipients; • the reliance which can be placed upon this document is a matter of commercial judgment and each recipient must make,

and will be deemed to have made, such investigations as it considers necessary to form its own opinions on the subject of this document;

• this document has been based upon information which is believed to be reliable but has not been independently verified by QIIB, as such, QIIB accepts no liability or responsibility for the adequacy, accuracy, completeness or currency of, nor makes any representation or warranty, express or implied, with respect to the information contained in this document or on which this document is based or as to the reasonableness of any projections which this document contains;

• QIIB accepts no responsibility or liability for advising any recipient of any changes or additions to the information contained in this document;

• QIIB may, from time to time, trade in any securities, either as principal or as intermediary, underwrite an issue of securities, earn brokerage or commission or have a long or short term position in any securities or instruments which are the subject of this document;

• the law in certain jurisdictions may restrict the distribution of this document and recipients warrant that they are required to inform themselves about, and to observe, any such restrictions, and QIIB accepts no liability to any person in relation to the distribution of this document in any jurisdiction; and

• this document does not constitute, and may not be used in connection with an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

• For the purposes of this disclaimer, QIIB refers to Qatar International Islamic Bank, its subsidiaries and associated companies, together with their respective directors, officers, employees and agents, both collectively and individually.

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Appendix A: Risk Management

Framework

Philosophy

Risk Management: Framework

Key Techniques

Detailed and documented framework Quantification of risk parameters where possible International best practice Continued development of credit and operational risk management processes Implementation of internal rating, collateral management and operational risk

systems Mechanism to identify, assess and control the risks to which the Bank is exposed

to

To ensure that QIIB is not subject at any time to any undue or excessive risks beyond the levels approved by the Board of Directors

To achieve a balance between the current and future risks incurred by QIIB and its targeted returns on equity for its shareholders

To protect the reputation, solvency and liquidity of the group or its ability to conduct its selected businesses in a continous manner

Internal Credit Risk Ratings Stress Testing

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Reorganisation of credit extension functions and segregation of duties separating portfolio development and management, operations and monitoring into three different areas of responsibility

Segregation

Board approved credit underwriting policies for three business segments: corporate, SME’s and retail banking

These policies incorporate standards in accordance with industry advances and best practices

The Board has approved policies governing extending credit and investments into foreign markets or to foreign entities

Board Approvals

Establishing a risk-based hierarchy for credit approvals consistent with a conservative approach limiting individual authorities

Adequate customer diversification Adequate collateral with appropriate levels of authority Efficient and effective credit approval process and credit control limits Adequate provisioning and compliance with regulatory limits and guidelines

Policies

Adopting a committee-based evaluation process to ensure different views are taken into consideration

Portfolio performance monitoring and reporting to the boardCommittee Evaluation

Risk Management: Credit Risk

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Board approved market risk policies consistent with Basel II requirements Additional standards for profit-rate (interest) risk are included in the board

approved Basel II implementation documents Periodic reporting to Board, ALCO and Risk Committee

Board

Comprehensive and conservative policies covering equity price risk, liquidity risk , FOREX risk and profit rate risk

No open positionsPolicies

Risk Management: Market Risk

Stress Testing

Periodic stress testing and scenario analysis

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Comprehensive operational risk management policy A functional automated operational risk framework and reporting system is

envisioned pending Board approval, which is expected, that will cover (a) risk and control assessments (b) key risk indicators and (c) risk and loss events database

Operational risks are being mapped with correlated risk mitigants Proper IT security focus Strict web monitor QIIB manages its operation risk in line with QCB’s directives and Basel accord

guidelines

Operational Risk

Treasury manages liquidity in coordination with the financial controller Credit and market risk department monitors liquidly risk and submits regular

reports to the Risk Committee Historically QIIB has not experienced any liquidity concerns, however, mitigating

measures are in place should it become an issue

Liquidity Risk

Risk Management: Operational & Liquidity Risk

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Risk Management: Policy Supports

Risk managers report directly to the Board

Three separate departments that manage and monitor QIIB’s risks

Adequate segregation of duties

Consistent reporting to the Board and management

Ongoing training and development

Independent reviews: internal and external

auditors and regulators

Implementation of integrated MIS software

Experienced personnel Policy and Procedure Manuals

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Risk Management: Basel II & III

Basel II

Pillar 1: implemented

Basel II

Pillar 2 and 3: not fully implemented in Qatar

Basel III

Intended accelerated implementation timetable

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Appendix B: Credit

Credit: General Principles

Completeness

Customer Knowledge

Credit Legitimacy Principle

Collateral

Collectability

QIIB requires each customer to have a specific credit repayment schedule, fully documented. To this end, customers shall be obliged to provide full and accurate financial information supporting smooth credit repayment

It is reasonably required that no adverse market information or credit aggregate position /credit bureau data exist against the customer or any other parties involved

QIIB does not grant credit facilities to individuals or businesses managed or controlled by persons whose ethics, reputation, or business legitimacy are questionable

QIIB grants credit facilities, at their own discretion, to customers whose financing, as well as the use of credit products are transparent and abiding by the rules and regulations of Central Bank of Qatar

A secondary repayment source shall be ensured for every credit, in addition to the first way out which is the cash flow. Apart from that, and on a case-by-case basis, it is imperative to take sufficient collateral and/or security minimizing credit risks or guaranteeing timely payment. Some of the key principle being

No credit facilities to lines of businesses we have no knowledge / No credit facilities to, charity funds, or other non profitable institutions / No credit facilities for weapons or military systems / Financing start up businesses requires extremely careful handling (e.g. new products, new technology)

QIIB controls, handles and monitors effectively the credits granted to customers, in order to secure their Collectability and proceed with business or legal actions in time, for the protection of Bank’s interests

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QIIB Overview

PORTFOLIO LEVEL Clear tolerance limits and risk policy set at the Board level Portfolio quality is examined on a regular basis with periodic stress testing Concentrations together with mitigation strategies are continuously

assessed Credit risk rating is based on quantitative, qualitative and expert judgment Concentration risks are managed continuously by diversification Credit limits for borrower, ownership and industry sectors The “one obligor concept” used in the Bank to identify aggregate exposure

to any one single borrower or group of borrowers who are related in such a way as to present the same risk profile as one single borrower

Monitoring capital adequacy required according to Basel II and the Qatar Central Bank regulations

The Bank continues to upgrade and fine-tune the above in line with increasing regulatory requirements and the challenging business and financial services industry environment

CUSTOMER LEVEL Rigorous financial, credit,

obligor’s risk rating and overall risk analysis for each customer / transaction

Annual and interim individual credit reviews any weakness or warning signals and consider proper remedies in case of need

Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups

Credit: Monitoring

Overview: The Board of Directors reviews and affirms QIIB’s overall credit risk policy and through its various committees,

ensures that senior management maintains comprehensive credit risk management policies. The bank addresses the challenge of banking risks comprehensively under an overall enterprise risk management

policy applying strict financing practices. Risk management reports to the Board’s Risk Committee. Credit risk management enhances the centralized reporting of credit risk and is responsible for the rollout of the

internal risk rating system within the Bank.

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Credit: Reports

Frequency of Reports Credit risk management reports to the Board’s Risk Committee on a quarterly basis and on an adhoc basis where required

MIS Reports / OtherInternal Risk rating figures.

Credit Portfolio figures, past dues figures, Capital Adequacy

Scope of reportsCredit risk management reports includes credit portfolio figures,

concentration, past dues figures, capital adequacy,

internal risk rating, expected loss and various stress tests on

the financing book

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QIIB Overview

Financial viability of the proposed transaction Detailed analysis of key financial data Verification of the analysis results by comparison with external ratings agencies Country, currency and banking rates provided by external rating agencies, where

available Evaluation of proposed limits according to the results of financial data analysis

Credit: Setting Limits

The limits for transactions with institutions in each country are proposed by QIIB's International Investment Department. The Market Risk Department role is to raise recommendations or concerns regarding these limits to the limits committee depending on the following:

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QIIB OverviewCredit: Non-Performing Financing Facilities (NPFF’s)

QCB define NPFF as:non-performing credit facility as “such amounts do not fulfill their commitments in conformity with the due dates and agreed conditions for a period of 3 months or more, or there are indicators or evidence that such account holders are not able to fulfill their commitments in full as agreed upon

QCB use the following NPFF classifications: Substandard 3 months or moreDoubtful: 6 months or moreBad: 9 months or more

(Reference: Qatar Central Bank Regulations – Instructions to Banks (March 2009) Eleventh Edition - Part (VII) – Third)

KEY INDICATORS OF NON PERFORMANCE

Customer has defaulted to pay one of the installments of the financing or the like

The agreed payments of the other direct credit facilities are past due

The limited granted for the other direct credit facilities is not renewed without submitted any acceptable reasons

The balance exceeds limits granted for the other credit facilities by 10% or more without submitting any acceptable reasons

OTHER INDICATORS OF NON PERFORMANCE

Borrower’s group has doubtful or bad accounts that have negative effects on the borrower

Insufficiency of sources for repaying the full value of the debt as well as the insufficient collaterals

There are insufficient repayments to the overdrafts and overdrawn accounts that meet the nature of the account or the agreed conditions

Gaps in the contract

Evidence of customer insolvency

Policy: Follow QCB concentration definition and regualtions

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QIIB Overview

Credit: Provisioning Policy

Banks shall apply the following haircuts on the collateral for the following categories:

Real Estate: 50% of the market value may be deducted but must not exceed 50% of the outstanding balance of the credit facility under the following circumstances: (a) the real estate should be the first degree mortgage in favour of the bank (b) no difficulty in selling the property in favour of the bank (c) two independent valuations

Securities: 50% of the market value of stocks or other securities listed in the exchange shall be deducted from the outstanding credit facility under the following circumstances: (a) the bank should possess pledges in favour of the bank to be able to sell the securities to settle the debt (b) no hurdles to liquidate the securities to settle the debt

Customer Deposits: 100% of customer deposits on which the bank has a lien may be deducted from outstanding credit facilities

Bank Guarantees: 100% of the unconditional bank guarantees may be deducted if the same is issued by banks with internationally acceptable rating

Precious Metals: 50% of the market value of the precious metal shall be deducted provided that the metal are independently valued and the bank has the appropriate pledge in favor of the bank

Reclassification of Credit Facilities

Banks are required to inform the QCB whereas they want to reclassify the credit facilities from non-performing to performing credit facilities as outlined in QCB circular no. (98/2006) dated 10/07/2006

Updating and Submission of Provision Data on Non-performing Credit Facilities

Banks shall complete data entry and updating on provisions made against NPL’s through the IT systems as per QCB instructions

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QIIB Overview

Credit: Risk Concentration

Maximum Limit of Credit Concentration Single Customer (credit facility): 20% of banks capital and reserves Major Shareholder: 10% of banks capital and reserves Single Customer (borrowing group): 25% of banks capital and reserves or must not exceed QR 3 billion Associate: 25% of banks capital and reserves Banks Staff: not allowed with the exception of finances granted to their employees for personal purposes in accordance with

their internal employment policies approved by the Board and HR departments External Auditor and Related Families: not allowed Other:

Total credit facilities granted to all customers and their borrowing groups, at 10% or more of bank’s capital and reserves, must not exceed 600% of banks capital and reserves

QCB approval is required for granting finance at 10% or more of the banks capital and reserves and the maturity exceeding 10 years

Total credit granted to related parties must not exceed 100% of bank’s capital and reserves Bank Limits:

Credit facilities granted to Ministry of Economy and Finance and to the institutions and corporations sponsored and guaranteed by the Ministry of Economy and Finance

Credit facilities guaranteed by cash deposits or margins Credit facilities guaranteed by irrevocable and unconditional banking guarantees from a bank or financial institution Bid bonds and credit facilities granted by banks

Policy: Follow the QCB concentration definition and regulations

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Credit: Risk Concentration

Real Estate (Maximum Granted to All Customers) The average of the total amount of 150% of the banks capital and reserves and 15% of customer deposits, with the exception

of deferred profits, when calculating the total amount of real estate financing, with the following exceptions: Real estate finance granted to the government that are guaranteed by the MOF; Finance granted to contractors to carry out the real estate projects for the public and private sectors ; Real estate projects against the following collaterals: (a) guarantee from MOF (b) cash collateral (c) unconditional and

irrevocable bank guarantee issued by a financial institution with a sound financial position;

Consumer Finance Facilities (Maximum) Total monthly obligations against customer’s salary, including obligations of consumer finance, should not exceed 50% of salary The maximum consumer finance facility limit to a single customer should not exceed QR 2.5 million with a maximum period of 7

years

Country (Percentage to Capital and Reserves – Tier 1) First Category Country 0% risk weighted according to Basel II 250% of Tier 1 Second Category Country 20 - 50% risk weighted according to Basel II 100% of Tier 1 Third Category Country > 50% risk weighted according to Basel II 50% of Tier 1

Deposits First Category Banks Rated not less than A3 and A- not exceed 25% of banks capital and

reserves Second Category Banks Rated not less than Baa2 and BBB not exceed 10% of banks capital and

reserves Third Category Banks Rated less than 2nd category not exceed 5% of banks capital and reserves

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2012 Moody's Ratings Review

Documents

Transcript of 2012 Moody's Ratings Review