Doha Bank Annual Report - 2017

Transcription

1. ANNUAL REPORT 2017 1
2. His Highness Sheikh Tamim Bin Hamad Bin Khalifa Al-Thani Emir of the State of Qatar 2 DOHA BANK
3. 04 DOHA BANK AWARDS 06 GLOBAL NETWORK 12 INTERNATIONAL NETWORK 14 MANAGEMENT REPORT 50 INDEPENDENT AUDITOR ’S REPORT 118 DOHA BANK CONTACT DIRECTORY 08 FINANCIAL HIGHLIGHTS 09 CHAIRMAN’S MESSAGE 10 BOARD OF DIRECTORS 11 EXECUTIVE MANAGEMENT 36 CORPORATE GOVERNANCE 48 ORGANISATIONAL STRUCTURE 49 FINANCIAL RESULTS 119 DOHA BANK BRANCH DIRECTORY (LOCAL) 120 PAY OFFICES & E-BRANCHES 121 OVERSEAS BRANCHES & REPRESENTATIVE OFFICES ANNUAL REPORT 2017 3
4. DOHA BANK AWARDS Doha Bank has been recognized by various professional institutions for its consistent and strong financial performance as well as its innovative banking products and services . Doha Bank’s international expansion strategy has also been identified as one of the key factors of its success and recognized by the Awarding institutions. The awards stand testament to the commitment of Doha Bank to ensure continuous improvement in its product and service quality as well as offer the best possible customer service. Few of the key awards received in 2017 are as below: Best Regional Commercial Bank - 2017 Banker Middle East Best Local Bank in Qatar - 2017 EMEA Finance Most Innovative Bank in the Middle East - 2017 EMEA Finance Best Bank Governance - 2017 Capital Finance International Qatar Domestic Trade Finance - 2017 Asian Banking & Finance Awards Qatar Business Excellence Awards - 2017 Best Business Bank MEA Qatar Domestic Project Finance - 2017 Asian Banking & Finance Awards Best Regional Enterprise For Excellence in Quality in Banking - 2017 Europe Business Assembly 4 DOHA BANK
5. 2017 ,2016,2015, 2014, 2013, 2010 2009, 2007 & 2006 Best Local Bank in Qatar EMEA Finance Best Bank Governance Capital Finance International Most Innovative Bank in the Middle East EMEA Finance 2017, 2016, 2012, 2011, 2010 2017 2017, 2016, 2010 3G global governance award Global Good Governance Awards Qatar Domestic Trade Finance Asian Banking & Finance Awards Qatar Domestic Project Finance Asian Banking & Finance Awards Best Business Bank MEA Qatar Business Excellence Bank 2017 2017, 2016, 2014 2017 2017 Best Regional Enterprise Award For “Excellence in Quality in Banking” Europe Business Assembly Best Commercial Bank in Qatar International Finance Award Best Web/Mobile Banking Services Banker Middle East 2017 2016, 2014, 2013 2016, 2015 2016, 2015 Best Saving Account Banker Middle East Golden Peacock Global Award for Corporate Social Responsibility Institute of Directors Best Co-branded Credit card Banker Middle East Product Awards 2016, 2015 2016, 2014, 2013, 2012 2016, 2015 Best Commercial Bank Middle East - Global Banking & Finance Review 2015, 2014 The Bizz - World Business leader World Confederation of Business Localization in Kuwait branch Board of Ministers of labor - GCC Environmental Award The Arab Organisation for Social Responsibility 2015 2015 2015, 2014 Best Regional Commercial Bank Banker Middle East Bank of the Year - Qatar Arabian Business - ITP Group 2015 Golden Peacock Global Excellence in Corporate Governance Institute of Directors ANNUAL REPORT 2017 5
6. GLOBAL NETWORK 1Qatar 2Dubai 3 Abu Dhabi 4 Kuwait City 5Mumbai 6Kochi 7Chennai 8London 9Frankfurt 10Istanbul 11Singapore 6 DOHA BANK 12Shanghai 13Seoul 14Tokyo 15 Hong Kong 16Sydney 17Toronto 18Sharjah 19Johannesburg 20Dhaka 21Colombo
7. MUMBAI ANNUAL REPORT 2017 7
8. FINANCIAL HIGHLIGHTS Key Figures 2013 (QR Mn) 2014 (QR Mn) 2015 (QR Mn) 2016 (QR Mn) 2017 (QR Mn) Total Assets 66,970 75,518 83,289 90,365 93,495 Net Loans & Advances 41,109 48,559 55,595 59,186 59,804 Customer Deposits 42,522 45,947 52,767 55,730 59,468 Total Equity 11,271 11,293 13,187 13,381 14,807 Total Revenues 3,208 3,517 3,708 3,950 4,428 Net Profit 1,313 1,359 1,354 1,054 1,110 Key Ratios (%) 8 2013 2014 2015 2016 2017 Return on Shareholders’ Equity 17.9% 16.5% 15.9% 12.1% 11.9% Return on Average Assets 2.18% 1.93% 1.70% 1.21% 1.21% Total Capital Ratio 15.90% 15.03% 15.73% 15.57% 17.51% Total Equity to Total Assets 16.83% 14.95% 15.83% 14.81% 15.84% Net Loans to Total Assets 61.38% 64.30% 66.75% 65.50% 63.96% Net Loans to Total Deposits 96.68% 105.68% 105.36% 106.20% 100.56% DOHA BANK
9. CHAIRMAN ’S MESSAGE In the Name of Allah, Most Gracious, Most Merciful, Dear Shareholders, Ladies & Gentlemen, Al Salamu Alaykum… On behalf of myself and the members of the Board of Directors (BOD), I would like to thank you all on this occasion for attending this meeting. I would also like to extend my sincere thanks to the BOD and the Executive Management for the achievements accomplished during the year 2017. The challenges faced by capital markets in this region have adversely affected all sectors this year including the banking sector and market liquidity. Nevertheless, due to the wise leadership of His Highness, Sheikh Tamim Bin Hamad AlThani, The Emir of Qatar, as well as the wise directives of the government and the cooperation of all governmental institutions in the country, we were able to overcome these problems and difficulties. An overview of the results of 2017 reveals that we have achieved good growth rates in most financial indicators. The total assets rose by 3.5% reaching to QR 93.5 billion, total portfolio of loans and advances rose by 1%, total customers’ deposits rose by 6.7% and the total shareholders’ equity reached to QR 14.8 billion. We also achieved net profit by the end of the year of QR 1,110 million compared to QR 1,054 million in 2016. These robust results were reflected in the performance indicators particularly the return on average shareholders’ equity i.e. (11.9%) and the return on average assets i.e. (1.21%). Based on these results, the BOD decided to put up a recommendation to the AGM to distribute cash dividend of QR (3) per share i.e. 30% of the paid up capital. During the year, the Board of Directors approved the bank’s five-year strategic plan, which incorporates certain amendments to the bank’s business strategy especially with regard to the activities of overseas branches and representative offices across the globe. The future plan of the bank includes implementation of an effective Risk Management strategy both at the local and international fronts, recruiting Qatari nationals, enhancing the levels of staff performance by recruiting highly experienced and qualified human resources, improving banks’ service delivery channels, upgrading the level of Corporate Governance in the bank, diversifying the income sources and strengthening the financial position with a view to achieving the highest level of effective operational performance. On the other hand, the bank has taken all measures to enhance its Corporate Governance system, whereby in addition to the policy manual on the BOD roles, responsibilities and terms of reference, the BOD Committees, the Executive Management Committees, Code of Ethics, we also approved the bank’s Corporate Governance Policy and Procedures. The BOD also enhanced the concepts of internal controls, transparency, disclosures, shareholder relations and stakeholders’ rights, etc. We also proposed in the EGM’s agenda, certain amendments/additions in the bank’s Articles of Association for your endorsement in order to align the AoA with the provisions of the Governance Code for Companies and Legal Entities issued by Qatar Financial Markets Authority. However, the bank’s report on Corporate Governance for the year 2017 is readily available to you in this meeting which reflected the Corporate Governance standards implemented by the bank. Finally, on behalf of the Board of Directors and myself, I would like to extend my sincere thanks and gratitude to H.H. The Emir, Sheikh Tamim Bin Hamad Al-Thani, H.E. The Prime Minister, Sheikh Abdullah Bin Nasser Al-Thani, H.E. The Minister of Finance, Mr. Ali Sharif El-Emadi, H.E. The Minister of Economy & Commerce, Sheikh Ahmed Bin Jassim Bin Mohammad Al-Thani, and H.E. The QCB Governor, Sheikh Abdullah Bin Saoud Al-Thani, and to all officials of Qatar Central Bank, the Ministry of Economy and Commerce, Qatar Financial Markets Authority and Qatar Exchange for their continued cooperation and support. Many thanks and appreciation to all the shareholders and customers for their confidence in the bank and to the Executive Management and all staff of the bank for their continuous cooperation and efforts which led to achieving impressive results for Doha Bank. Fahad Bin Mohammad Bin Jabor Al-Thani Chairman ANNUAL REPORT 2017 9
10. BOARD OF DIRECTORS Sheikh Fahad Bin Mohammad Bin Jabor Al Thani Chairman of the Board of Directors Mr . Ahmed Abdul Rahman Yousuf Obaidan Vice Chairman Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani Managing Director Graduate of the Royal Academy, Sandhurst, UK General Manager, Al Waha Contracting & Trading Est. Chairman of the Board of Directors, Qatar Industrial Manufacturing Co. Board Member, National Leasing Holding Chairman of the Board of Directors Qatar Oman Investment Company “State of Qatar representative” Sheikh Falah Bin Jassim Bin Jabor Bin Mohammad Al Thani - Representative of Jassim and Falah Trading and Contracting Co. Board Member Mr. Ahmed Abdullah Ahmed Al Khal Board Member Board Member, Al Khaleej Takaful Group Sheikh Abdulla Bin Mohamed Bin Jabor Al Thani Board Member Chairman of the Board of Directors Al Khaleej Takaful Group Businessman Chairman of the Board of Directors National Leasing Holding Mr. Hamad Mohammed Hamad Abdulla Al Mana Board Member Vice Chairman, Al Mana Group Board Member, Qatar General Insurance & Reinsurance Co. Board Member, Qatar Navigation Co 10 DOHA BANK Mr. Ali Ibrahim Abdullah Al-Malki Mr. Nasser Khalid Nasser Abdullah Al-Mesnad Independent Member Independent Member
11. EXECUTIVE MANAGEMENT Dr . R. Seetharaman Chief Executive Officer Sh. Mohamed Fahad M J Al-Thani Acting Chief Human Resources Officer Mr. David Challinor Chief Financial Officer Mr. Abdullah Asad Al-Asadi Executive Manager, Shareholders Affairs Mr. Krishnan C.K. Chief Wholesale Banking Officer Mr. Khalid Alnaama Head of Public Sector Mr. Hassan Ali Kamal Corporate Branch Manager Mr. Maher Ahmed Ali Ahmed Branch Manager- Al Mirqab Mr. Khalid Latif Chief Risk Officer Mr. Khalifa Al Kaabi Head of Recovery Mr. Frank Hamer Chief International Banking Officer Mr. Ahmed Ali Al-Hanzab Head of Administration Mr. Braik Ali HS Al-Marri Acting Chief Retail Banking Officer Mr. Peter Edward Roberts Chief Operating Officer Mr. Yousuf Ahmed Mandani Main Branch Manager Mr. Mokhtar Abdel Monem Elhenawy Legal Advisor to the Board and Company Secretary Mr. Jamal Eddin H. Al Sholy Chief Compliance Officer Dr. Mohammad Omar Abdelaziz Daoud Chief Internal Auditor ANNUAL REPORT 2017 11
12. INTERNATIONAL NETWORK 12 Mr . M. Sathyamurthy Deputy Head International Banking Singapore Representative Office Mr. Loai Fadel Mukamis Chief Country Manager - Kuwait Mr. Alaga Raja Country Head of UAE Mr. Manish Mathur Country Manager - India Mr. Hilton Wood Chief Representative Australia Representative Office Mr. Kanji Shinomiya Chief Representative Japan Representative Office Mr. Young Joon Chief Representative South Korea Representative Office Mr. Peter Lo Chief Representative China Representative Office Mr. Ivan Lew Chee Beng Chief Representative Hong Kong Representative Office Mr. Nezih Akalan Chief Representative Turkey Representative Office Mr. Maik Gellert Chief Representative Germany Representative Office Mr. Richard Whiting Chief Representative The United Kingdom Representative Office Mr. Venkatesh Nagoji Chief Representative Canada Representative Office Mr. Andre Leon Snyman Chief Representative South Africa Representative Office Mr. Ajay Kumer Sarker Chief Representative Bangladesh Representative Office Mr. Eranda Wishanake Weerakoon Chief Representative Sri Lanka Representative Office DOHA BANK
13. KUWAIT ANNUAL REPORT 2017 13
14. MANAGEMENT REPORT Global Economy Domestic Trend According to the recent IMF report January 2018 , global growth forecast has been revised to 3.9% for 2018 as well as 2019. The advanced economies are expected to grow by 2.3% in 2018 and 2.2% in 2019. The emerging and developing economies are expected to grow by 4.9% in 2018 and 5.0% in 2019 respectively. The sweeping U.S. tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners. The primary sources of GDP acceleration so far have been in Europe and Asia, with improved performance in the United States, Canada, and some large emerging markets, notably Brazil and Russia. Even though the United States Federal Reserve continues to raise interest rates gradually, it has been cautious, having responded to the turbulence of early 2016 by postponing previously expected rate increases. The European Central Bank has started to taper its large-scale asset purchases, which have played a critical role in reviving euro area growth, but has also signaled that interest-rate increases are a more distant prospect. IMF October 2017 report had revised Qatar’s economic forecasted growth to 3.1% in 2018. Qatar will raise LNG production by 30% to 100mtpa within five to seven years after lifting a moratorium on gas development earlier in 2017. Qatar was also ranked 25th in ‘the Global Competitiveness Report 2017-18’. India is projected to grow at 7.4% of its Gross Domestic Product (GDP) in 2018 making it the fastest growing economy among emerging economies; Last year’s slowdown was attributable largely to demonetization and the implementation of Goods and Services Tax (GST). IMF projected India’s GDP growth rate at 7.4% in 2018 and 7.8% in 2019. The commodity prices are rising and inflation challenges are expected to come up in 2018. The Middle East, North Africa, Afghanistan and Pakistan growth was expected to pick up in 2018 to 3.6%. Mr. Alaga Raja, Country Head of UAE for Doha Bank, receives the “Best Commercial Bank” at IFM Awards. 14 DOHA BANK Doha Bank CEO with H.E. President Maithripala Sirisena at President’s House in Sri Lanka. In response to the economic blockade, Qatar has emerged strong and has brought various reforms to transform itself into a self-reliant economy. Qatar’s reserves are more than twice of its Gross Domestic Product (GDP). With regards to financial stability, Qatar is strong, stable and functional. A new law for Public Private Partnership (PPP) businesses in Qatar should provide an additional level of comfort to the private sector and foreign investors. In February 2017, Qatar issued a new law on arbitration (the “Arbitration Law”), inspired by the UNCITRAL Model Law (the “Model Law”), an international template for law on arbitration. Qatar’s landmark residency plan introduced in 2017 is a welcoming social and economic reform. It will attract skilled expats to have a career in Qatar. In terms of food security, Qatar now has many local companies that are supporting the country and it can develop these businesses further and boost its food production to provide both locally and internationally. In 2017, Qatar has waived entry visa requirements for citizens of 80 countries. The Qatar 2018 budget allocations for health, education and transportation reached QR83.5 billion or 41% of total expenditure. The transportation
15. and other infrastructure projects were assigned the largest share in the 2018 budget with allocations of QR42 .0 billion, 21% of total expenditure. Sports sector and 2022 FIFA World Cup projects amounted to a total allocation of QR11.2 billion. Wholesale Banking Group advisory capabilities. CCB focuses its attention on effective credit monitoring in order to ensure superior asset quality, and, selectively establishing new relationships with prominent local and international companies; Doha Bank actively associates with selective large ticket infrastructure projects, real estate financing and other landmark financings. Wholesale Banking Group’s (WSB) strategy is vibrant, designed with the notion of prioritizing customer satisfaction, and system digitization. Focusing on projects, which hold up services and increase turnaround time, WSB has begun building processes that allow clients to be up to date on the status of their requests. Despite the political situation with regional neighbors and the tight liquidity resulting from low oil prices, WSB continued to fund and grow its assets in line with the market. Furthermore, the unit has consistently made progress in developing business in line with the risk appetite endorsed by the Bank’s Board of Directors. The continuing success of Wholesale Banking and the resilience of its business divisions illustrates the effectiveness of WSB strategy to successfully counterbalance external shocks, economic cycles and shifting capital flows. The organization under WSB is operated through following divisions • Corporate and Commercial Banking • SME Banking • Corporate and Structured Finance • Public Sector Unit • Cash Management Services • Mortgage Finance and Real Estate Services • Corporate Branches and Service Centers Dr. R. Seetharaman, CEO of Doha Bank, delivers a speech during the “Energy Sustainability – The Next Decade” in Mumbai. Corporate and Commercial Banking (CCB) offers a broad range of lending products including working capital finance, overdrafts, bill-discounting and term loans. Nonfunded facilities include Letters of Credit and Letters of Guarantees for local and cross-border financing. As the growth engine for the bank, CCB follows a proven and well-balanced growth strategy, responding to market challenges with flexibility and an enhanced spread of Mr. Ahmad Al-Hanzab, Head of Administration at Doha Bank, receives a token of appreciation on behalf of Doha Bank from the Qatar National Day Celebrations Organizing Committee. The Small-and-Medium Enterprise (SME) banking continues to concentrate on the lower risk of the more profitable medium-sized enterprises. SME’s operations are supported by strong digitization transforming the interaction with clients and guiding them on how to integrate new technologies and adapting straight-throughprocessing (STP). Consultant-Banking is also prioritized as partnerships with world-class consultants on liquidity and working capital management, managing operating expenses, establishing a reliable financial reporting and management information systems are provided to SMEs to support them in competing, developing and expanding their operations. Corporate Finance provides services for large-cap and mid-cap corporates, governments and financial sponsors. The division successfully closed a number of transactions as mandated lead arranger both within the GCC and internationally by leveraging on Doha Bank’s international footprint. Corporate Finance’s highly qualified team takes a holistic and research driven approach to the raising of capital for clients and has the ability to effectively leverage the bank’s balance sheet. Additionally, the team uses alternative sources of funds and risk distribution models to optimize the outcome for the client. Public Sector unit (PSU) provides services and banking solutions to government and semi-government institutions and corporations operating in Qatar. PSU has strong business relationships with these entities of various economic sectors including aviation, oil & gas, education, health and transportation and also specializes in financing the development of infrastructure projects in line with the State of Qatar’s National Vision 2030. The Cash Management Services (CMS) unit provides Doha Bank customers with rapid, reliable and cost effective solutions tailor made to meet their cash needs. CMS’ customized online platform contributes to customers’ operational efficiency and promoting reduction in operating costs. CMS offers services ranging from ANNUAL REPORT 2017 15
16. receivables management to secured cash pickup , to payables and liquidity management. high quality Sovereign debt to ensure a ready source of liquidity. Mortgage Finance and Real Estate Services (MFRES) offers a variety of products to meet individual and corporate needs, whether for the purchase of real estate, or the development of residential, commercial or hospitality projects. MFRES works closely with leading regional and international institutions to ensure that the process of securing a mortgage is completed in an effective and timely manner. Doha Bank will continue to evolve and align its investment and liquidity management activity to accommodate the requirements of Basel III. Political uncertainties in the macro-economic environment and a broad range of challenges will reflect on the agenda in 2018 and beyond. One of the most important threat faced by WSB is the possibility that the budget deficits of the largest economies within GCC will affect government spending and private consumption, which potentially can result in weakening credit qualities. For protecting the asset quality, regular portfolio reviews are being done. A risk distribution desk will also help to manage industry and peak exposures for individual borrowers. Liability Management has also been institutionalized to support cost efficient fund-raising. International Banking Group I n t e r n a t i o n a l B a n k i n g G ro u p ( I B G ) c o v e r s D o h a Bank’s international operations, facilitates substantial cross-border trade and is responsible for the overall relationship management with over 600 financial institutions worldwide. As part of its operations, IBG arranges loans and participates in syndicated loans to financial institutions across all the strategic international locations. IBG also supports the bank’s funding resources and treasury management by arranging cost effective term loan borrowings for the bank. The Representative Offices in Australia, Japan, Korea, China, Hong Kong, Singapore (South East Asia), Bangladesh, Turkey, Germany (Central Europe), United Kingdom, South Africa, Sharjah and Canada cover all relevant trade and infrastructure related transactions with the partner countries of Qatar, Kuwait, India and the UAE through reference only. A new representative office in Sri Lanka was approved in 2017 and is expected to open in 2018. A network of full-fledged branches in Kuwait, Dubai, Abu Dhabi and three branches in India offer the entire range of Wholesale, Retail, Treasury and Foreign Exchange besides Trade Finance products and services to the domestic customers. The branches also meet the cross-border banking needs of Doha Bank customers in these countries. Doha Bank sponsors the football team of Al Arabi Sports Club for two seasons. Treasury and Investments Group The Treasury and Investments (T&I) Group competitively offers a broad range products to customers. Products include foreign exchange, money market, fixed income, mutual funds, equity brokerage, commodities and notably precious metals. Doha Bank’s operations in India pave the way for the Bank to support all Non-Resident Indian expatriates in the GCC countries with the best-in class solutions including remittance solutions through all its existing branches in Mumbai and Kochi. During the year, the bank has obtained necessary local Regulators’ approval to shift its Raheja Branch to the new location in Chennai. The year also saw new product launches in India with NRI home loan product as well as wealth management, insurance and estate planning launched in cooperation agreements. T&I continues to focus on improving all aspects of its client servicing ethos through a dedicated and skilled sales team with diverse knowledge of both local and international markets. It remains T&I’s main objective to be a trusted partner in providing corporate risk management solutions in currency, commodities and interest rate products. T&I continues to execute on strategies to widen and diversify sources of funding for the Bank. Approvals are in place to issue up to USD2Bn under the Euro Medium Term Note (EMTN) Programme (with issuances planned in several currencies) and up to USD 5Bn under the Joint Certificate of Deposit (CD) / Commercial Paper (CP) Program. As on 31st December 2017, Qatar Exchange Traded Fund (QETF) is in its final stages of launching. The Bank’s investment philosophy remains prudent and cautious. The focus has been on increasing holdings of 16 DOHA BANK Representatives from Doha Bank and Citizens Bank (Nepal) after signing the e-Remittance Agreement. The overseas expansion of the Bank is in line with the strategic vision of the Board to have a worldwide operative presence to cater and serve the growing customer base across GCC and a robust emerging market in India with a synergy to the
17. Qatar market . The Representative Offices complement Doha Bank’s existing branch network both within and outside Qatar by better understanding the various international markets, thus enabling enhanced customer experience with globalized expertise for GCC companies. The international network aims to facilitate customers to conduct and optimize cross-border trade transactions between Qatar, Kuwait, UAE, India and other overseas countries. In line with the vision of the Board of Directors to expand the Bank’s overseas operation, the Bank constantly assesses the potential opportunities to expand the bank’s operations globally in select countries. Doha Bank also organized various knowledge sharing sessions, roadshows and forums across Singapore, Sydney, Kuwait, Frankfurt, New York, Toronto and London in 2017; Topics included inter alia ‘New World Order and Opportunities’, ‘Bilateral Opportunities between New York & Qatar’, ‘Qatar – A Land of Opportunities’, ‘Qatar – Germany Bilateral Opportunities’. Retail Banking Retail Banking Group is focused on building a profitable and sustainable business in Qatar, Kuwait and India. In the backdrop of the liquidity crunch, declining oil prices, rising interest rates, restructuring & reorganization in most of the industry sectors and price-led competition in the local market - has been quite a challenge for the retail business for the whole of 2017. Amidst these challenging environment, Retail Banking Group has sustained to a large extent and has maintained its Net Interest Margin (NIM) in a fiercely competitive market. Retail Banking Group offers a wide range of products and services to its customers through diverse delivery channels such as branches, electronic branches, mobile banking, internet banking, SMS banking, call centers, ATMs & Mobile Van ATMs. It was one of the first banks in Qatar to introduce phone and SMS banking, internet banking, mobile banking & payroll cards. In Qatar, Doha Bank has 27 Branches and has overseas branches in UAE, Kuwait and India. Doha Bank also maintains over 110 ATMs, 6 pay offices and 6 electronic branches in Qatar. Along with this, there are other delivery channels such as direct sales units, Al Riyada RMs, Private Banking RMs, Call Center and Bancassurance team. The Bank has an effective merchant acquisition program enrolling over 2,700 merchants and has installed over 4,600 point of sale machines in Qatar as on 31st December 2017. Dr. Seetharaman and other Doha Bank officials at the Certification Ceremony of the first surveillance audit of ISO 20000-2011. Dr. Seetharaman with H.E. Mr. Ranjan Mathai, former Indian Foreign Secretary and Indian High Commissioner to the UK, during the Knowledge Sharing Session on “Changing International Dynamics”. Retail Banking Group continued to utilize social and digital media, and developed complete 360° communication platforms across all touch points, adopting social media usage for listening to customer feedback and suggestions. With a view to reach out to its customers, and also a part of digital and customer experience journey, Retail Banking launched WhatsApp Chat service in 2017 that will offer customers immediate and personalized information. On the occasion of Qatar National Day, a new Arabic Mobile Banking App was released with new features such as improved experience for log-in, facial recognition, scheduled payments, one-touch balance check, etc. in the new app. The Digital, Product & Marketing team in partnership with the channels continue to lead the Retail transformation across all three markets - Qatar, India and Kuwait - with focus on digitization, cross-sell to drive fee income, shift to premium segment, new to bank customer acquisition & retention, grow low-cost deposit and grow revenue contribution from international markets. Another key objective is to enhance marketing & brand share of voice through digital & social media channels. We are in process of enhancing the Digital Marketing ecosystem with various business partners. A new version of DB customer loyalty program – Doha Miles was launched in May 2017 with over 11,000 customers registering to this program. The Bank also introduced ‘Doha Bank MyBook Qatar’ a mobile app version of MY BOOK which is the first incentive provider of ‘Buy One Get One Free’ (B1G1F) Offers in Qatar that was exclusively brought by Doha Bank. Furthermore, the Bank has soft launched Contactless Card Payments and 3D secure OTP for credit card in November 2017; Also launched new “Doha Global Cash Back”, 1st in Qatar (merchant funded 2500+ int`l brands) in November 2017. Remittance revenue has also increased significantly this year with the launch of new international money transfer to 200+ countries through the new mobile banking application. On the liabilities front, the ‘Al Dana’ savings scheme’s prize draws, got to see some interesting winners including a popular international football player and several others walking away with life-changing prizes this year. The annual Al Dana Green Run event - with the aim of promoting environmental awareness, and social and sports activities in Qatar - attracted the attention of general public for Al Dana product. ANNUAL REPORT 2017 17
18. Retail Banking plans to meet the liability crunch , curb the rising interest rates & to build a stable and long-term deposit base by introducing Flexi Save Deposit product, which offers customers to withdraw anytime from any of Doha Bank delivery channel. Retail Banking plans to launch Al Jana series 7 and revised the Flexi save product proposition to drive the deposit mobilization for 2018. On the loans front, Doha Bank launched a special bundled offer for high ticket loans aimed to acquire Qatari customers. Retail banking also launched car loan offer bundled with a free Comprehensive Car Insurance, hosted a special Suhoor banquet for its customers in June 2017. In a step aimed at rewarding environmentally-conscious new homeowners, Doha Bank, has launched Qatar’s first ‘Green Mortgage’ home loan program. Blood Donation initiative at Doha Bank. Al Riyada proposition offers a bouquet of product & services and life style differentiators like Products Services Lifestyles Visa Infinite Card 1 hr. Loan Approval Global Cash Back Flexi save Deposit 30 min Acct Opening Movie Ticket B1G1F Insurance services 30 sec call pick up Valet Parking & Concierge Services Worldwide Airport lounge Access For the NRI segment, Retail Banking launched an enhanced NRI customer proposition including Retail Home Loan product. It launched a tie up with Centrum for NRI Wealth Management in October 2017 and ‘Estate Planning’ through Warmond this year. The focus is to leverage the India presence to expand the business proposition to a large Indian community base in Qatar and Kuwait as a whole. For the Kuwaiti market, Retail Banking Group launched Doha Miles in October 2017. On the channels front, the Bank is committed on footprint optimization, digitization, transaction off-loading from branches to alternative channels and from call center to IVR. Retail Banking Group is aligned to branch & footprint optimization and have inaugurated its new branch in Mall of Qatar, opened another new branch at Doha Festival City in addition to relocating the Airport branch. To achieve operational efficiency, Retail banking has merged Handasa Branch with Main Branch, Umm Salal Branch with Al Kheretiat Branch, Muaither Branch with Al Rayyan Branch, 18 DOHA BANK Aspire Branch with Salwa Branch and have also closed Abu Hamour & Najada Pay-offices this year. With regard to reducing variable costs, the business unit has periodically revamped the website information on various products & services and using it as an effective channel for generating online leads. Retail Banking Group is seeking to consolidate and extend its strength in the retail sector through innovative products & services, leveraging technology, exploring self-service distribution channels and establishing best practices that are intended to streamline processes. The objective is to deliver an unprecedented customer experience in coming years in accordance with the Bank’s slogan, “There is so much to look forward to” and establish Doha Bank as one of the best Banks in the region. A discussion during the Knowledge Sharing Session on “Enhancing Customer Value through Wealth Management”. Doha Bank Assurance Doha Bank Assurance Company LLC (‘DBAC’) was established in 2007 by Doha Bank, being the first GCC bank to establish a fully-owned insurance subsidiary. The strategic vision of the company is to provide clients with a wide range of professional services to meet their holistic insurance needs and financial security. With authorization from the Qatar Financial Centre Regulatory Authority, the company is licensed to underwrite all lines of general insurance business (including Fire, Engineering, Marine, Aviation, Liability, Motor, Travel, Medical and Personal Accident). DBAC provides insurance advisory services and financial protection for all corporate entities & individuals, being a full end-to-end insurer with the following internal functions: • Executive Management • Finance • Sales & Marketing • Products • Underwriting (Motor & Non-Motor) • Claims (Motor & Non-Motor) • Reinsurance • Risk Management • Compliance & AML • Legal • HR & Admin • IT
19. Effectively showcasing its robust risk control framework and solid underwriting profits coupled with DBAC ’s extremely strong capital adequacy, S&P continued DBAC’s financial rating of ‘BBB+’ in 2017. In addition, DBAC also successfully became the first insurance company in Qatar to be awarded with ISO 9001:2015 certification, after the external assessment conducted last year. DBAC bears testimony to the fact that it has established itself as one of the preferred general insurance risk carriers for leading corporates in Qatar and is steadily expanding its footprint (with both Bank and non-Bank clientele). The company is empanelled by leading enterprises in Qatar as an approved insurance vendor and has one of the highest underwriting profit ratios domestically. The winners of Doha Bank’s Al Dana Saving Scheme posing with the QR 1m Mega Prize Cheque with senior officials of the Bank. Since inception, DBAC’s shareholder equity has steadily increased, due to DBAC’s prudent Underwriting, Risk and ALM/investment management; with significant aspirations to increase its market share and fully optimize its return on capital, in alignment with future growth strategies. In order to dramatically increase market share and revenue – DBAC will continue to capitalize on its strong parent branding and from identifying critical success factors; clearly articulate and execute its robust strategy. To facilitate the execution of sustainable and profitable growth, DBAC’s diverse and competitive product suite caters to all Bank/ non-Bank customers and is effectively integrated within its multi-channel distribution network (Retail, Corporate, SME, Project Finance, Mortgage Lending, Trade Finance, Brokers and Direct etc.) To maximize bottom line profitability and solid sustainability, all risk management facets comprise an integral part of operational controls (incl. underwriting, claims, pricing, reinsurance, MIS, ORM & ALM etc.) and with a welldefined destination model and clear/realistic and well executed strategy, there continues to be significant growth opportunity for DBAC, even in this challenging & highly competitive insurance market. Islamic Banking Islamic banking services have been discontinued in 2011 further to QCB directive No. 313/273/2011 dated January 31, 2011 which prohibits conventional banks from entering into any new Islamic banking business. Doha Bank’s management has decided to keep the Islamic portfolio until maturity as per the Islamic sharia contract. Risk Management Group Doha Bank’s Risk Management Group (RMG) operates through an enterprise-wide risk management framework (ERMF). ERMF in Doha Bank sets out activities, tools, techniques and Governance structure to ensure that all identified risks are understood and appropriate measures are in place to mitigate the same. RMG consistently and continually monitors risks and processes across the organization to identify, assess, measure, manage and report on potential threats that could negatively impact the desired results of Bank’s objectives. Risk Management policies, models, tools and systems are regularly reviewed/ revised to improve the framework and reflect market changes. RMG reports to the CEO, with a dotted line of reporting to Board Level Audit Compliance and Risk committee, which in turn reports to the Board of Directors of the Bank. The RMG is also independently empowered to escalate issues directly to the Board and Audit, Risk and Compliance Committee. Responsibility for risk management resides at all levels of the Bank, from the Board and the Executive Committee down through the organization to each business manager and risk specialist. These responsibilities are distributed so that risk/return decisions are taken at the most appropriate level, as close as possible to the business, and are subject to robust and effective review and challenge. The ERMF lays down a clear, consistent, comprehensive and effective approach for the management of all risks. It also sets out the key activities required for all employees to operate Doha Bank risk and control environment, with specific requirements for key individuals, including the CRO and CEO, and the overall governance framework designed to support its effective operation. General Assembly Meeting of the Shareholders at Doha Bank. The Board has laid down the risk appetite of the Bank since the Board and the Executive Management are ultimately responsible for all the risks assumed by the Bank. The risk appetite framework sets out the qualitative and quantitative thresholds for risk capacity and tolerance. The risk strategy seeks to balance the risk profile against sustainable returns to achieve the business goals of the Bank. Doha Bank has engaged qualified professionals, and has set out policies and procedures, limits, thresholds, authority levels, committees, review mechanism, controls and accountabilities to manage risk through a common framework. Implementation of the Risk Management framework is entrusted to a highly competent team and is controlled and implemented through various senior level management committees chaired by the CEO - mainly in Credit, Risk, ANNUAL REPORT 2017 19
20. Investment and Asset and Liability Committees . In addition, the Board level committees viz. Audit, Risk and Compliance Committee, reviews the observations and findings of internal auditors, Risk management reports, external auditors, compliance and the regulators to prevent deviations. Doha Bank recognizes every year the outstanding contribution of its employees who reach the service milestones of 10, 15, 20, 25 or 35 years. Risk Management Committee: A number of committees / Task Force have been established to manage various risks in an efficient and objective manner and these include: • Executive Management committee • Management Credit Committee • Asset and Liability committee (ALCO) • Risk Management committee • Retail Credit committee of operations of the Bank and the material risks, a comprehensive assessment of capital was conducted to determine the level of extra capital required to meet such risks identified under Pillar 2. Implementation of Capital and Recovery planning framework: QCB instructed all the Domestic Systemically Important Banks (DSIB) in Qatar to place credible recovery actions that could be implemented to restore the DSIB’s businesses to a stable and sustainable condition in the event of severe stress. In preparing recovery plans, DSIB’s are not expected to rely on public funding available from QCB or from other authorities in case of severe stress or default. QCB also instructed all the banks in the country to put in place sound capital planning processes and develop detailed, comprehensive, and forward looking capital plans that are proportionate to the bank’s profile and complexity. Doha Bank engaged consultants to review its Capital and Recovery plan and submitted the report to QCB. Basel III: QCB has outlined detailed instructions for Basel III Capital Adequacy calculations in accordance with the rules of Basel Committee on Banking Supervision (BCBS). The bank has adopted Basel III framework and accordingly started reporting Capital Adequacy Ratio on a quarterly basis to QCB. The Bank also submits a detailed Internal Capital Adequacy Assessment Process (ICAAP) document covering quantitative impact of various identified risks in the balance sheet. Over the last couple of years, a number of major regulatory changes have been introduced to test banks’ ability to respond to severe stress conditions as well as bank’s governance framework around capital planning. Implementation of ICAAP & Stress Testing Framework as per QCB guidelines: Banks prepares a comprehensive report on the Internal Capital Adequacy Assessment Process with all its forms and tables according to the new guidelines based on the consolidated and audited financial statements as at 30th September of each year. Each year the Bank provides QCB with this report by 15th December. Based on this report, QCB reviews and assesses the additional capital charge approved for the following year which the bank is required to maintain within the overall minimum limit of the CAR during the whole period. The ICAAP encompasses internal assessment of material risks such as Liquidity risk, Interest rate risk, Country risk, Credit concentration risk, Sector concentration risk, Counterparty credit risk, Residual risk, Strategic risk and Reputational risk. The assessment also involves calculation of quantitative impact of these risks on capital adequacy of the bank. Furthermore, ICAAP includes capital planning and financial projections, defining and aligning risk appetite, stress testing & scenario analysis and defining the risk universe for the bank. Considering the nature 20 DOHA BANK At an event, Dr. Seetharaman said “Digital Currency will be the solution as a payment gateway”. Implementation of IFRS 9: IFRS 9 introduces a new impairment model which results in the early recognition of credit losses in contrast to the previous standard which required the recognition of losses when incurred. The new accounting standard provides guidance in the following three areas; 1. C l a s s i fi c a t i o n a n d M e a s u re m e n t o f fi n a n c i a l instruments 2. Impairment of financial statements 3. Hedging Under the new model, the Bank is expected to maintain provisions against all financial assets that are debt
21. in nature (including placements, investments, trade receivables, loans and advances and off balance sheet items) upon initial recognition (i.e. day 1 of recording). This will also include healthy assets that are expected to be recoverable in full. The QCB has issued its regulatory implementation guidelines of IFRS 9 with the instruction to the Banks to calculate Expected Credit Loss (ECL) and submit an impact analysis of adopting IFRS 9 on the assets classified under stage 1 and stage 2 of the ECL model based on 30 June 2017 figures. assumptions, inputs and techniques used for estimating the expected credit losses, the provision movement and additional credit risk disclosures. • IFRS 9 requires the involvement of those charged with governance and senior management to ensure that the Bank has appropriate credit risk practices including an effective system of internal control, to determine adequate expected credit loss (ECL) allowances in accordance with IFRS 9 as well as the bank’s stated policies and relevant QCB regulatory guidance. The major risks associated with the banking business have been discussed in detail in the following sections: Dr. Seetharaman and representatives of Doha Bank at the SIBOS conference in Toronto. Doha Bank’s IFRS 9 Implementation progress The Bank has engaged external consultant firm to assist in preparation for meeting the requirement of IFRS 9: Financial instruments as well to ensure compliance with the instructions issued by the Qatar Central Bank. • The Bank’s senior management set up a Steering Committee in accordance with the requirements of the QCB mandate, to oversee the IFRS 9 implementation. The Steering Committee is chaired by the Bank’s CEO and comprised of the Chief Risk Officer, Chief Financial Officer, the Chief Internal Auditor, Chief Compliance Officer and Head of IT. Amongst other matters, the Steering Committee is responsible for making judgments where policy decisions were required, develop a granular transition plan for the implementation of IFRS 9 and ensure adherence to the plan. The Steering Committee meetings convened on a bi-weekly basis since the commencement of the project. • The adoption of IFRS 9 will bring about certain changes to the business processes and policies of certain functions within the Bank, including the finance, risk, IT, etc. and the way these departments collaborate in the Bank’s adoption and implementation of IFRS 9. This will also require the amendment of certain policies of procedures to include guidance on IFRS 9 implementation. The policies and procedures of the Bank that may revised include the credit manuals, collateral management, IT support, finance manuals. • IFRS 9 also requires extensive qualitative and quantitative disclosures around the expected loss model adopted by the Bank including the Strategic Risk: This risk can arise from adverse business decisions, poor implementation of decisions, absence of clearly defined strategic business direction and goals; failure to have adequate product programs, inadequate preparations for continuity of business should disaster strike, and incorrect assessment of external factors. The Bank has mitigated these risks by implementing a welldefined strategy and growth plans. In addition, the Bank’s Disaster Recovery Plan (DRP) has been well-documented, and detailed manuals have been made available to the employees. The employees are regularly updated on the developments through ongoing training, education and system updates. Reputation Risk: It is a risk of loss resulting from damages to a firm’s reputation due to failure to meet stakeholder expectations. This could arise as a result of behavior, action or inaction, either by Doha Bank itself, our employees or those with whom we are associated. It could lead to lost revenue; increased operating, capital or regulatory costs; or destruction of shareholder value. We have a zero tolerance for knowingly engaging in any business, activity or association where foreseeable reputational risk or damage has not been considered and mitigated. Dr. R. Seetharaman with dignitaries during the Knowledge Sharing Session on Qatar-Bangladesh bilateral relationships. This risk could arise from poor customer service delivery, a high incidence of customer complaints, non-adherence to regulations, imposition of penalties and adverse publicity in the media. The Bank has established customer service units and call centers to monitor the services rendered through its delivery points and undertakes timely corrective measures. Additionally, the Bank has a robust Compliance Department, which is responsible for monitoring stringent compliance on all regulatory provisions stipulated by the ANNUAL REPORT 2017 21
22. QCB and other regulatory authorities , wherever applicable. The department also creates awareness of the related regulatory circulars among staff and provides guidance on business decisions that could have regulatory implications. The Executive Management Committee provides bank wide oversight on reputational risk, sets policy and monitors material risks that could have negative reputational consequences. At the business level and across its subsidiaries, overseas branches and representative offices, the relevant Senior Management is responsible for the management of reputational risk in their respective business / functional operations. Dr. R. Seetharaman, CEO of Doha Bank, with other officials and dignitaries at Doha Bank’s Knowledge Sharing Session in the UK. probability of default etc.; • The credit portfolio, including concentration trends, provisions, quality of portfolio and requirements vis-àvis credit strategy and risk appetite; • Portfolio concentration limits against Regulatory and Internal Limits set for counterparties, industry sectors, geographic regions, foreign country or class of countries, and classes of security; • Business strategies to ensure consistency with the Bank’s business/growth plan and other asset/liability management considerations; • Significant delinquent credits (watch list and under settlement accounts) and follow up actions taken to safeguard the interests of the Bank; • Adequacy of loan loss provisioning requirements; • Establishment of an authorization structure and limits for the approval and renewal of credit facilities; • Detailed credit policies, procedures and guidelines, proper segregation of duties, well defined authority matrix for credit approval and periodic audit and examinations by internal and external auditors to ensure that a rigorous environment of checks and balances exist within the Bank • In order to take the bank to the next stage, to comply with IFRS 9 and Basel Accords, the Bank has decided to acquire a predictive scoring model for retail credit to enhance the due diligence process. The Bank has already initiated the induction process with the plan to implement the model by Q2 2018. Legal Risk: Legal risk is the possibility of loss resulting from the Bank’s failure to comply with local laws, breach of ethical standards and contractual obligations with counterparties or customers. The Bank also faces the risk of litigation due to unenforceable contracts with vendors, counterparties or regulators. The Bank maintains a qualified team of legal advisors, in addition to a couple of International Law firms on the panel, who are responsible for validating all the Bank’s agreements. They also review the legal implications of standard / specific documents for all the Bank’s products and services that are being offered to customers and counter parties. Credit Risk: This refers to risk arising from the potential that an obligor is either unwilling to honor his/her obligation or has become unable to meet such obligation, which leads to economic loss to the bank or the possibility of losses associated with diminution in the credit quality of borrowers or counter parties and/or in the value of the collateral held by the Bank as security. Identification, measurement and management of risk are strategic priorities for the Bank and its credit risk is managed by a thorough and well-structured credit assessment process complemented with appropriate collaterals wherever necessary and continuous monitoring of the advances at account and portfolio levels. Although the overall responsibility for managing the risks at macro level lies with the Board, the responsibility for identifying risk in Bank’s credit exposure is entrusted to the Management Credit Committee. The Management Credit Committee shall review and decide on the following: • 22 The extent to which the Bank should assume credit risk, taking into account the capital base, the Bank’s ability to absorb losses, the risk-reward ratio, DOHA BANK Mr. Rashid Al Mansoori, CEO of Qatar Exchange, Dr. Seetharaman, CEO of Doha Bank, and other officials, announce the QETF in New York. Credit Risk Management (CRMD) Structure: The CRMD function is independent of the business functions, which include policy formulation, underwriting, technical evaluation and limit setting, exposure and exception monitoring, portfolio analysis, classification of advances and compiling reports for the management. The key objectives of CRMD are to ensure: • Bank-wide credit risks are identified, assessed, mitigated (wherever possible), monitored and reported on a continuous basis at customer and portfolio level; • The Bank’s exposure is within the risk appetite limits established and approved by the Board of Directors, which covers group and single obligor limits, borrower ratings, portfolio analysis, counter party limits and concentration of the limits to effectively measure and
23. manage its credit risk ; • Review and assessment of credit exposures in accordance with the authorization structure and limits prior to facilities being committed to customers; • Ensure completion of documentation and security creation through Legal Risk Advisor as per approval terms before release of credit facilities to the clients. • Monitoring the concentration of exposure to industry sectors, geographic locations and counter parties; • Proactive and dynamic monitoring of the accounts as to the quality of the assets and to spot any adverse features/warning signs which can eventually lead to deterioration in the recovery prospects. • • • Engage the Business Units at an early stage itself to take corrective steps so that the exposure does not become unmanageable. Review of compliance with exposure limits agreed for counter parties, industries and countries, on an ongoing basis, and review of limits in accordance with the risk management strategy and market trends; Prior to launching of new products, vetting the business proposals from risk perspective especially in light of delinquent reports. Doha Bank named “Best Trade Finance Bank in Qatar” at Global Finance Awards 2017. The objective of this unit is as follows: 1. Reconsider the Bank’s position with the borrower. 2. Analyze the financial and economic condition of the borrower and its forecasts. 3. Proactively undertake restructuring and rescheduling of distressed loans. 4. Suggest appropriate measures to turnaround, restructure, rehabilitate with the objective of eventually upgrading delinquent accounts. DEBT RECOVERY DEPARTMENT Dr. R. Seetharaman at the International Arab Banking Summit in 2017. REMEDIAL ACCOUNT MANAGEMENT Doha Bank has a disciplined and vigorous remedial account management process. Effective workout programs are critical to managing risk in the portfolio, it is important to segregate the workout function from the area that originated the credit. Doha Bank has established a robust portfolio monitoring process by creating a Remedial Asset Management Unit to act jointly with business units in order to prevent further deterioration in Corporate and SME accounts. This includes facts finding, clients meetings and visits, negotiating rescheduling deals and settlement proposals with customers and carrying out “Defect Analysis” for special mentioned accounts recommended to downgrade to NPL and to ascertain the reasons for delinquency. The outcome of defect analysis is shared with business units to learn lesson for default. Findings of Defect Analysis also triggers revisit of lending norms based upon delinquency trends to ensure booking of quality assets in future. Non-performing loans seriously affect profitability of the Bank. Some borrowers do not follow discipline of payment of their loans and default, while others fail due to numerous reasons beyond their control. Profitability of the Bank gets negatively impacted when loans become non-performing resulting in not only suspension of interest income but also forces to create loan loss provision from the income of the Bank. Moreover, Non-Performing Loans (NPL) reflects badly on the image of the Bank. Thus recovery of stuck-up loans is a major concern for the Bank. The Debt Recovery function of the Bank handles nonperforming loans/ portfolio with a clear objective to recover stuck-up loans and advances to contain NPL ratio and to increase the profitability through reversal of provision and suspended interest. Doha Bank hosted a Knowledge Sharing Session on “Qatar – Land of Opportunities” during the year. Liquidity Risk: Liquidity risk can be defined as the potential inability of the Bank to meet its maturing obligations. ANNUAL REPORT 2017 23
24. Liquidity risk is inherent in banking operations and liquidity planning and management are necessary to ensure that the Bank meets its obligations at all times . The Treasury division, in conjunction with other departments, manages the liquidity on a daily basis. ALCO, which meets regularly, sets the broad framework for Treasury to operate so that the Bank is always in a position to meet its financial commitments. During crisis, the bank’s ability to manage liquidity requirements could be impacted due to increased cost of funds or accessibility to wholesale funding. Moreover, any market disruption may impact liquidity of investments. Doha bank has a comprehensive Liquidity Management framework for managing the liquidity risk. The framework sets the group’s risk appetite for liquidity risk by setting limits and benchmarks. Dr. Seetharaman delivers his keynote during a seminar at the College of North Atlantic. The Bank’s approach to manage the liquidity risk is to ensure that it has adequate funding from diverse sources at all times. Diversification of the Bank’s depositor base, reducing dependence on large depositors for reducing concentration risk and maintaining a suitable mix of long, medium and short term deposits including lowcost deposits are some of the measures that the Bank is regularly taking to maintain a suitable deposit base. The Bank relies on many quantitative indicators and forecasts to manage its liquidity risk positions. The Bank maintains sufficient high quality liquid assets, which can be liquidated at short notice to raise cash, if required. The bank’s liquidity policy requires the bank to maintain a pool of liquid assets which can be accessed at the time of liquidity crises. The Bank also has in place credit lines with several international banks to make funds available in case of need. The Bank’s liquidity position is subjected to diverse stress scenarios in order to evaluate the impact of unlikely but potentiality plausible events on liquidity and regularly evaluated by ALCO. Scenarios are based both on historical and hypothetical events. The results obtained from such stress testing provide meaningful input when defining target liquidity risk positions. In addition, the Bank maintains a Contingency Liquidity plan, which details how liquidity stress events would be managed during a crisis situation. Post diplomatic crisis, we have submitted Liquidity Contingency Plan to QCB for remaining period of the year to mitigate liquidity risk. Since nature of any such event cannot be ascertained in advance, the plans are designed to be flexible and hence provide various options that could be used during liquidity crisis situation. The bank has also implemented an AssetLiability Management system, which provides further guidance towards the Bank’s balance sheet management. 24 DOHA BANK The tools under Bank’s Liquidity risk framework could be summarized as below: - Liquidity risk appetite - Prudential Limits - Stress testing - Early warning indicators - Liquidity buffers - Liquidity crises contingency plan QCB through its guidelines issued in 2014 and 2015 has mandated all the banks in Qatar to comply with Liquidity coverage ratio (LCR) and Net stable funding ratio (NSFR). Doha Bank ensured compliance with LCR and NSFR ratio reporting implementation in line with QCB instructions. QCB has issued final guidelines for maturity ladder in August 2016 for monitoring liquidity mismatch and accordingly the Bank has set up the liquidity gap limits. Market Risk: This is the risk of loss arising from unexpected changes in financial indicators, including interest rates, exchange rates, as well as equity and commodity prices. Bank has an active Management Information System (MIS) to keep the Management and the Investment Committee informed about the changes in market risks and their effects on the Bank’s financial results. The prominent market risks affecting the Bank are currency risk and interest rate risk, which are detailed below. Currency Risk: The major foreign currency to which the Bank is exposed is the US Dollar. The established parity between the US Dollar and Qatari Riyal substantially reduces this risk unless the parity between the two currencies is revised or removed altogether. To control currency exposures, the Bank has the following measures in place: Doha Bank offers Financial Support to Qatar Society for Rehabilitation of Special Needs. • Net open position in various currencies are reported to ALCO regularly while evaluating proposals and also as reports. As per QCB Circular 27/2016 on Balancing Currency Position, timeline to comply with maximum NOP of 25% for USD and 5% for other currencies of total capital and Reserves were given to all banks by April 2017. The Bank is constantly monitoring the NOP situation and taking steps to reduce such balances as soon as the liquidity improves in the local market. • Intraday and overnight limits have been set up for each currency; • Stop loss limits have been setup for Foreign Exchange proprietary trading; • Currency exposure is monitored daily;
25. • Currency gap analysis is produced at month end – it includes forward purchases and sales; • A report on total foreign currency assets and liabilities excluding contingent exposure is produced daily; • Transaction limits have been set up for foreign exchange dealers to avoid excess exposure; the limits are monitored on online real time basis. • All outstanding Foreign Exchange exposure – including spot, swap and forwards - is revalued daily. The Doha Bank Annual “Beach Clean-up” event. Since most of the Bank’s financial assets such as loans and advances contain an option to re-price, majority of the bank’s interest rate risk is hedged naturally due to simultaneous re-pricing of deposits and loans. Further, the Bank manages the interest rate risk by matching the re-pricing of the assets and liabilities through various means and by operating within the set gap limits. Foreign currency loans are linked to the London Interbank Offered Rates (LIBOR – which is among the most common of benchmark interest rate indexes used to make adjustments to adjustable rate mortgage) and are re-priced regularly to reduce the inherent interest rate risks. Additionally Interest rate Risk on Banking Book Pillar 2 Capital Charge is required to be calculated for 200 bps change in interest rates as per NII (Net Interest Income) and EVE (Economic value of equity) approach as defined in the QCB circular (ICAAP) of March 2016. The Bank will also complete the implementation of Earnings at Risk (EAR) and Economic Value of Equity (EVE) in the coming days. Interest Rate Risk: This risk largely arises due to the probability of changes in interest rates, which may affect the value of financial instruments or future profitability. It is evaluated from two different perspectives: with respect to the Fixed Income Investment Portfolio of the Bank, and with respect to the entire Bank’s Assets and Liabilities. Interest Rate Risk of Fixed Income Portfolio arises from fluctuating interest rates, which contribute to the change in the Fair Value of the Fixed Income Investment Portfolio of the Bank. The Bank’s Bond Portfolio is analyzed daily, and its interest rate risk is based on the portfolio modified duration. Bank keeps its portfolio duration within its risk appetite. The risk department analyzes each investment proposal separately, and potential market risks are identified and mitigated before placing the proposal for Investment Committee review and approval. The Bank’s hedging policy sets the framework to be followed for hedging the interest rate risk if certain thresholds are triggered. Doha Bank hosts Suhoor banquet for Clients. Bank-wide Interest Rate Risk: The Bank is exposed to interest rate risk as a result of mismatches or gaps in the quantum of Assets and Liabilities and Off-Balance Sheet instruments that mature or re-price in a given period. H.E. Mr. Abdulla Al-Hamar, Ambassador of Qatar to Singapore, addresses the audience at an event in Singapore. Stress testing: Bank wide stress tests form an integral part of the risk review process and provide sufficient insight into the financial health and risk profile of the bank. Stress tests also provide early warning signs of potential threats to the Bank’s capital. Doha Bank adopts a comprehensive stress testing framework in line with QCB instructions. The stress testing policy of the Bank is aligned to risk appetite and works towards regulatory and internal stress test models. The internal models supplement the regulatory models and measure impact of changes in macroeconomic indicators on various parameters including but not limited to: • Asset quality during crises • Concentration risk • Liquidity risk including liquidity buffers • Interest rate risk • Market risk in investments • Currency risk • Collateral coverage under falling real estate prices scenario • Regulatory ratios under crises situations In particular, the bank measures the impact of different stress scenarios on its capital adequacy ratio, net interest margin, profit after tax, return on assets, liquidity asset ANNUAL REPORT 2017 25
26. ratio and additional liquidity requirements . The stress testing process is regular, detailed and uses both plausible and severe scenarios. The results of these stress tests are shared with ALCO on monthly basis and QCB on semiannual basis. Internal stress testing framework is revised based on QCB requirements defined in the QCB circular (ICAAP) issued in March 2016 which includes enterprise wide stress testing and reverse stress testing. those changes to avoid the risk of losses. In the current scenario, one of the top emerging risk is “Threat from Cyber Attacks”. The Bank, may be a target of cyber-attacks which could jeopardize the sensitive information and financial transactions of the Bank, its clients, counterparties, or customers, or cause disruption to systems performing critical functions. This could potentially have below two impacts: • regulatory breaches which could result in fines and penalties; and • significant reputational damage which could adversely affect customer and investor confidence in Doha Bank However, to mitigate the above risks Doha Bank has taken various measures to secure our Bank’s IT infrastructure. The key steps taken by the Bank in this direction are as below: Doha Bank and MasterCard drive inclusion with a Payroll Solution. Operational Risk: Operational Risk is the risk of loss arising from inadequate or failed internal processes, people and systems, or from external events. The Group is exposed to many types of operational risk. This includes: • internal and external fraudulent activities; • inadequate processes, controls or procedures or any breakdowns in them; • failures in the key systems of the Bank leading to disruption of services; • an attempt by an external party, to make a service or supporting infrastructure unavailable to its intended users, and • the risk of cyber-attacks which destabilizes or destroys the Bank’s information technology; • risk of business disruption arising from events wholly or partially beyond control, for example, natural disasters, acts of terrorism or utility failures etc. which may give rise to losses or reductions in service to customers and/or economic loss to the Group. Dr. Seetharaman receives the “Best Manager of Year for Excellence in Quality in Banking” at the International Conference Excellence in Quality event in Switzerland. The operational risks that Doha Bank is exposed to keeps on changing and the Bank endeavors to rapidly adapt to 26 DOHA BANK • The Bank has laid out a roadmap to enhance control framework and technology infrastructure to strengthen our ability to prevent, detect and respond to the ever increasing and sophisticated threat of cyber-attacks; • Protection of sensitive information is being the utmost priority for the Bank and it has High Level Management committee for review and monitoring the Information Security posture of the Bank; Dr. R. Seetharaman receiving the “Golden Peacock Award for Corporate Social Responsibility” from the Institute of Directors. • As mandated by Qatar Central Bank (QCB), Doha Bank has actively participated in Cyber Security Maturity Assessment by Third party and complied most of the requirements in the initial year of assessment (2016). During this year, the Bank has improved compliance with the most of the remaining requirements. Considering the changing cyber threat landscape and multi-tiered/ multi-vector attack patterns, Doha Bank has developed cyber security strategy for coming two years to ensure secure Banking channel for the customers. • The Bank has realigned the Information Security Governance architecture across the Board for effective cyber and information risk management and initiated various security improvement programs within IT infrastructure and process.
27. During the year 2017 , ORM System was implemented to support operational risk identification and assessment, control evaluation, loss management, issue remediation, KRI monitoring, and risk reporting activities. The system enabled the Bank to replace the manual and silos ORM processes with a highly automated, efficient, and collaborative approach. The ORM system assists in gathering and transforming operational risk data into critical risk intelligence to strengthen decision-making. Dr. Seetharaman speaking during Fourth Conference on Information Security for the financial sector. The prime responsibility for management of operational risk and the compliance with control requirements rests with the business and functional units where the risk arises. The Bank has a well-defined operational risk framework and an independent operational risk function. It is responsible for establishing and maintaining the Operational Risk Management Framework and monitoring the level of operational losses and the effectiveness of the control environment. The Head of Operational Risk is a member of the Risk Management Committee and reports to the Chief Risk Officer. The Risk Management Committee oversees the implementation of an effective risk management framework that encompasses appropriate systems, practices, policies and procedures to ensure the effectiveness of risk identification, measurement, assessment, reporting and monitoring within the group. The Bank has detailed policies and procedures and Operational Risk Management tools that are regularly updated to ensure a robust internal control mechanism for the Bank. The Bank is closely reviewing the various recommendations issued by the Basel Committee on ‘Sound Practices for the Management and Supervision of Operational Risk’ for implementation. The Bank continues to invest in risk management and mitigation strategies, such as a robust control infrastructure, business continuity management or through risk transfer mechanisms such as insurance and outsourcing. There have been significant efforts to streamline operational risk management processes, procedures and tools to provide more forwardlooking risk insights and strengthen the control culture in the organization Doha Bank honoured at Asian Banking and Finance (ABF) Wholesale Banking Awards. In addition, the Internal Audit department carries out an independent assessment of the actual functioning of the overall Operational Risk Management Framework. Each business segment must implement an operational risk process which is consistent with the requirements of this framework. Dr. Seetharaman at a Knowledge Sharing Session on “Qatar-US Bilateral Opportunities” in New York. The key steps in management of Operational Risk are described as follows: • Effective staff training, documented processes/ procedures with appropriate controls to safeguard assets and records, regular reconciliation of accounts and transactions, process of introducing new products, reviews of outsourcing activities, information system security, segregation of duties, financial management and reporting are some of the measures adopted by Doha Bank to manage the bank-wide operational risk; • Investigation and Reporting of any risk event (losses, near misses and potential losses), which is used to help identify the root cause and lay down the corrective action plans to reduce the recurrence of risk events. Risk events are analyzed to identify the root cause of incidents, reported, mitigated, recorded on a central database and reported quarterly to the Board of Directors; • Preparation of ‘Control Risk Self-Assessment’ across business and support units including subsidiaries and overseas branches. This approach results in detailed understanding of inherent and residual risks with evaluation of controls across the Bank. Therefore, it enhances the determination of specific operational risk profile for the business units while corrective action points are captured and the changes on the operational risk profile is monitored on an ongoing basis. ANNUAL REPORT 2017 27
28. Doha Bank officials with SME customers at a Breakfast Meeting on the theme “Financial & Business Solutions for SMEs”. Doha Bank categorizes Operational Risks into the following risk types for self-assessment process: • Origination and Execution Risk • Fraud Risk • Business Continuity Risk • Regulatory Risk • Information Security Risk • Vendor Risk • Financial Reporting and recording Risk • Staff Risk, and • Transaction Processing Risk The Bank’s blanket insurance policy adequately covers high severity losses and stress losses. Doha Bank’s regional Business Continuity Management Policy and Plans documents has been developed with the objective to ensure that our key operations will continue to function and our customers’ accounts will be secure and accessible regardless of the incident scope. In the event of a prolonged disruption to our branches or facility premises, our BCP provides an alternate work locations, where we will continue to provide the best service possible. (All local & international branches and HO premises are identified with alternative work locations) Our Business Continuity planning handles critical data backup, protection and recovery; protecting people and assets; communication arrangements to contact customers, employees, and regulators; alternate work location for employees; Identification of critical supplier and assuring our customers prompt access to their accounts if we are unable to continue our operations. DB Business Continuity Management Readiness: 1. All critical business units’ readiness via BCM mock drills have been tested at our alternative work sites. 2. Doha Bank staff are trained on business continuity and Crisis Management handling. 3. All critical applications source codes are protected via escrow process outside the country. 4. Emergency Communication tool is available for crisis communications. Business Interruption (BI) insurance has been obtained to protect our business against catastrophic events. Dr. Seetharaman receiving the “Energy and Environment Foundation 2017 Global Excellence Award” at a Renewable Energy conference in New Delhi. DB Business Continuity Management: Doha Bank is committed to ensure that all critical business activities are maintained during disruptive incidents. Business Continuity Management (BCM) scope is to cover Doha Banks critical business units, staff and vendors/ partners who are engaged in Banks operation both directly or indirectly. 28 DOHA BANK Dr. Seetharaman at the 2nd SME conference organized by Qatar Chamber of Commerce. International Rating Below is the summary of Doha Bank’s rating from International Rating agencies as on 31st December 2017:
29. Foreign Currency LT Foreign Currency ST Local Currency LT Local Currency ST Financial Strength / Viability / Baseline Support Outlook Capital Intelligence A+ A2 - - A 2 Stable Moody’s A2 P-1 A2 P-1 baa3 - Neg Standard & Poor’s A- A2 A- A2 - - Neg Fitch A F1 A F1 bbb 1 Neg Rating Agency International Rating Agencies have maintained the usual strong ratings, recognizing the Bank’s strength and performance. Ahmed Al Henzab (left), Head of Administration at Doha Bank; handing over the aid to Saad Shaheen Al Kaabi (centre), Director of Resource Mobilization Department; and Hamid Moharrar, Head of Corporate Relations at QRCS. Doha Bank Recommends the Distribution of 30% of the Paid-up Capital as a Cash Dividend to the Shareholders for the Year 2016. Dr. R. Seetharaman, CEO of Doha Bank, felicitating employees during the Monthly Employee Recognition Awards. Doha Bank’s Annual ECO-Schools Programme aims at encouraging students and school across Qatar to contribute to the protection of the environment. ANNUAL REPORT 2017 29
30. Information Technology The Bank ’s Information Technology (IT) division has been a major contributor in aligning people, process and technology to bring major transformation to the way the Bank operates. The division is responsible for developing the Bank’s IT strategy and the delivery of all related services to employees and customers. Doha Bank has undertaken several transformational initiatives through innovation and utilizing cutting edge technology to support the needs of our customers. Doha Bank has incorporated technology as an innovation driver to provide state-of-the-art products and services to its customers and has leveraged state of the art technology to bring increased efficiency and effectiveness to its service delivery. Doha Bank has been a pioneer and is renowned as prime mover of banking technology and has provided its customers with several innovative products and ‘firsts’ in the country. The Bank is supported by highly efficient and qualified IT resources for delivery of technology projects and to support its technical architecture to maximize availability, scalability, reliability, security and manageability. Doha Bank’s Information Security Management System (ISMS) ensures the confidentiality, integrity and availability of the information assets of the Bank through the implementation of various controls and processes of global standards. The network and security architecture is built to ensure maximum security covering end point security solutions, application firewalls, intrusion prevention systems and virtual private network with encryption of its internal and external communication networks. Doha Bank has resilience in its network to ensure high-availability and auto-failovers for continuity and uninterrupted delivery of services. Doha Bank CEO with dignitaries at the Knowledge-Sharing event on “Qatar-Kuwait Bilateral Opportunities” in Kuwait. In line with its strategy, the Bank continues to deliver Digital Transformation projects to improve customer services and make available self-service anytime/anywhere banking channels. As part of this Digital Transformation, Doha Bank has enhanced its mobile banking channel with new look and feel and also provided multi-language support in order to enhance customer experience and services. In addition to the above, Doha Bank has also revamped its online portal for Retail and Corporate customers to provide all customer segments enhanced customer experience and enhanced security. The Bank’s IT 30 DOHA BANK and business partnership is focusing on end to end straight through processing which is going to further enhance the customer experience overall and bring cost efficiency. Dr. Seetharaman at a Knowledge Sharing Session titled “QatarCanada Bilateral Opportunities” held in Toronto. Carrying on the theme of innovation and increased convenience for our customers, Doha Bank has launched Whatsapp and Facebook chat services making it much easier for customers to contact the bank. Doha Bank has also completed an ISO27001 certification review and aiming to have this certification achieved in 2018. This is testament of Doha Bank commitment towards information security and implementation of standards to secure customer information. Doha Bank was the first organization in the GCC to have achieved the ISO/IEC 20000 certification for its IT Service Management System in 2007. For the 10th year in a row, Doha Bank achieved recertification to ISO20000-2011. Doha Bank is also proud to be the only financial institution in the country to be accredited with this award. Doha Bank also became the first bank in Qatar to achieve accredited certification for ISO 9001:2015, the newly revised international standards for Quality Management systems. These certifications demonstrate the Bank’s commitment to high standards of integrity within its processes and procedures and its aim to always achieve world class benchmarks in operational risk management. Doha Bank was also honored in 2017 with ‘MEA Architecture Excellence Award’ from ICMG. This award is to recognize Doha Bank’s major IT infrastructure transformation project to implement the latest technology to bring agility and pace to its transformation plans and to further enhance the services we provide to our customers. The Bank has provided its customers with new innovative channels for e-banking and m-banking which include ATMs, Cheque and Cash Deposit Machines using the latest technology. This has been a key differentiator and has given the Bank an edge over its competitors. In 2018, the bank will build on these strong technology foundations to provide more convenience and exciting products to its customers using the latest digital technology and Fintech solutions. It will also use these technologies to streamline its internal process to create enhance value for staff, customers and shareholders.
31. Overseas Recruitment Drives , Social Network / Media. For assessment of a good quality and high potential candidate, Psychometric Testing skills are also applied. Dignitaries inaugurating the new branch of Doha Bank at Mall of Qatar. More will follow in 2019 and beyond, as the Bank continues to implement its medium term plans based on utilizing the latest technology. These will bring a stepped change to the way the bank operates providing market leading customer service and products, greater operational efficiency and enhanced security to its operations. Human Resources One of the key achievements of Doha Bank over the years has been the high level of employee satisfaction. Doha Bank believes in creating an environment where employees enjoy working and striving towards excellence in every aspect of their roles. The key word for successful employee engagement is ‘Association’. The bank strongly believes employee engagement is of high importance and mutually beneficial to employees as well as the bank. Employees are encouraged to participate in events that are organized by the HR Department that require physical, emotional as well as intellectual involvement. During the course of the year, Bank sponsors several social activities such as Knowledge Sharing sessions, Sports Activities, Blood Donation drives, Recognition Awards and Long Service Awards. In line with Doha Bank’s commitment to high performance and green banking, HR strives continuously to implement the latest electronic solutions by providing efficient online services, thereby increasing productivity and encouraging a paperless environment. Human capital development and employee engagement have always been one of the key priorities for Doha Bank. Within the corporate guidelines, every business partner is responsible for ’people management’ within the unit. Professional support is provided by the Human Resources (HR) Department of the Bank. Doha Bank is highly committed to Qatarization, which is a prominent aspect of its corporate objective. With a view of grooming future leaders amongst the Qatari nationals, the Bank implemented various initiatives, designed various programs and strengthened on the existing initiatives to attract and retain Qatari resources. Qatari Career Development has been given more focus with a view of grooming Qataris in the bank. Doha Bank’s officials along with dignitaries at “Tamim Al Majd” branding. In previous years, Doha Bank’s learning strategy has clearly communicated that learning is critical to the bank’s success. Leaders take an excellent leading role in creating and sustaining a supportive learning culture in Doha Bank. The bank uses interactive training programs to encourage learning and sharing of experiences and knowledge. Annual training goals are set for employees to encourage continuous learning and development. Knowledge and Learning Skills of Doha Bank Employees are the most important assets to realize its ambition. Mr. Abdul Rahman A. Al Ansari, CEO of QIMC, with DR. R. Seetharaman, CEO of Doha Bank, after signing the term loan agreement. Equal Employment Opportunity and Diversity are key variables, which are woven into each step of the recruitment process at Doha Bank. Doha Bank’s experienced recruitment team ensures through careful evaluation that well qualified and suitable candidates are selected for each role and team. To attract local as well as international talent and to strengthen employee branding, the bank uses recruitment channels such as Doha Bank’s Career Website, Advertisements, Internal Referrals, Corporate Social Responsibility (CSR) Doha Bank is one of the leading integrated financial institutions in the GCC and one of the most active advocates of Corporate Social Responsibility (CSR), constantly supporting environmental protection, engagement with community, stakeholder groups and sustainability practices. Building upon decades of strong commitment to environmental issues and community engagement, Doha Bank is the first financial institution in Qatar to issue an annual Sustainability Report explaining its approach to stakeholder engagement including the environment. ANNUAL REPORT 2017 31
32. programme guides , assists, supports and works with the student action teams within schools on their journey towards sustainability by providing a framework to help embed these principles into the heart of students. It offers flexibility, allows creativity and encourages innovation on how the school plans to transform itself into becoming an eco-friendly institution. Dr. Seetharaman handing over QR 1mn to Xavier ‘Xavi’ Hernandez Creus, the winner of this year’s third Al Dana draw, at Doha Bank’s branch in Mall of Qatar. As a fundamental aspect of the Group’s CSR Charter, the Bank strives to incorporate the values and ethics of sustainability into its everyday operations, in the use of environmentally efficient business practices and overall products and services that reduce the impact on the environment and in coordination with all sectors of the society to address the issues both in the local and global settings. This is one of the main reasons why Doha Bank has successfully won the ‘Golden Peacock Global Award for Corporate Social Responsibility’ for many years. This award is also in recognition of Doha Bank’s societydriven initiatives like educational, health benefits and commitment to social causes, which has seen it introduce innovative products even during tough market conditions resulting from the global financial crisis. As a pioneer in raising awareness for environmental and climate change issues in Qatar, the Bank’s vision is to lead the way as a Green Banking institution in encouraging account holders to opt for Paperless Banking, Green Accounts and ‘Go Green’ Credit Cards. Alongside these products, the Bank has become the leading bank in Qatar and the Middle East for environmental advocacy through numerous CSR initiatives. Doha Bank is proactively hosting and conducting green-related activities to promote customer participation and engaging the society’s ecoconsciousness by encouraging them to go green and support the environment. Dr. Seetharaman with dignitaries at a Knowledge Sharing Session on Qatar-Mexico ties. Doha Bank’s ECO-Schools Programme is dedicated t o t h e e n v i ro n m e n t a n d e n c o u r a g e s s c h o o l s t o proactively participate in the implementation of good environmental practices. The overall objective is to increase eco-consciousness and support children to become environmental advocates at a young age. The 32 DOHA BANK The ECO-Schools Programme is an ideal way to deliver ECO-curricular activities for the next generation, which provides a creative learning environment for children to become resourceful, innovative, artistic, and proactive in saving the environment through various educational methods and approaches whether at school, home or society at large. The academic value gained from handson experimental learning will assist establishing valuable information as a simple step to make a big difference. Apart from Qatar, Doha Bank is working on introducing the ECO-Schools Programme in Kuwait as well. Part of the Bank’s social responsibility is to support ambitious students and the youth in general, which was also applauded by Kuwait’s Minister of Commerce. Doha Bank envisions the school children to become young leaders in promoting environmental awareness and the schools continuously endeavoring to become eco-friendly advocates for a better world by empowering them to make a difference for the environment and the society. Dr. Seetharaman addresses the audience after receiving “Golden Peacock Award for Sustainability in Financial Sector” in London. Doha Bank now looks forward to a promising future, with better banking experiences for its customers, better returns for its shareholders and an even more progressive and prosperous environment for its employees. Doha Bank, as one of the main pillars supporting sustainable development in Qatar, was also recognized as one of the proactive supporters on Clean and Green Qatar Programme, School Exhibition for Arabic Schools in coordination with Ministry of Education, Climate Change School Competition in coordination with Qatar Petroleum DG/HSE, promoting the ECO-Schools Programme to schools in the State of Qatar. Green activities provide a venue for building global awareness, cooperation and participation of international organizations and companies specialized in environment technologies and sustainable energy. The Board of Directors of Doha Bank has reiterated their continued support for environmental development, which will eventually support the development drive in the country as a whole. Doha Bank also looks forward
33. to increasing its role in preserving the environment and supporting the endeavors of other national organizations aimed at curbing the deterioration of environmental systems and preserving the changing as well as the unchanging resources . It is customary for Doha Bank to find itself occupying a distinguished position in the programs drawn up for celebrating the Qatari Environment Day as it is at the core of the strategies designed for protecting the health and safety of humans as well as their environmental security. Doha Bank maintains a well-defined Environmental Policy with the principles of ‘Reduce, Reuse and Recycle’. Doha Bank has reached out to the larger community through its long standing CSR activities where it is committed to raise awareness on environmental issues and focus on the economic challenges facing the world and the region. Some of the Initiatives to support the State of Qatar’s ‘Go Green Qatar’ are: • Dedicated Green Bank Website • ECO-Schools Programme • Beach Clean-up • Green Accounts and e-Statements, Environmentfriendly and Biodegradable Credit Cards, Paperless Banking • Green Banking Task Force Committee • ECO-Schools Committee • Participation in Earth-related global event • Annual Marathon - Al Dana Green Run • Public Awareness Campaigns through ATMs • Green Forms • Green System for Auto-shutdown of PCs • Recycling of Papers • Use of natural lighting, LED lights, power stabilizers, auto-shutters, etc. Thousands of runners took part in the 13th edition of one of the biggest CSR events in Qatar dedicated to ‘Tamim Al Majd’ campaign. A d e d i c a t e d D o h a G re e n B a n k w e b s i t e ( w w w. dohagreenbank.com) is available on the internet showing the Bank’s various initiatives taken, planned activities, projects, products and services. It also includes other environment-related articles and video clips. Planned activities are lined up such as Tree Planting, Adopt-a-Beach campaign, Recycling and Waste Management programs. Promotional flyers, brochures were designed with a catchy phrase, “GO Green with Doha Bank! It’s simply the right thing to do!” to convey its message to the public and gain joint-effort cooperation amongst various sectors of the society for a better world. Thousands turn out for Doha Bank’s Al Dana Green Run - 13 years in a row. Dr. Seetharaman receiving the “Best Regional Commercial Bank” for the fifth time in a row at the Banker Middle East Industry Awards 2017. Doha Bank has taken various proactive measures in addressing global warming and its ramifications. It is propagating energy saving as a corporate habit. The Bank encourages ideas from staff on energy savings and suitably rewards them. Doha Bank is committed to being a carbon neutral entity. The departments at the Bank were encouraged to practice energy efficiency in their respective premises by switching off the lights, air conditioning system and other office equipment when not in use, conserve water, carpooling, eliminating usage of non-biodegradable materials, encourage recycling and proper waste disposal and buying of fair-traded and environment-friendly goods. These are small steps that will make a big difference. ANNUAL REPORT 2017 33
34. Green Banking Awards : The Leading Bank in Every Domain • Golden Peacock Global Award for CSR – IOD – 2016, 2014, 2013, 2012, 2011 • Environmental Award - The Arab Organization for Social Responsibility – 2015, 2014 • Golden Peacock Global Award for Sustainability – Institute of Directors (IOD) – 2017, 2014, 2013, 2012, 2011, 2010 • Golden Peacock Global Excellence in Corporate Governance – Institute of Directors (IOD) – 2016, 2015 • Certificate of Merit - Ministry of Environment 2013 • Best Corporate Social Responsibility Programme in the Middle East 2013 - EMEA Finance • Excellence Award for the Best Corporate CSR Programme by a Bank in Qatar 2012 - The Arab Organization for Social Responsibility • Green Systems Implementation of the Year - Arab Technology Awards 2010 - Arabian Computer News • Best Environmental Leadership Award 2010 - Qatar Today • Best Public Awareness Campaign Award 2010 - Qatar Today • Best Public Awareness Campaign Green Award 2009 - Qatar Today • Best Green Bank 2008 - Banker Middle East • Best Internet Banking Service in Middle East 2008 Banker Middle East Dignitaries during ribbon cutting at Doha Bank’s new branch in Doha Festival City. ECO-consciousness is integrated into Doha Bank’s daily operations through knowledge sharing, paperless banking and awareness campaigns on social responsibility to gradually instill the value of ‘green culture’ within the organization. The Electronic Banking products and services of Doha Bank greatly help reduce paper usage/wastage, reduce carbon footprint and encourage customers to be environmentally-conscious of their activities. Social Responsibility initiatives focuses on seminars, knowledge sharing and awareness; support for cultural events, e-Newsletters, educational visits, charitable donations and similar activities. Doha Bank conducted its 13th annual ‘Al Dana Green Run’ in 2017. People across age groups, nationalities and social background came forward enthusiastically to take part in the run. Participants included professionals, males and females from different age groups, sports enthusiasts and members of various socio-cultural groups. The ‘Al Dana Green Run’ is one of the Bank’s major campaigns, which is aimed to raise awareness and motivate people to become advocates of environmental issues as they go about their daily lives. Mr. Alaga Raja, Country Head of UAE at Doha Bank, receiving the “Best Local Bank in Qatar’ Award at the EMEA Finance Middle East Banking Awards 2017. Doha Bank honoured with “Company of the Year” Award by Qatar University. 34 DOHA BANK
35. BOARD MEMBERS ANNUAL REPORT 2017 35
36. CORPORATE GOVERNANCE OVERVIEW As part of the compliance requirement of the Corporate Governance code for listed companies issued by Qatar Financial Markets Authority , and the instructions of Qatar Central Bank, Doha Bank as a Qatari shareholding company listed on the Qatar Exchange is required to disclose the extent to which it complies with the provisions of the code. Doha Bank believes that applying a proper corporate governance framework and principles is essential to assist the Bank in achieving its goals with a high performance level in addition to improving its internal and external working environment, protecting stakeholders’ interests and distributing roles and responsibilities in an ideal way. During the year, the Bank was keen to enhance the corporate governance framework by applying the corporate governance policies and procedures’ manuals and adopting best practices. This report summarizes Doha Bank’s governance processes for 2017 in accordance with the disclosure requirements of QFMA and QCB as illustrated below. BOARD OF DIRECTORS AND BOARD COMMITTEES Roles and Responsibilities: The Board of Directors is responsible for the stewardship of the Bank and for providing effective leadership and supervision of Doha Bank’s business, whilst growing value in a profitable and sustainable manner. The roles and responsibilities of the Board are defined in the Board Charter. The Board Charter has been published to the public through the Doha Bank website and will be available to shareholders before the Shareholder’s meeting. The Board’s roles and responsibilities are compliant with the requirements of the Governance Code of QFMA and QCB, and cover the following areas: 36 • Strategy • Governance • Compliance • Risk Management • Authorities and Delegations DOHA BANK • Internal and External Audit • Board Committees • Board Code of Conduct • Board Composition • Board Meetings • Board Membership Requirements Each Board Member’s duties have been updated and defined in Job Descriptions prepared for this purpose. Moreover, each Board Member is also required to provide sufficient time to perform his duties. Currently, time commitments are not contractually set but are understood by all Directors. The following are the general roles and responsibilities of the Board of Directors as stated in the approved Corporate Governance Policies’ Manual: 1. Delegate the authority to the Managing Director to oversee the CEO of Doha Bank to implement Board directives and resolutions. The Board shall define the jurisdiction and duties of both the Managing Director and the CEO, their responsibilities and the mechanism of their reporting to the Chairman and the Board. 2. Approve Doha Bank’s organization structure, authorities delegated to the Board Committees and Executive Management, financial commitments in excess of delegated authorities to the Board Committees and Executive Management, the remuneration and bonus policy of the CEO and staff recommended by the relevant Board Committee, the strategic initiatives including new business initiatives and key investments and divestitures, and periodically approve the Bank’s polices and procedures’ manuals. The Board shall also approve the annual Doha Bank budget, the Board Committees’ recommendations, and the appointment of the CEO and senior staff of the Bank including the compliance and reporting officers and the Head of Internal Audit. 3. Approve the Bank’s strategy and work on developing the strategic plan and business objectives on a periodic basis and whenever necessary. 4. Create Board committees and set their authorities and duties, and annually evaluate the work of the Board Committees, including the Audit, Compliance and Risk Committee, Executive Committee, Nomination and Governance Committee, Policy, Development and Remuneration Committee, etc.
37. 5 . Call the Ordinary and Extraordinary General Assembly for convention, and approve the agenda of both meetings, and submit recommendations to the General Assembly to approve the proposed cash dividends, the remuneration of the Chairman and the Board members, the appointment of the External Auditor, the capital increase, the amendment of the Bank’s Articles of Association, and other issues as stated in the Commercial Companies’ Law. 6. Monitor the financial performance of the Bank and its subsidiaries, and meet with the External Auditor to learn about any existing substantial problems and work on resolving them. 7. Discuss with the Audit, Compliance and Risk Committee matters related to internal audit, AML/ CTF issues, QCB reports, external audit, and financial statements. 8. Ensure that Doha Bank maintains adequate levels of capital and reserves, according to sound commercial principles and banking regulations. 9. Make enquiries about potential problems that come to the Board’s attention and follow up until the Board is satisfied that the management is addressing the issues appropriately. 10. Supervise and ensure the implementation of proper internal control systems, mainly through the Audit, Compliance and Risk Committee, and monitor operations and assess Doha Bank’s performance and management of risks, and ensure that necessary and adequate financial and human resources are in place to achieve Doha Bank’s goals and objectives. 11. Oversee the overall corporate governance of Doha Bank. Review and approve governance policies (including policies on conflict of interest and insider trading), principles recommended by the Executive Management and external consultants, and the Code of Ethics. 12. Review the Bank’s policies, directly or through a delegated committee, periodically to ensure that they are adequate, suitable and in line with the internal business changes and the external macro-economic factors. 13. Delegate the authority to the CEO of Doha Bank to implement Board directives and resolutions. The Board shall define the jurisdiction and duties delegated to the CEO who should report to the Chairman and the Board. 17. Appoint independent advisors to assist the Board in their activities. The Board should receive adequate funding from Doha Bank for independent advisors and the related administrative expenses. Financial Statements The financial statements are prepared by the Executive Management. The Board shall review and assess Doha Bank’s Financial Statements and other releases prior to announcement to shareholders. The balance sheet and income statement shall be signed by the Chairman or the Managing Director and CEO. Review of the Board and Board Committees’ Performance The Board undertakes ongoing self-assessment (through the Nomination and Governance Committee) and an annual review of the Board as a whole, the Board Committees and individual Board members. Main Transactions that Require Board Approval: Board authorities include approval of the following transactions: • Credit facilities with values above the authorized limits set for the Board Executive Committee. • Credit limits for countries and correspondent banks. • Investments with values above the authorized limits set for the Board Executive Committee. • Annual budget of the bank. • Expenses above the authorized limits set for the Board Executive Committee. • Credit facilities granted to the Board members and their families. BOD’s Tasks & Other Duties: Consultancy: The Board may consult at the Bank’s expense any independent expert or consultant. It is permitted for the Board Members to obtain professional advice at the cost of the Bank with the approval of the Board. 14. Ensure that Doha Bank is in compliance with its Articles of Association and applicable international and local laws and regulations including QCB regulations. Receive and review any legal cases brought against the Bank periodically. Access to documentation: As defined in the Board Charter, Board Members shall have full and immediate access to information, documents, and records pertaining to the Bank. The Bank’s Executive Management shall provide the Board and its committees with all requested documents and information pertaining to Board decisions. 15. Provide shareholders with timely information to be able to take decisions in the general assembly. Ensure the fair treatment of all shareholders within the same class in accordance with the law. Ensure that a transparent process of stakeholder relations is in place including procedures for disclosures and communication, and assume responsibilities towards shareholders and other stakeholders and related parties within Doha Bank and the community at large. Nominations: the Bank has established a system for the nomination/appointment of Board Members. As per the Nomination and Governance Committee’s roles and responsibilities, the committee should consider terms, qualifications and experience required for a nominee to take an active role as a Board Member. Hence, the committee will determine the standards necessary to elect any new Board Member. 16. Assist management in addressing related entities’ issue s broug h t fo rwa rd b y re s p e cti ve B oard representatives. Training Programs: the Bank has put in place Corporate Governance Policies which include principles for ANNUAL REPORT 2017 37
38. guiding and training new Board Members . The Bank has enrolled Board Members in a training course on Corporate Governance. Governance: the Board will be continuously updated on governance practices through the Management and the Board Nomination and Governance Committee. Dismissal: Members who do not attend Board meetings on a regular basis without an acceptable excuse may be removed in accordance with Doha Bank’s Articles of Association. Self-Assessment: Templates and tools have been approved to perform an annual self-assessment by the Board. • Member in the Executive Committee • Date of Appointment on Board: April 20, 1982 • Experience: General Manager, Al Waha Contracting & Trading Est. • & 4,346,203 shares as at December 31, 2016 • Attendance: Attended six Board meetings Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani • Managing Director • Chairman of Policies, Development and Remuneration committee and Chairman of Nomination and Governance committee and Member in the Executive Committee • Date of Appointment on Board: December 21, 1978 • Education: Bachelor of Civil Engineering, Missouri University, USA Passing of Board Resolutions by Circulation: From time to time Board Resolutions may be passed by circulation with the approval of the Board Members in writing and submitted to the Board of Directors for endorsement in the following meeting. With regard to such resolutions passed by circulation, the Bank’s Articles of Association have been amended to be in line with the new Commercial Companies Law. • Other Board Memberships: Chairman of the Board of Directors, Qatar Industrial Manufacturing Co.; Chairman of the Board of Directors, Qatari Oman Investment Company; and Board Member, National Leasing Holding Company Board Composition • The Board currently consists of nine members, i.e. 4 executive members and 5 non-executive members two of them independent (by appointment). The current term of the Board of Directors started on March 6th, 2017 and continues for a period of three years through election at the shareholders’ Ordinary General Assembly. Sheikh Abdulla Mohamed Jabor Al-Thani Remuneration: the Board estimates the Executive Management’s remunerations based on the Bank’s overall performance and on the extent to which the goals stated in the Bank’s strategy are achieved. Briefs of each Board Member’s education and experience profile are depicted below: • • Chairman • Chairman of the Executive Committee • Date of Appointment on Board: June 3, 1996 (acting in his own capacity) and March 6th, 2017 (acting as the company’s representative) • Education/ Experience: Graduate of the Royal Academy, Sandhurst, UK • Other Board Memberships: Board Member at Al Khaleej Takaful Group • Ownership: 5,438,517 shares; i.e. 1.75% as at December 31, 2017 & 3,414,538 shares as at December 31, 2016 • Attendance: Attended six Board meetings & 4,988,617 shares as at December 31, 2016 Vice Chairman DOHA BANK Attendance: Attended five Board meetings • Non-Executive Board Member • Chairman of Audit, Compliance and Risk Committee • Date of Appointment on Board: April 20, 1982 • Education: Bachelor Degree • Other Board Memberships: Chairman of Al Khaleej Takaful Group • Ownership: 2,325,350 shares; i.e. 0.75% as at December 31, 2017 & 1,937,792 shares as at December 31, 2016 • Attendance: Attended six Board meetings Sheikh Falah Bin Jassim Bin Jabor Al-Thani Representative of Jassim and Falah Trading and Contracting Co. • Board Member – Executive Director • Member of Executive Committee • Date of Appointment on Board: Feb 27, 2011 • Experience: Ex-Minster of Civil Service Affairs and Housing • Other Board Membership : Chairman of Board of Directors, National Leasing Holding • Ownership: 3,100,466 shares; i.e. 1% as at December 31, 2017 & 2,583,722 shares as at December 31, 2016 Mr. Ahmed Abdul Rehman Yousef Obaidan • Ownership: 6,026,340 shares; i.e. 1.94% as at December 31, 2017 Sheikh Fahad Bin Mohammad Bin Jabor Al Thani Representing Fahad Mohammad Jabor Holding Company. 38 Ownership: 5,269,358 shares; i.e. 1.7% as at December 31, 2017 • Attendance: Attended four Board meetings
39. Mr . Hamad Mohammad Hamad Abdullah Al Mana • Non-Executive Board Member • Member of the Policies, Development and Remuneration Committee • Date of Appointment on Board: April 13, 1999 • Education: Bachelor Degree • Other Board Memberships: Board Member of Qatar General Insurance & Re-insurance Company and Qatar Navigation Company, and Vice Chairman of Mohammad Hamad Al Mana Group Companies; • Ownership: 2,235,651 shares; 0.75% as at December 31, 2017 & 4,058,901 shares as at December 31, 2016 • Attendance: Attended 4 Board meetings Mr. Ahmed Abdullah Al Khal 20,000 shares; i.e. 0.01% as at December 31, 2017. He did not own any of Doha Bank’s shares in 2016. • Attendance: Attended five Board meetings Independent Board Member The current composition of the Board includes two i n d e p e n d e n t B o a rd m e m b e r s w h o m e e t Q C B ’s requirements. The independent member’s ownership of Doha Bank’s shares shouldn’t exceed 0.25% of the bank’s capital. Fiduciary Responsibilities Each Board member owes the Bank by employing diligence, loyalty and integrity in support of the Bank’s overall vision and in line with the Board Charter and the Bank’s Code of Ethics. Board members act on an informed basis in the best interest of the Bank and in fulfillment of their responsibilities to the Bank. Board members therefore have the required knowledge, experience and skills. • Non-Executive Board Member • Member in Nomination & Governance Committee • Date of Appointment on Board: March 3, 2014 • Education: Economics & Political Science Duties of the Chairman of the Board • Experience: He previously assumed the position of the Head of Economic Planning Section of the Ministry of Foreign Affairs, and he worked in the Ministry of Economy and as ambassador to Germany and Japan. • Ownership: The role of the Chairman is to lead Doha Bank towards achieving its strategic goals and to provide its shareholders with sustainable gains. The Chairman also leads the Board and oversees that it is fully functioning in accordance with its mission and approves the agenda of all the board meetings. Additionally, he discusses with Board members recommendations, improvements, strategic initiatives, annual budgets, and new available investment opportunities and he ensures that the Board has performed its assigned duties. He also periodically discusses general bank issues with the members, ensures that there is a mechanism for evaluating board members, and communicates with shareholders. He may delegate specific duties to the Board Members, Board Committees, Managing Director and CEO as he deems fit. The Chairman also coordinates regularly with the CEO to avail the necessary financial and human resources to achieve the Bank’s goal, whilst monitoring performance periodically through the CEO. 2,327,991 shares; i.e. 0.75% as at December 31, 2017 & 1,939, 993 shares as at December 31, 2016 • Attendance: Attended six Board meetings Mr. Ali Ibrahim Abdullah Al-Malki • Independent Board Member (by appointment) • Member in Audit, Compliance & Risk Committee, and Polices, Development & Remuneration Committee • Date of Appointment on Board: March 6th, 2017 • Education: Bachelor of Science Degree in Aviation Administration • Other Board Memberships: Chairman and Managing Directors of Al-Malki Group, Board Member of Doha Bank Assurance Company • Experience: Businessman • Ownership: 123,378 shares; i.e. 0.04% as at December 31, 2017 & 102,815 shares as at December 31, 2016 • Attendance: Attended five Board meetings Mr. Nasser Khaled Nasser Abdullah Al-Misnid • Independent Board Member (by appointment) • Member in Audit, Compliance & Risk Committee, and Nomination & Governance Committee • Date of Appointment on Board: March 6th, 2017 • Education: Bachelor Degree of Political Science from George Town University in Qatar • Experience: Financial Analyst in Qatar Investment Authority • Ownership: Duties of the Vice Chairman The holder of this position shall assume the role of the Chairman in his absence. He works closely with the Chairman in developing and overseeing the execution of the Bank’s strategies. Additionally, he shall undertake other responsibilities as delegated by the Chairman. Duties of the Managing Director • Supervise the implementation of the Board resolutions in accordance with Doha Bank’s strategy and objectives. • Oversee that the Board receives timely, accurate and complete information to enable sound decisionmaking, effective monitoring and advising. • Sign/ countersign (endorse) correspondence, reports, contracts or other documents on behalf of Doha Bank. • Supervise the implementation of strategic initiatives and investments within the level of authority delegated by the Board. ANNUAL REPORT 2017 39
40. • Approve investments, credit facilities and expenditures within the level of authority delegated by the Board. Board Remuneration • Oversee the implementation of key initiatives within Doha Bank in coordination with the CEO and Executive Management. • Provide the Board and the Board Committees with the required reports and disclosures in a timely manner for review and approval. At the end of each year prior to the General Assembly meeting, the proposed remuneration for Board members and the Chairman is made available to the shareholders for discussion and approval. • Update the Board with periodic reports on Doha Bank’s performance and activities. • Participate in various board-level committees. • Any additional responsibility entrusted to him by the Board/ the Chairman of the Board. Duties of the Non-Executive/ Independent Board Member • Work actively on providing information required for the Board to undertake its activities as stipulated in the Board of Directors’ Terms of Reference. • Assist in Doha Bank’s strategic planning and business planning processes and constructively challenge and develop strategic proposals. • Review Doha Bank’s performance periodically and scrutinize the performance of management in achieving agreed goals and objectives. • Review the integrity of financial information and monitor that financial controls and systems of risk management are robust and defensible. • Spearhead the development of Doha Bank’s Corporate Governance policies and monitor compliance to the same. • Assist the Board to properly attend to the External Auditor’s report. • Oversee that Bank and Shareholder interests are maintained, especially in conflict of interest situations between executive members and other members. • Be available to shareholders if they have concerns which have not or cannot be resolved through contact with the Chairman, MD and the CEO or if such contact is not appropriate. • Act as a supplier to the Board for the communication of shareholder concerns when other channels of communication are inappropriate. • Any additional responsibility entrusted by the Board/ Board Chairman. • Be collectively responsible for the Board decisions and actions. • Participate in various Committees including the Audit, Compliance and Risk Committee, Policies, Development and Remuneration and Nomination and Governance Committee. Board Meetings The Board meets based on the invitation of the Chairman or two members of the Board. Each Board meeting has an agenda which is submitted to all members prior to the meeting giving enough time for preparation purposes. As per the Board Charter, the Board meets a minimum of 6 times a year. The Board met six times in 2017, last meeting was held on 5 December 2017. 40 DOHA BANK Departments Reporting to the Board Legal Advisor to the Board and Company Secretary: Mr. Mukhtar Al Henawy Mr. Mukhtar Al Henawy has joined Doha Bank in 2002 as Legal Advisor to the Board. He was also appointed as a Secretary to the Company in 2007. He has more than 30 years of experience, and he worked at law firms before joining the bank. Mr. Mukhtar obtained a Bachelor’s Degree in Law from Ain Shams University in 1987 and a Diploma in Law in 1988. It is in Doha Bank’s view that the Company’s Secretary meets all the requirements of the Code. Legal Advisor to the Board is performing the duties of Company’s Secretary and maintains all Board documentation and manages the overall processes related to board meetings. The Company’s Secretary reports directly to the Chairman, however, all members may use the Company’s Secretary’s services. Chief Compliance Officer: Mr. Jamal Al Sholy Mr. Jamal Al Sholy has joined Doha Bank in 1997 as Head of the Internal Audit Department and in 2002 he has become Chief Compliance Officer to date. He has more than 37 years of experience, and he worked in external audit before joining the bank. The Compliance Department includes the Compliance Control Unit and the AML/CTF Unit. The Chief Compliance Officer works independently from the Executive Management and reports directly to the Board of Directors. Mr. Jamal holds a Bachelor’s Degree in Accounting and Business Administration from the University of Jordan, 1981. Chief Internal Auditor: Mr. Mohammad Daoud Mr. Mohammad Daoud has joined Doha Bank in 2012 as an Acting Head of Internal Audit Department. In 2016, he was appointed as a Head of Internal Audit Department. He has more than 25 years of experience in the field of banking and financial institutions before joining Doha Bank. Mr. Mohammad Daoud has got a PhD in Finance. Executive Management Doha Bank’s Executive Management consists of the CEO, his assistants and the heads of the executive departments. Following are the profiles of the CEO and the department heads, noting that none of them is a holder of Doha Bank shares.
41. Chief Executive Officer : Dr. Raghavan Seetharaman Dr. R. Seetharaman has joined Doha Bank in 2002 as Assistant General Manager. In 2007, he was appointed as CEO of the bank. He has an extensive experience of more than 37 years during which he worked in a number of banks and institutions before joining Doha Bank, including Bank Muscat. than 31 years in several financial and banking institutions before joining Doha Bank. Mr. Roberts holds Bachelor of Arts degree with associate of the Chartered Institute of Bankers (ACIB). Acting Chief Human Resources Officer: Sheikh Mohamed Fahad Mohamed Al Thani Dr. R. Seetharaman is a Chartered Accountant, whilst being a Gold medalist in his graduation – Bachelor of Commerce. He is a recipient of multiple doctorate degrees from leading universities of the world including two PhDs. Sheikh Mohamed Fahad Al Thani has joined Doha Bank in 2013 as Head of Financing Unit. He has banking experience in several financial institutions. He held the position of Acting Head of HR Department in 2017. Chief Risk Officer: Mr. Khalid Latif Sheikh Mohamed Fahad Al Thani holds a Bachelor Degree in General Business. Mr. Khalid Latif has joined Doha Bank in 1990 and has held several positions since then. He has more than 34 years of experience and has worked for several years in the banking sector and other sectors in Pakistan before joining the bank. Mr. Khalid Latif holds a Master’s Degree in Business Administration from Pakistan. Chief Wholesale Banking Officer: Mr. Cherussery Krishnan Mr. Cherussery Krishnan has joined Doha Bank in 2000 as an Executive Manager in the Wholesale Banking Group. He has more than 33 years of experience and has worked at a number of institutions and banks before joining Doha Bank. Mr. Cherussery Krishnan holds a Master’s Degree in the Bank Management. Chief Financial Officer: Mr. David Challinor Mr. David Challinor has joined Doha Bank in 2008 as Assistant General Manager. He has more than 23 years of experience and has worked at several financial institutions in Australia before joining Doha Bank. Mr. Challinor holds a Bachelor’s Degree in Economics from England, and he is a fellow of the Institute of Chartered Accountants in England and Wales. Chief International Banking Officer: Mr. Frank Hamer Mr. Frank Hamer has joined Doha Bank in 2016 as a Head of International Banking Department. He has more than 24 years of experience and has worked at the banking sector before joining Doha Bank. Mr. Frank Hamer holds a Master’s Degree in Business Administration & is a Certified Public Accountant. Chief Operating Officer, Technology and Operations Group: Mr. Peter Roberts Mr. Peter Roberts has joined Doha Bank in 2017 as Assistant General Manager- Chief Operating Officer, Technology & Operations. He has experience of more Acting Chief Retail Banking Officer: Mr. Braik Ali H S Al-Marri Mr. Braik Ali H S Al-Marri has joined Doha Bank in 2015 as Branch Control Manager. He has experience of more than 24 years as he worked in several financial and banking institutions before joining the bank. He has held the position of the Acting Chief Retail Banking Officer in 2017. Senior Management Remuneration The Bank adopts a policy, which regulates the process for assessing the performance of Senior Management based on the achievement of the bank’s strategic goals. Based on the performance assessment and the Bank’s results, the additional benefits and bonuses are set. With regard to salaries, the Bank has hired one of the consulting firms to prepare a study and proposal for the salaries and financial benefits of the staff, which is approved by the Board. Separation of Positions of Chairman and CEO The Chairman and CEO duties and responsibilities are separated in the Bank and each position has clearly defined roles and responsibilities under its own Job Description. Conflict of Interest and Insider Trading Doha Bank has set in place several controls to prevent conflict of interest situations from occurring. Specifically, the Bank has adopted a related party policy under Corporate Governance policies. Related party transactions are approved by the Board based on materiality. As per Commercial Companies Law, if a Board Member has a conflict of interest related to a certain transaction, he shall not participate in the Board meeting at the time of taking a decision on the transaction and shall not participate in the issuance of a resolution if it is passed to him by circulation. It is also worth noting that the Bank has adopted a conflict of interest policy which must be complied with by all employees of the Bank. Currently, monitoring and controlling insider trading are done by Qatar Exchange directly. A policy on insider trading has been adopted by the Bank. ANNUAL REPORT 2017 41
42. Related Party Transactions In general , any staff or board member shall be considered as a related party upon carrying out commercial operations for Doha Bank with one of the family members or any business running by one of the family members. Approvals of Related Party Transactions The staff or board member shall disclose the related party transactions and shall obtain a written approval from the bank’s Executive Committee. Regarding the board members, the related parties shall be disclosed and discussed during the board meeting in the absence of the concerned member, and shall be submitted during the General Assembly Meeting following the date of transaction. Disclosure of Related Party Transactions The bank’s policy prohibits the Chairman, board members and executive managers from carrying out any selling or buying transactions for the bank’s shares during the period set by Qatar Exchange and even publishing financial statements to the public, knowing that no related party has concluded any transactions in the prohibition periods during the year. Board Committees Board Committees are established to assist the Board of Directors in conducting their duties. Each committee has developed Terms of Reference that define the committee’s roles and responsibilities in accordance with QCB’s instructions and QFMA regulations and leading governance practices. The Bank has four Board committees as follows: • Audit, Compliance and Risk Committee • Nomination and Governance Committee • Policies, Development and Remuneration Committee • Executive Committee Audit, Compliance and Risk Committee Membership: Sheikh Abdulla Mohammad Bin Jabor Al Thani – NonExecutive Board Member (Chairman). He attended all the meetings of the Committee Mr. Ali Ibrahim Abdullah Al Malki – Independent Board Member. He attended five meetings. Mr. Nasser Khalid Abdullah Al Mesnad – Independent Board Member. He attended six meetings. Meetings: Seven meetings were held during the year, noting that only six meetings are required as per the Governance Code. Roles and Responsibilities: The Committee is responsible for reviewing the financial statements, the work of external and internal auditors, the internal control environment, the compliance with regulations and laws 42 DOHA BANK and the management of risk at the Bank. The Audit Committee may seek independent professional advice for risk management and may hire consultants to assist it in performing its functions, and exercising its powers and responsibilities soundly. The Committee discusses with the external auditors the nature, scope and efficiency of the undertaken audits in accordance with International Audit Standards and International Financial Reporting Standards, and it also ensures the independence and objectivity of the external auditors by collecting information from them on their relationship with the bank, including the nonauditing services. The Committee also reviews the annual and quarterly financial statements and inspects the Bank’s annual report and the notes contained therein, and in the other related control reports. It also reviews the important financial and accounting reports, including the complex cases and the unusual operations and the areas that require a high level of diligence and good judgment. The Committee considers the effectiveness of the Bank’s risk management and internal control over annual, interim and regulatory financial reporting and other regulatory reporting, including information technology security. It also seeks clarifications from the management and the internal and external auditors as to whether the financial and operational controls are adequate and effective. The Committee ensures that the financial statements and the issued reports are in compliance with the accounting standards and practices accepted by QCB and QFMA, and with the listing regulations enforced by QE, as well as the disclosure rules and any other requirements governing the preparation of financial reports. The Committee meets regularly during the year to discuss the reports of the Internal Audit Department, the Compliance Department and Risk Management in addition to the reports issued by the External Auditors and QCB’s inspection reports. The Committee also reviews the quotations submitted by the external auditors for auditing the Bank’s accounts every year and submits recommendations thereof to the Board of Directors to select the most suitable auditor or to renew the term of the current auditor so as to submit a Board recommendation to the General Assembly of Shareholders. The Bank has approved a whistle-blowing policy to encourage the Bank’s employees to detect/ disclose any violations that may adversely affect the Bank. The critical issues are then reported to the Audit, Compliance & Risk Evaluation Committee which in turn ensures taking the necessary actions to rectify the violations. There has been no conflict between the Committee’s recommendations and the Board’s resolutions or any other issues of material impact during the year 2017. Nomination and Governance Committee Membership: Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani – Managing Director (Chairman). He attended all the Committee’s meetings.
43. Mr . Ahmed Abdul Rehman Yousef Obaidan - Vice Chairman & Executive Member up to 06/03/2017.He attended all the Committee’s meetings. Sheikh Abdulla Mohammad Jabor Al Thani - NonExecutive Board Member, up to 06/03/2017.He attended all committee meetings. Mr. Hamad Mohammad Hamad Al Mana – Non-Executive Board Member, up to 06/03/2017. Mr. Ahmed Abdullah Hamad Al Khal – Non-Executive Board Member. He was appointed on 06/03/2017. Mr. Nasser Khalid Abdullah Al Mesnad – Independent Board Member. He was appointed on 06/03/2017. Meetings: Two meetings were held during the year, noting that only one meeting is required as per the Governance Code. Roles and Responsibilities: The Committee reviews the nominations for the Board of Directors’ membership and monitors the adherence to corporate governance principles at Doha Bank. It also identifies and nominates new members for the Board who have the ability to make sound decisions on behalf of the bank and shareholders. The Committee takes into account the availability of a sufficient number of potential candidates who can perform their duties as Board Members. It also assesses their skills, knowledge and experience as well as their professional, technical, and academic qualifications and their personality. The Committee evaluates the candidates for the membership of the Board based on criteria including integrity, insight, acquired experience and the ability to devote sufficient time to manage the Bank’s affairs. other employment benefits of the Bank’s employees and makes recommendations to the Board of Directors for approval. The allowances and benefits of the Chairman, Board Members and Board Committees are presented to the shareholders at the General Assembly Meeting at the end of each financial year for approval. Executive Committee Membership: Sheikh Fahad Bin Mohammad Bin Jabor Al Thani – Chairman of the Board of Directors (Committee Chairman). He attended all the Committee meetings. Mr. Ahmed Abdul Rehman Yousef Obaidan – Vice Chairman. He attended all the meetings. Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani – Managing Director. He attended all the committee meetings. Sheikh Falah Bin Jassim Bin Jabor Al Thani – Executive Board Member. He attended all the Committee meetings. Meetings: The required number of meetings as per the Code is at least four times a year, or whenever requested by the Committee Chairman. Two meetings were held during the year. Roles and Responsibilities: • Review changes relating to Doha Bank’s capital structure and significant changes to the management and control structure of Doha Bank, recommend to the Board for approval. • Facilitate the effective supervision and overall control of the business of the Bank by receiving and reviewing overall customer credit, inter-group and investment exposures. • Approve credit facilities above the authorized limit set for management up to the Executive Committee limit delegated by the Board of Directors. • Review credit proposals above the Executive Committee limit and provide recommendations on reviewed proposals to the Board of Directors. • Recommend to the Board of Directors appropriate action pertaining to the impaired indebtedness cases or obligation above the delegated limit. • Mr. Ali Ibrahim Abdullah Al Malki – Independent Board Member. He attended two meetings. Review on a quarterly basis the status of pending litigation matters. • Meetings: Three meetings were held during the year, noting that only two meetings are required as per the Governance Code. Approve purchase and expenditure for amounts within the limit delegated to the Committee by the Board of Directors. • Approve donations for charity activities and corporate social responsibility expenditures on a case-bycase basis in line with the delegated limits to the Committee as approved by the Board of Directors and the corporate social responsibility strategy. • Review and approve strategic and commercial investments within the Committee’s delegation. • Oversee the performance of strategic investments by periodically receiving reports from management and reporting to the Board. Policies, Development and Remuneration Committee Membership: Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani – Managing Director (Chairman). He attended all the Committee meetings. Mr. Hamad Mohammad Hamad Al Mana – Non-Executive Board Member. He attended two meetings. Roles and Responsibilities: The Committee approves the Bank’s policies and strategies, and reviews the remuneration framework for the Executive Management and the Board. The Committee is also responsible for drawing up the general policy of bonuses and benefits of the Board of Directors, CEO and Senior Executives based on the achievement of the Bank’s long-term strategic goals. The Committee also reviews the pay scale and ANNUAL REPORT 2017 43
44. INTERNAL CONTROL , COMPLIANCE, RISK MANAGEMENT AND INTERNAL AUDIT Internal Control The general objective of the internal controls procedures of Doha Bank is to safeguard assets and capital and to ensure the reliability of Doha Bank’s and its subsidiaries’ financial recordkeeping. Doha Bank has adopted a process of internal controls that allow Management to detect errors in procedures or financial recordkeeping. Doha Bank’s internal control framework includes the establishment of strong finance, risk management, compliance and internal audit departments which support in establishing a strong internal control framework. The Internal Control Framework is overseen by the Audit, Compliance and Risk Committee. The Internal Audit, Compliance and Risk Departments respectively provide periodic reports to the Audit, Compliance and Risk Committee on: • The major risks associated with the banking business related to Strategic, Reputation, Compliance, Legal, Credit, Liquidity, Market, and Operational Risks; • Overall compliance of the Bank with rules and regulations; • Internal Audit and External Audit recommendations and findings. The Board of Directors has approved policies related to Internal Audit Department, Compliance Department and Risk Management Department. Compliance The main responsibility of the Compliance Department at the Bank is to assist the Board and Bank’s Executive Management in managing and controlling the Compliance risks efficiently and to protect the Bank from financial losses “if any” due to failure of compliance. Compliance risks include risk of legal/regulatory sanctions, material financial loss, or loss of reputation. Compliance also assists the Board of Directors and Executive Management in improving the internal controls procedures that will mitigate Compliance, AML and Anti–Terrorist Financing (ATF) risks. Moreover, Compliance acts as a liaison between the Bank and the respective regulators and updates management with new laws and regulations. Internal Audit The Bank has an independent Internal Audit Department that reports to the Board of Directors through the Audit, Compliance and Risk Evaluation Committee on a periodic basis. The Internal Audit is carried out by operationally independent, appropriately trained and competent staff. The Internal Audit employees have access to all the Bank’s activities, documents and reports that are needed to accomplish their missions. The Internal Audit team does not perform any activities in relation to Bank’s daily regular activities and all their bonuses and benefits are directly determined by the Board of Directors. 44 DOHA BANK The Internal Audit Department operates in accordance with an Audit Plan that is approved by the Audit, Compliance and Risk Evaluation Committee. This plan includes a review and evaluation of the internal control systems of the various branches and departments of the Bank. Risk Management The Bank has consistently and continually monitored risks and processes across the organization to identify, assess, measure, manage and report on opportunities and threats that could impact the achievement of the Bank’s objectives. The Board and the Executive Management are ultimately responsible for all the risks assumed by the Bank. They seek to balance the risk profile against sustainable returns to achieve the business goals of the Bank. The Board has engaged qualified professionals and has set policies and procedures, risk limits, organizational framework, committees, authority levels and accountability. Implementation of the Risk Management Framework is entrusted to a highly competent team and is controlled and implemented through various senior level management committees chaired by the Chief Executive Officer covering Credit, Investment, operational risk, and Asset & Liability Management. INTERNAL CONTROL ASSESSMENT The Board receives periodic reports on the internal control framework from Senior Management and control functions such as Internal Audit, Compliance and Risk Management. Such reports are assessed and scrutinized by the Board to ensure that the internal control framework is being implemented according to management prerogatives. The Board views that the current processes adopted for internal control by the Board and Senior Management are robust for Doha Bank’s operations. No major breach of control or internal control failure has taken place which has affected or may affect Bank’s financial performance during 2017. EXTERNAL AUDIT Annually, the external account auditors are appointed by the General Assembly of Shareholders based on a recommendation submitted by the Board of Directors. The Bank takes into consideration the instructions of the regulatory authorities related to the appointment of external auditors in terms of the number of times for the appointment of any auditor. The Board of Directors also takes QCB’s prior approval for the nomination of an external auditor/more than one external auditor for the approval of the General Assembly of Shareholders. After choosing an external auditor by the General Assembly of Shareholders, an engagement letter is signed between the two parties. Under this engagement, the external auditor shall be required to comply with the best professional standards and exert the necessary professional due diligence upon conducting any audit assignment, and to inform the regulatory authorities in the event of the failure of the Bank (the Board) to take appropriate actions towards the material issues that have been raised by them.
45. The external auditor also reviews the balance sheet and profit & loss accounts. KPMG reviews and audits the Bank’s accounts since 2017 to date, including overseas branches’ accounts, Doha Bank Assurance Company’s accounts in addition to investment fund accounts and periodic reports pertaining to QCB requirements. The external audit fee for 2017 was QR 2,350,000. We have received three quotations from three well-known auditing firms. These quotations were presented to the Ordinary General Assembly of shareholders and KPMG were selected to review the bank’s accounts for 2017. MEANS OF COMMINICATION WITH SHAREHOLDERS: Doha Bank considers its shareholders as key stakeholders. Doha Bank has established a Shareholder Relations function which is responsible for addressing shareholder queries. It is also responsible for communicating with any investors in the markets, and acts as a liaison between them and the Chairman of the Board. DISCLOSURE AND SHAREHOLDERS RIGHTS Doha Bank strives to provide shareholders with sufficient data to analyze Doha Bank performance and to take decisions on Board Member elections and other matters such as dividends Doha Bank ensures that its assembly meetings and the mechanism for voting adopted is in accordance with commercial companies’ law. Doha Bank can provide general information such as financial statements, articles of association and by-laws of the Bank to its shareholders. Disclosure Duty Doha Bank adheres to all the disclosure requirements issued by Qatar Financial Markets’ Authority, where the Bank discloses all its financial information and any activities carried out by the Bank in a transparent manner to its shareholders and the public through Qatar Exchange and the local newspapers and the Bank’s website. The Bank’s Board is keen to ensure that all information is accurate, correct and not misleading. The Corporate Governance Report contains details on the composition of the Board of Directors as well as information about the Board Members and the Board Committees. Doha Bank confirms that all financial statements are prepared in accordance with the International Financial Reporting Standards and the relevant QCB regulations, and that the external auditor of the Bank prepares its reports in accordance with the International Standards on Auditing (ISA) after obtaining all the necessary information, evidences and confirmations and following the appropriate audit procedures. The Bank has provided the shareholders with all the interim and annual financial reports. Access to Information Doha Bank has a web site through which all information about the Bank is published, such as the annual and quarterly financial statements and the Board of Directors’ Report and the Corporate Governance Report in addition to the Annual Report and any other information relating to the management of the Bank and the Board of Directors and the products, services and branches of the Bank. The bank has internal procedures allowing shareholders to obtain the company’s documents and the relevant data, however shareholder register details are maintained by the Qatar Central Securities Depository Company. Shareholders’ Rights and Shareholders’ Meetings The Bank’s Articles of Association include provisions that ensure the shareholder’s right to attend the General Assembly meetings and vote on the General Assembly’s resolutions and have a number of votes equal to the number of his shares. Minors and incompetent shareholders shall be represented by their legal proxies at the meeting. Each shareholder has the right to discuss the topics listed in the agenda of General Assembly and raise questions to the board members. Voting at the General Assembly shall take place by raising hands or as decided by the General Assembly. Voting must be by secret ballot if the decision relates to the election of the Board members, or their dismissal or initiating legal procedures against them; or if the Chairman of the Board of Directors or a number of shareholders comprising at least one tenth of the voters present at the meeting so request. Proxy for attending the General Assembly is permissible, but it is stipulated that the proxy must be a shareholder and it should be private and confirmed in writing. Moreover, a shareholder may not appoint one of the Board Members to attend the meetings of the General Assembly on his behalf. Under all circumstances, the number of shares which the proxy possesses in this capacity may not exceed 5% of the Bank’s share capital except in the case where the proxy represents Qatar Investment Authority. The General Assembly shall meet at the invitation of the Board of Directors at least once a year at the time and place determined by the Board of Directors after the approval of the Commercial Affairs Department at the Ministry of Economy and Commerce. The Assembly should be convened within four months as of the end of the financial year of the Bank. The Board may call the General Assembly for convention whenever necessary, but it should call for a meeting if such a request has been submitted for serious reasons by the auditor or by a number of shareholders holding not less than 10% of the capital within fifteen days as of the date of the request. The Extraordinary General Assembly may be convened based upon an invitation from the Board of Directors itself, but the Board should also call for such a meeting if requested to do so by a number of shareholders holding at least 25% of the Bank’s share capital. ANNUAL REPORT 2017 45
46. Equitable Treatment of Shareholders The bank ’s Articles of Association include that each shareholder of the same class shall have equal right in the Bank assets titles and the profits distributed according to the number of shares he owns. Shareholders’ Rights Concerning Board Members’ Elections After notifying the competent regulatory authorities, the Bank shall announce that nominations are open for the membership of the Board of Directors in the local newspapers, and then the Nomination & Governance Committee, after the closure of the nomination period, shall study the applications received from shareholders. All information on the nominees may be obtained by shareholders by visiting the Bank before the General Assembly. After obtaining approval of the competent authorities, these names shall be submitted to the Ordinary General Assembly of Shareholders to elect new Board Members from the nominees. The Bank’s Articles of Association gives shareholders the right to vote on the Assembly’s resolutions and also on the nominees for Board membership, pursuant to Commercial Companies Law No. (11) of 2015 which refers to QFMA’s Governance Code with regard to public shareholding companies. Shareholders’ Rights Concerning Dividend Distribution The Board of Directors shall propose the distribution of dividends to the General Assembly every year according to the Bank’s policy for dividend distribution as approved by the Board of Directors under the governance policy and the Bank’s Articles of Association. The Articles of Association of the Bank allow the distribution of dividends to the shareholders after deducting 10% of the net profit of the bank to be appropriated for the legal reserve. The General Assembly may suspend this deduction once the reserve reaches 100% of the paid up capital. But if this reserve becomes less than the mentioned percentage, then the deduction should be resumed until the reserve reaches that percentage. The legal reserve may not be distributed to the shareholders except in the cases permitted by the Qatari Commercial Companies Law and after obtaining the approval of Qatar Central Bank. Upon a proposal from the Board of Directors, the General Assembly may annually decide to deduct a portion of the net profits to the optional reserve account. This reserve may be used as deemed fit by the General Assembly. A portion of the profits as determined by the General Assembly shall be deducted to meet the obligations imposed on the company by virtue of the Labor Law. The remaining profit amount shall then be distributed to the shareholders or shall be brought forward to the next year, based upon a proposal from the Board of Directors and subject to the approval of the General Assembly. 46 DOHA BANK Shareholders’ Rights and Major Transactions Doha Bank is a Qatari shareholding company with a capital of QR 3,100,467.020 divided into 310,046,702 ordinary nominal shares, at a value of QR (10) per share, listed on Qatar Exchange. With the exception of Qatar Investment Authority “The Government of State of Qatar” may buy and own up to 20% of the Bank’s share capital, any natural or legal person neither shall possess more than 2% of the bank’s shares nor less than 100 shares, with the exception of ownership by way of inheritance. The Extraordinary General Assembly may approve the registration of a number of shares, not exceeding 20% of the share capital, in the name of a trusted depositary agent in the event of a capital increase through the issuance of global depositary receipts. The investment funds shall be considered as a single investment group, regardless of their number, if each is managed by one natural or judicial person, or if the founder in each is a natural or judicial person. In these two cases, the investment group shall not own more than 2% of the capital shares. Foreigners, on the other hand, may invest in the shares of the bank up to 49% of the issued capital. Doha Bank hereby confirms that there are no shareholder agreements related to capital structuring and the exercise of shareholder rights, and there is nothing stated in the Bank’s Articles of Association on minority rights. Ownership of Shares: The ownership of Doha Bank’s shares distributed by nationality as at December 31, 2017 is as follows: Nationality Qatar No. of Shares Percentage 267,950,792 86.42% GCC 8,252,917 2.66% Arab countries 3,039,969 0.98% Asia 4,02v6,430 1.30% Europe 10,385,667 3.35% 107,275 0.04% 13,311,929 4.29% Other 2,971,723 0.96% Total 310,046,702 100% Africa USA The number of shareholders reached 3,192 as at 31/12/2017. No shareholder possesses more than 2% of the Bank’s shares except Qatar Investment Authority (the
47. Government of State of Qatar ) which owns directly and indirectly 17.22% of the shares as per bank’s Articles of Association. STAKEHOLDER RIGHTS Doha Bank endeavors to maintain equitable and fair treatment of all its stakeholders. To enhance ethical conduct by the Bank’s employees, each employee must abide by Doha Bank’s Code of Ethics which stipulates ethical principles that each employee must demonstrate. Any breaches of ethical conduct are investigated and, as appropriate, disciplinary and corrective action is taken. Moreover, Doha Bank has established a whistle-blowing policy, whereby employees can report concerns without fear of retribution. Such concerns are reviewed and, as necessary, investigated and reported to the Audit, Compliance and Risk Committee. It is also worth noting, that Doha Bank has standardized its processes related to compensation and assessment of employees by adopting a performance appraisal scheme and a staff compensation and benefits structure. BANK BRANCHES, REPRESENTATIVE OFFICE AND SUBSIDIARIES Domestically, Doha Bank’s network inside Qatar includes a total of 27 branches, 6 e-branches, and 6 pay offices and one mobile banking unit. The number of ATMs reached 119 ATMs of which 5 ATMs in UAE and 2 ATMs in Kuwait, and 2 ATMs in India. Globally, the bank has six branches, Dubai and Abu Dhabi branches in UAE, a branch in Kuwait and three branches in India. Furthermore, we have thirteen representative offices located in Singapore, Turkey, Japan, China, UK, South Korea, Germany, Australia, Canada, Hong Kong, South Africa and the Emirate of Sharjah (UAE) & Bangladesh. The Bank also fully owns subsidiary companies i.e. Doha Bank Assurance Company in Qatar, Doha Finance Limited, and Doha Bank Securities Limited in Cayman Island for purpose of debt issuance and derivative transactions, and has a strategic share of 44.02% of the capital of one of the Indian brokerage companies, which was later re-named as Doha Brokerage and Financial Services and positioned to practice brokerage and asset management businesses. Fahad Bin Mohammad Bin Jabor Al-Thani Chairman ANNUAL REPORT 2017 47
48. DOHA BANK CORPORATE ORGANISATIONAL STRUCTURE (as at 31st December 2017) Nomination & Governance Committee Board Executive Committee Policies, Development & Remuneration Committee Audit, Compliance & Risk Committee Board of Directors Board Secretariat & Shareholders Affairs Chairman & Managing Director Office Asset Liability Committee (ALCO) Credit Committee HR Committee Technology & Operations Committee Chief Executive Officer Tender Committee Management Executive Committee Risk Management Committee Investment Committee Legal Counsel Chief Compliance Officer Chief Internal Auditor Legal Compliance Internal Audit CEO’s Office Chief Wholesale Banking Officer Chief Treasury & Investments Officer Chief International Banking Officer Chief Financial Officer Chief Human Resources Officer Chief Strategy, Corporate Performance & Marketing Officer Chief Risk Officer Deputy Chief Executive Officer Chief Retail Banking Officer Wholesale Banking Treasury & Investments International Banking UHNWI & Private Banking Finance Human Resources Strategic Planning & Corporate Performance Marketing & Public Relations Global Governance Risk & Credit Management Retail Banking Chief Operating Officer Information Technology Operations Note 1: Committees can be added as long as their roles are justified & well defined. Further guidance is presented in the EY gov ernance report as part of Project Horizon Note 2: The BOD is represented by HE the Managing Director and effectively the CEO will report to him on day to day basis as a representative of the Board Note3: As the BOD has empowered HE the Managing Director to act on behalf of the Board, the Bank expect matters related to the control functions are addressed with their Excellences' as documented in the Delegation of Authority for these functions 48 DOHA BANK Administration
49. 2016 2017 1 ,110 2016 1,054 2017 1,354 14,807 13,381 13,187 2016 2017 2016 2016 59,468 55,730 59,804 59,186 55,595 93,495 90,365 83,289 FINANCIAL RESULTS 2017 2017 ANNUAL REPORT 2017 49
50. INDEPENDENT AUDITOR ’S REPORT TO THE SHAREHOLDERS OF DOHA BANK Q.P.S.C. Report on the Audit of the Consolidated Financial Statements Opinion We have audited the accompanying consolidated financial statements of Doha Bank (Q.P.S.C.) (the ‘Bank’) and its subsidiaries (together the ‘Group’), which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRS’) and the applicable provisions of Qatar Central Bank regulations (‘QCB regulations’). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under 50 DOHA BANK those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the Bank’s consolidated financial statements in the State of Qatar, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
51. INDEPENDENT AUDITOR ’S REPORT TO THE SHAREHOLDERS OF DOHA BANK Q.P.S.C. Impairment of loans and advances - How the matter was addressed in our audit refer to notes 3(g)(v), 4(b)(v), 5(a)(i) and 10(c) in the consolidated financial statements We focused on this area because: • Loans and advances are QAR 59,804 million representing 64% of the Group’s total assets as at 31 December 2017, hence a material portion of the consolidated statement of financial position. The net impairment charge on loans and advances during the year was QAR 593 million. • The Group makes complex and subjective judgments over both timing of recognition of impairment and the estimation of the amount of such impairment. Our audit procedures in this area included, among others: • Our team used their local knowledge to assess the trends in their local credit environment and considered the likely impact on the Group’s loans and advances portfolio to focus their testing on key risk areas. • For the corporate portfolio: - we tested the key controls over the credit grading and monitoring process; - we tested the governance controls over the impairment processes, including the continuous re-assessment by the Group that impairment policies remain appropriate for the risks within the Group’s loans and advances portfolio; - we performed detailed credit assessments of a sample of performing and non-performing loans and advances in line with QCB regulations; - as part of our credit assessments for these selected loans and advances, we critically challenged the reasonableness of the forecast of recoverable cash flows, realization of collateral and other possible sources of repayment. We tested the consistency of key assumptions and compared them to progress against business plans and our own understanding of the relevant industries and business environments. We also agreed them where possible to externally derived evidence. • For the retail portfolio, the impairment process is based on historical payment performance of each segment within the portfolio, adjusted for current market and economic conditions. We tested the accuracy of key variables relevant for the retail loans portfolio (e.g. year-end balances, repayment history, past-due status) and we assessed the appropriateness of the impairment calculation methodology. We evaluated whether the output is consistent with historical payment performance, and we challenged the appropriateness of the Group’s adjustments to reflect current market and economic conditions. • For the collective impairment calculation, our work included testing controls over the appropriateness of the methodology and models used to calculate the charge, the process of determining key assumptions and the identification of loans to be included within the calculation. • We assessed the adequacy of the Group’s disclosure in relation to impairment of loans and advances by reference to the requirements of IFRS and QCB regulations. Valuation of investment securities refer to notes 3(g)(v), 5(a)(ii), 5(b)(ii) and 11 in the consolidated financial statements How the matter was addressed in our audit We focused on this area because: • Investment securities are QAR 17,513 million representing 18.7% of the Group’s total assets as at 31 December 2017, hence a material portion of the consolidated statement of financial position. Available-for-Sale (“AFS”) investment securities amount to QAR 11,818 million and account for 67.5% of the total investment securities, which comprise quoted and unquoted securities, pricing of which involves management judgment. • IFRS and QCB regulations require assessment at each reporting date to determine whether there is objective evidence that an investment is impaired. In case of equity instruments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of an investment below cost, determination of which requires management judgment. Our audit procedures in this area included, among others: • Testing controls over the process of valuation of investment securities. • Agreeing the valuation of the quoted equity and debt securities to externally quoted prices. • For unquoted debt and equity securities, assessing the appropriateness of the valuation methodology and challenging the key underlying assumptions, such as pricing inputs and discount factors. • For AFS equity instruments, performed tests to determine whether there has been a significant or prolonged decline in the fair value of the relevant securities. • For AFS debt securities, performed tests to determine whether there is objective evidence of impairment due to credit-related factors. • We assessed the adequacy of the Group’s disclosure in relation to the valuation of investment securities by reference to the requirements of IFRS and QCB regulations. ANNUAL REPORT 2017 51
52. INDEPENDENT AUDITOR ’S REPORT TO THE SHAREHOLDERS OF DOHA BANK Q.P.S.C. Other Matter The consolidated financial statements as at and for the year ended 31 December 2016 were audited by another auditor, whose audit report dated 30 January 2017, expressed an unmodified audit opinion thereon. Auditor’s responsibilities for the Audit of the Consolidated Financial Statements The Board of Directors is responsible for the other information. The other information comprises the information included in the Bank’s 2017 annual report (the “Annual Report”), but does not include the Bank’s consolidated financial statements and our auditor’s report thereon. The annual report is expected to be made available to us after the date of this auditor’s report. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. As part of an audit in accordance with ISA, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and when it becomes available, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Other Information When we read the annual report, if we conclude that there is a material misstatement therein we are required to communicate the matter with those charged with governance. Responsibilities of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and QCB regulations, and for such internal control as the Board of Directors determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 52 DOHA BANK
53. INDEPENDENT AUDITOR ’S REPORT TO THE SHAREHOLDERS OF DOHA BANK Q.P.S.C. Auditor’s responsibilities for the Audit of the Consolidated Financial Statement (continued) • Evaluate the overall presentation, structure and content of the consolidated financial statements, i n c l u d i n g t h e d i s c l o s u re s , a n d w h e t h e r t h e consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Legal and Regulatory Requirements We have obtained all the information and explanations we considered necessary for the purposes of our audit. The Bank has maintained proper accounting records and its consolidated financial statements are in agreement therewith. We have not been provided the report of the Board of Directors to determine whether there is any financial information contained therein is in agreement with the books and records of the Bank. We are not aware of any violations of the applicable provisions of the Qatar Central Bank Law No. 13 of 2012 and of the Qatar Commercial Companies Law No. 11 of 2015 or the terms of the Bank’s Articles of Association and the amendments thereto, having occurred during the year which might have had a material effect on the Bank’s consolidated financial position or performance as at and for the year ended 31 December 2017. 23 January 2018 Doha State of Qatar Gopal Balasubramaniam Qatar Auditor’s Registry Number 251 KPMG Licensed by QFMA: External Auditor’s License No. 120153 From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. ANNUAL REPORT 2017 53
54. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2017 2017 QAR ’000 Notes 2016 QAR’000 ASSETS Cash and balances with central banks 8 6,669,609 4,260,410 Due from banks 9 7,821,983 10,505,250 Loans and advances to customers 10 59,804,174 59,186,222 Investment securities 11 17,512,610 14,706,110 Investment in an associate 12 11,126 10,343 Property, furniture and equipment 13 14 708,580 770,845 Other assets TOTAL ASSETS 967,199 925,769 93,495,281 90,364,949 LIABILITIES Due to banks 15 11,005,061 12,275,336 Customer deposits 16 59,468,326 55,729,950 Debt securities 17 657,669 1,819,598 Other borrowings 18 19 5,432,936 4,994,474 Other liabilities TOTAL LIABILITIES 2,124,292 2,165,056 78,688,284 76,984,414 2,583,723 EQUITY Share capital 20(a) 3,100,467 Legal reserve 20(b) 5,092,762 4,317,561 Risk reserve 20(c) 1,372,000 1,372,000 Fair value reserve 20(d) 20(e) (67,555) (103,412) Foreign currency translation reserve (13,451) (24,991) 1,322,774 1,235,654 10,806,997 9,380,535 4,000,000 4,000,000 TOTAL EQUITY 14,806,997 13,380,535 TOTAL LIABILITIES AND EQUITY 93,495,281 90,364,949 Retained earnings TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE BANK Instruments eligible as additional capital 20(g) The consolidated financial statements were approved by the Board of Directors on 23 January 2018 and were signed on its behalf by: Fahad Bin Mohammad Bin Jabor Al Thani Chairman Abdul Rahman Bin Mohammad Bin Jabor Al Thani Managing Director Dr. Raghavan Seetharaman Group Chief Executive Officer The attached notes 1 to 36 form an integral part of these consolidated financial statements 54 DOHA BANK
55. CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2017 Notes Interest income Interest expense 2017 2016 QAR ’000 QAR’000 21 3,630,853 3,168,995 22 (1,375,382) (1,108,349) 2,255,471 2,060,646 Net interest income Fee and commission income 23 516,313 502,948 Fee and commission expense 24 (51,788) (43,169) 464,525 459,779 Net fee and commission income 62,315 65,237 Premium ceded (17,195) (33,794) Net claims paid (37,918) (23,419) 7,202 8,024 Gross written premium Net income from insurance activities Foreign exchange gain 25 106,544 102,246 Income from investment securities 26 27 49,822 55,584 Other operating income Net operating income Staff costs 28 62,276 54,879 218,642 212,709 2,945,840 2,741,158 )531,109( )516,304( Depreciation 13 (98,820) (93,642) Impairment loss on investment securities 11 (142,067) (139,499) Net impairment loss on loans and advances to customers 10 29 (592,541) (480,224) Other expenses Profit before share of results of associate Share of results of the associate 12 Profit before tax Income tax reversal 30 Profit (472,664) (459,445) (1,837,201) (1,689,114) 1,108,639 1,052,044 158 (46) 1,108,797 1,051,998 1,277 1,783 1,110,074 1,053,781 3.02 3.12 Earnings per share: Basic and diluted earnings per share (QAR) 31 The attached notes 1 to 36 form an integral part of these consolidated financial statements ANNUAL REPORT 2017 55
56. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017 Notes Profit 2017 2016 QAR ’000 QAR’000 1,110,074 1,053,781 Other comprehensive income: Items that are or may be subsequently reclassified to income statement: Foreign currency translation differences for foreign operations Net movement in fair value of available-for-sale investment securities Other comprehensive income Total comprehensive income 20 (d) 11,540 (5,166) 35,857 166,264 47,397 161,098 1,157,471 1,214,879 The attached notes 1 to 36 form an integral part of these consolidated financial statements 56 DOHA BANK
57. CONSOLIDATED CHANGES IN EQUITY For the year ended 31 December 2017 Equity attributable to shareholders of the Bank Balance as at 1 January 2017 Share capital QAR ’000 Foreign Fair currency Legal Risk value translation reserve reserve reserve reserve QAR’000 QAR’000 QAR’000 QAR’000 2,583,723 4,317,561 1,372,000 (103,412) Retained earnings QAR’000 Instrument eligible as additional Total capital QAR’000 QAR’000 (24,991) 1,235,654 9,380,535 Total equity QAR’000 4,000,000 13,380,535 Total comprehensive income: Profit - - - - - 1,110,074 1,110,074 - 1,110,074 Other comprehensive income - - - 35,857 11,540 - 47,397 - 47,397 Total comprehensive income - - - 35,857 11,540 1,110,074 1,157,471 - 1,157,471 Transfer to legal reserve - 85 - - - (85) - - - Transfer to risk reserve - - - - - - - - - Distribution for Tier 1 Capital notes - - - - - (220,000) (220,000) - (220,000) Contribution to social and sports fund - - - - - (27,752) (27,752) - (27,752) Increase in share capital (note 20 a) 516,744 775,116 - - - - 1,291,860 - 1,291,860 - - - - - (775,117) (775,117) - (775,117) 3,100,467 5,092,762 1,372,000 (67,555) Dividends paid (note 20 f) Balance as at 31 December 2017 (13,451) 1,322,774 10,806,997 4,000,000 14,806,997 The attached notes 1 to 36 form an integral part of these consolidated financial statements ANNUAL REPORT 2017 57
58. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the year ended 31 December 2017 Equity attributable to shareholders of the Bank Share capital QAR’000 Balance as at 1 January 2016 Foreign Fair currency Legal Risk value translation Retained reserve reserve reserve reserve earnings QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 2,583,723 4,316,950 1,292,000 (269,676) Instrument eligible as additional Total capital QAR’000 QAR’000 (19,825) 1,283,946 9,187,118 Total equity QAR’000 4,000,000 13,187,118 Total comprehensive income: Profit - - - - - 1,053,781 1,053,781 - 1,053,781 Other comprehensive income - - - 166,264 (5,166) - 161,098 - 161,098 Total comprehensive income - - - 166,264 (5,166) 1,053,781 1,214,879 - Transfer to legal reserve - 611 - - - (611) - - - Transfer to risk reserve - - 80,000 - - (80,000) - - - Distribution for Tier 1 Capital - - - - - (220,000) (220,000) - (220,000) Contribution to social and sports fund - - - - - (26,345) (26,345) - (26,345) Dividends paid (note 20 f) - - - - - (775,117) (775,117) - (775,117) (24,991) 1,235,654 9,380,535 Balance as at 31 December 2016 2,583,723 4,317,561 1,372,000 (103,412) 1,214,879 4,000,000 13,380,535 The attached notes 1 to 36 form an integral part of these consolidated financial statements 58 DOHA BANK
59. CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2017 Notes 2017 QAR ’000 2016 QAR’000 1,108,797 1,051,998 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Net impairment loss on loans and advances to customers 10 592,541 480,224 Impairment loss on investment securities 11 142,067 139,499 Depreciation 13 98,820 93,642 44,121 11,502 26 (10,571) 5,095 83 446 12 (158) 46 Profit before changes in operating assets and liabilities 1,975,700 1,782,452 Change in due from banks 1,663,729 541,188 )1,294,604( )4,480,255( )41,430( )173,003( )1,270,275( 3,499,206 3,738,376 2,963,337 Change in other liabilities (40,483) 51,487 Social and sports fund contribution )26,345( )34,343( 1,277 1,783 4,705,945 4,151,852 (7,634,121) (8,066,482) 4,731,199 5,578,839 )36,684( )89,143( 46 9,997 (2,939,560) (2,566,789) Amortisation of financing cost Net (gains) / loss on investment securities Loss on sale of property, plant and equipment Share of results of the associate Change in loans and advances to customers Change in other assets Change in due to banks Change in customer deposits Income tax paid Net cash from operating activities Cash flows from investing activities Acquisition of investment securities Proceeds from sale of investment securities Acquisition of property, furniture and equipment 13 Proceeds from the sale of property, furniture and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from other borrowings 18 Proceeds from right issues Repayment of debt security Proceeds from issue of debt securities 438,462 1,541,940 1,291,860 - )1,823,000( )773,273( 661,071 - Distribution on Tier 1 capital notes )170,000( )220,000( Dividends paid (775,117) (775,117) Net cash used in from financing activities (376,724) (226,450) Net increase in cash and cash equivalents 1,389,661 1,358,613 Cash and cash equivalents as at 1 January 8,916,014 7,557,401 10,305,675 8,916,014 Interest received 3,606,557 3,200,642 Interest paid 1,292,252 1,041,332 39,251 48,215 Cash and cash equivalents at 31 December 33 Net cash flows from operating activities: Dividends received The attached notes 1 to 36 form an integral part of these consolidated financial statements ANNUAL REPORT 2017 59
60. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 1. Reporting Entity Doha Bank Q. P. S. C. (“Doha Bank” or the “Bank”) is an entity domiciled in the State of Qatar and was incorporated on 15 March 1979 as a Joint Stock Company under Emiri Decree No. 51 of 1978. The commercial registration of the Bank is 7115. The address of the Bank’s registered office is Doha Bank Tower, Corniche Street, West Bay, P.O. Box 3818, Doha, Qatar. Doha Bank is engaged in conventional banking activities and operates through its head office in Qatar (Doha) and 27 local branches, six overseas branches in the United Arab Emirates (Dubai & Abu Dhabi), State of Kuwait, the Republic of India (two branches in Mumbai and one branch in Kochi) and representative offices in United Kingdom, Singapore, Turkey, China, Japan, South Korea, Germany, Australia, Hong Kong, United Arab Emirates (Sharjah), Canada, Bangladesh and South Africa. The consolidated financial statements for the year ended 31 December 2017 comprise the Bank and its subsidiaries (together referred to as “the Group”). The principal subsidiaries of the Group are as follows: Company’s name Country of incorporation Company’s capital (QAR’000) Company’s activities Percentage of ownership 2017 Percentage of ownership 2016 Doha Bank Assurance Company L.L.C Qatar 100,000 General Insurance 100% 100% Doha Finance Limited Cayman Island 182 Debt Issuance 100% 100% DB Securities Limited Cayman Island 182 Derivatives Transactions 100% - 2. Basis Of Preparation a) Statement of compliance The consolidated financial statements of the Group (“consolidated financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the applicable provisions of the Qatar Central Bank (“QCB”) regulations. b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the derivative financial instruments, financial assets held for trading and available-for-sale financial assets that have been measured at fair value. In addition, the carrying values of recognised assets that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value attributable to the risk that are being hedged. c) Functional and presentation currency These consolidated financial statements are presented in Qatari Riyals (“QAR”), which is the Group’s 60 DOHA BANK functional and presentation currency. Except as otherwise indicated, financial information presented in QAR has been rounded to the nearest thousand. d) Use of estimates and judgements The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, and the accompanying disclosures, and the disclosure of contingent liabilities Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are described in note 5. 3. Significant Accounting Policies a) New and amended standards and interpretations adopted by the Group The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those of the previous financial year, except for the following new and amended IFRS recently issued by the IASB and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations effective as of 1 January 2017. T h e f o l l o w i n g s t a n d a rd s , a m e n d m e n t s a n d interpretations, which became effective as of 1 January 2017, are relevant to the Group: i) Disclosure Initiative (Amendments to IAS 7) The amendments require disclosures that enable users of (consolidated) financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. The adoption of this amendment had no significant impact on the consolidated financial statements. ii) Recognition of Deferred Tax Assets for Unrealized Losses (Amendments to IAS 12) The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value. The amendments clarify that the existence of a deductible temporary difference depends solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is
61. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) not affected by possible future changes in the carrying amount or expected manner of recovery of the asset. Therefore, assuming that the tax base remains at the original cost of the debt instrument, there is a temporary difference. The adoption of this standard had no significant impact on the consolidated financial statements. iii) Annual Improvements to IFRSs 2012–2014 Cycle – various standards The annual improvements to IFRSs to 2014-2016 cycles include certain amendments to various IFRSs. Standards issued but not yet effective A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and earlier application is permitted; however, the Group has not early applied the following new or amended standards in preparing these consolidated financial statements. i) IFRS 9 Financial Instruments The Bank will adopt IFRS 9 on 1 January 2018 and will not restate the comparative information in accordance with applicable Qatar Central Bank (QCB) guidelines. IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement and introduces new requirements for the classification and measurement of financial assets and financial liabilities, a new model based on expected credit losses for recognizing loan loss provisions and provides for simplified hedge accounting by aligning hedge accounting more closely with an entity’s risk management methodology. The Bank has assessed the estimated impact that the initial application of IFRS 9 will have on its consolidated financial statements as below. Retained earnings QAR’000 Fair value reserve QAR’000 Closing balance under IAS 39 (31 December 2017) 1,322,774 )67,555( Estimated risk reserve transfer on 1 January 2018 1,372,000 - Investment securities (equity) from available-for-sale to those measured at fair value through other comprehensive income (a.1) 157,401 )157,401( Investment securities (debt) from held to maturity to those measured at fair value through other comprehensive income (a.2) - )1,216( Investment securities (equity) from available-for-sale to those measured at fair value through profit or loss (a.3) 7,546 )7,546( Investment securities (mutual funds) from available-for-sale to those measured at fair value through profit or loss (a.3) 7,441 )7,441( - (38) 172,388 )173,642( )17,179( - )1,418( - )10,319( - )1,305,554( - (344,261) - )1,678,731( - 1,188,431 )241,197( Impact on reclassification and remeasurements (a) : Investment securities (debt) from available-for-sale to those measured at amortized cost (a.4) Impact on recognition of Expected Credit Losses (b) Expected credit losses for due from banks Expected credit losses from debt securities at amortized cost Expected credit losses for debt securities at fair value through other comprehensive income Expected credit losses for loan and advances Expected credit losses for off balance sheet exposures subject to credit risk Estimated adjusted opening balance under IFRS 9 on date of initial application of 1 January 2018 ANNUAL REPORT 2017 61
62. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) The above assessment is preliminary because not all transition work has been finalised. The actual impact of adopting IFRS 9 on 1 January 2018 may change because: • IFRS 9 will require the Bank to revise its accounting processes and internal controls and these changes are not yet complete; • although parallel runs were carried out in the second half of 2017, the new systems and associated controls in place have not been operational for a more extended period; • the Bank has not finalized the testing and assessment of controls over its new IT systems and changes to its governance framework; • the Bank is refining and finalizing its models for ECL calculations; and • the new accounting policies, assumptions, judgements and estimation techniques employed are subject to re-assessment and changes upon instructions of the regulatory authority. (a) Classification and measurement IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which financial assets are managed and the underlying cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at Amortised Cost (AC), Fair Value through Other Comprehensive Income (FVOCI) and Fair Value through Profit or Loss (FVPL). Under IFRS 9, derivatives embedded in contracts where the host is a financial asset are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. Based on the Bank’s assessment, the new IFRS 9 classification requirements is expected to have a material impact on its accounting for loans, investments in debt securities and investments in equity securities as follows and will be adjusted in the financial statements for the period starting 1 January 2018: (a.1) At 31 December 2017, the Bank had equity investments classified as available-for-sale with a fair value of QAR 701.6 million that are held for longterm strategic purposes. Under IFRS 9, the Bank has designated these investments as measured at FVOCI. Due to this reclassification, an increase of QAR 157.4 million is estimated in the retained earnings along with a corresponding decrease in fair value reserve due to reclassification of impairment on equity investments measured at fair value through other comprehensive income to the reserves. 62 DOHA BANK (a.2) At 31 December 2017, the Bank had debt investments classified as held-to-maturity with a carrying value of QAR 1,986 million. Under IFRS 9, the Bank has designated these investments as measured at FVOCI based on the business model. Due to this reclassification, a decrease of QAR 1.2 million is estimated in the fair value reserve. (a.3) At 31 December 2017, the Bank had investments in mutual funds and equity instruments classified as available-for-sale with carrying values of QAR 58.5 million and QAR 122.4 million respectively. Under IFRS 9, the Bank has designated these investments as measured at FVTPL based on the business model. Due to this reclassification, an increase of QAR 15 million is estimated in the retained earnings and equivalent decrease is estimated in fair value reserve. (a.4) At 31 December 2017, the Bank had debt investments classified as available-for-sale with a carrying value of QAR 670.1 million. Under IFRS 9, the Bank has designated these investments as measured at amortised cost based on the business model. Due to this reclassification, a decrease of QAR 0.04 million is estimated in the fair value reserve. (b) Expected credit losses IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments. A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: • Determining criteria for significant increase in credit risk (SICR); • Choosing appropriate models and assumptions for the measurement of ECL; • Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and • Establishing Banks of similar financial assets for the purposes of measuring ECL. (c) Financial liabilities Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income. No significant changes are expected for financial liabilities, other than changes in the fair value of financial liabilities designated at FVTPL that are attributable
63. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) to changes in the instrument’s credit risk, which will be presented in other comprehensive income. (d) Hedge accounting IFRS 9’s hedge accounting requirements are designed to align the accounting more closely to the risk management framework; permit a greater variety of hedging instruments; and remove or simplify some of the rule-based requirements in IAS 39. The elements of hedge accounting: fair value, cash flow and net investment hedges are retained. When initially applying IFRS 9, the Bank has the option to continue to apply the hedge accounting requirements of IAS 39 instead of the requirements in IFRS 9. However, the Bank determined that all existing hedge relationships that are currently designated in effective hedging relationships would continue to qualify for hedge accounting under IFRS 9. The new hedge accounting requirements under IFRS 9 will not have a material impact on hedge accounting applied by the Bank. (e) Disclosure I F R S 9 a l s o i n t ro d u c e s e x p a n d e d d i s c l o s u re requirements and changes in presentation. These are expected to change the nature and extent of the Bank’s disclosures about its financial instruments particularly in the year of the adoption of IFRS 9. i) IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group plans to adopt IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). As a result, the Group will not apply the requirements of IFRS 15 to the comparative period presented. The Group has assessed the impact of IFRS 15 and expects that the standard will have no material effect, when applied, on the consolidated financial statements of the Group. ii) IFRS 16 Leases IFRS 16 introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard- i.e. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. The Group is currently performing an initial assessment of the potential impact of the adoption of IFRS 16 on its consolidated financial statements. b) Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries (“the Group”) as at 31 December 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: • Power over the investee • Exposure, or rights, to variable returns from its involvement with the investee, and • The ability to use its power over the investee to affect its returns When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income and consolidated statement of other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of Other Comprehensive Income (“OCI”) are attributed to the equity holders of the parent of the Group and to the ANNUAL REPORT 2017 63
64. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) non-controlling interests, even if this results in the non-controlling interests having a deficit balance. These consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. c) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the income statement. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment 64 DOHA BANK still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cashgenerating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cashgenerating unit retained. d)Associates Associates are entities over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control or joint control over those policies. Investments in associates are accounted for by the equity method of accounting and are initially recognised at cost including transaction costs directly related to acquisition of investment in associate. The Group’s share of its associate’s post-acquisition profits or losses is recognised in the consolidated income statement; its share of post-acquisition movements in equity is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Intergroup gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Intergroup losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s share of the results of associates is based on financial statements and adjusted to conform to the accounting policies of the Group. Intergroup gains on transactions are eliminated to the extent of the Group’s interest in the investee. Intergroup lossesare also eliminated unless the transaction provides evidence of impairment in the asset transferred.
65. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) The consolidated financial statements of the Group include the associate stated below: Company Name Doha Brokerage and Financial Services Limited Country of incorporation and operation India Ownership Interest Principal activity (%) 2017 2016 44.02% 44.02% foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to ‘Other comprehensive income’. When a foreign operation is disposed of, or partially disposed of, such exchange differences are recognised in the consolidated income statement as part of the gain or loss on sale. g) Financial assets and financial liabilities Brokerage and assets management e) Foreign currency Foreign currency transactions and balances Foreign currency transactions that are transactions denominated, or that require settlement in a foreign currency are translated into the respective functional currencies of the operations at the spot exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the spot exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences resulting from the settlement of foreign currency transactions and arising on translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. f) Foreign operations The results and financial position of all the Group’s entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date; • income and expenses for each income statement are translated at average exchange rates; and • all resulting exchange differences are recognised in other comprehensive income. Exchange differences arising from the above process are reported in shareholders’ equity as ‘foreign currency translation reserve’. On consolidation, exchange differences arising from the translation of the net investment in i) Recognition and initial measurement All financial assets and liabilities are initially recognised on the trade date, i.e., the date that the Group becomes a party to the contractual provisions of the instrument. This includes “regular way trades”: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. ii) Classification The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them. Financial assets At inception, a financial asset is classified in one of the following categories: • loans and receivables; • held to maturity (HTM); • available-for-sale (AFS); or • fair value through profit of loss (FVTPL) Financial liabilities The Group has classified and measured its financial liabilities at amortised cost. iii) Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability in the statement of financial position. On derecognition of a financial asset, the difference between the carrying the amount of the asset and consideration received including any new asset ANNUAL REPORT 2017 65
66. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) obtained less any new liability assumed is recognised in profit or loss. The Group enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions. In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. The transferred asset is derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract, depending on whether the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the servicing. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. iv) Offsetting Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a currently enforceable legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. v) Measurement principles Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the 66 DOHA BANK measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • • In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability The fair value for financial instruments traded in active markets at the reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For the financial instruments that are not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison with similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models. The fair value of investments in mutual funds and portfolios whose units are unlisted are measured at the net asset value provided by the fund manager. The foreign currency forward contracts are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads between the respective currencies. All contracts are fully cash collateralised, thereby eliminating both counterparty and the Group’s own credit risk. The fair value of unquoted derivatives is determined by discounted cash flows. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained in note 5. Identification and measurement of impairment The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the assets, and that the loss event has an impact on the future cash flows of the assets that can be estimated reliably. Objective evidence that financial assets including equity securities are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the
67. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) group, or economic conditions that correlate with defaults in the group. The Group considers evidence of impairment loss for loans and advances to customers and held-tomaturity investment securities at both a specific asset and collective level. All individually significant loans and advances to customers and held-tomaturity investment securities are assessed for specific impairment. All individually significant loans and advances to customers and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances to customers and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances to customers and held-to-maturity investment securities with similar risk characteristics. Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and advances to customers. In assessing collective impairment, the Group uses historical experience and credit rating in addition to the assessed inherent losses which are reflected by the economic and credit conditions for each identified portfolio. For listed equity investments, generally a significant decline in the market value from cost or for a prolonged period, are considered to be indicators of impairment. Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are not recycled through the consolidated income statement. In case of debt instruments, if in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in consolidated income statement, the impairment loss is reversed through the consolidated income statement. h) Cash and cash equivalents Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial assets with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. Cash and cash equivalents are carried at amortised cost in the consolidated statement of financial position. i) Due from banks and loans and advances to customers Due from banks and loans and advances to customers are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Due from banks and loans and advances to customers are initially measured at the transaction price which is the fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method. Write-off of loans and advances to customers Loans and advances to customers (and the related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier. All write- offs of loans and advances to customers are recorded after obtaining approvals from QCB for such write-offs. j) Investment securities Subsequent to initial recognition investment securities are accounted for depending on their classification as either held-to-maturity, fair value through profit or loss or available-for-sale. Held-to-maturity financial assets Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity, and which were not designated as at fair value through profit or loss or as available-for-sale. Held-to-maturity investments are carried at amortised cost using the effective interest method. ANNUAL REPORT 2017 67
68. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) Fair value through profit or loss The Group has classified its investments as held for trading where such investments are managed for short-term profit taking or designated certain investments as fair value through profit or loss. Fair value changes on these investments are recognised immediately in profit or loss. Available-for-sale financial assets Available-for-sale investments are non-derivative investments that are designated as available-forsale or are not classified as another category of financial assets. Where the fair value is not reliably available, unquoted equity securities are carried at cost less impairment, and all other available-for-sale investments are carried at fair value. Interest income is recognised in profit or loss using the effective interest method. Dividend income is recognised in profit or loss when the Group becomes entitled to the dividend. Foreign exchange gains or losses on available-for-sale debt security investments are recognised in the consolidated income statement. Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, where upon the cumulative gains and losses previously recognised in consolidated statement of comprehensive income are reclassified to consolidated income statement. k)Derivatives Derivatives held for risk management purposes and hedge accounting Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. Derivatives held for risk management purposes are measured at fair value on the consolidated statement of financial position. The Group designates certain derivatives held for risk management as well as certain non-derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging derivative instruments and hedged items, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, as to whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, 68 DOHA BANK and whether the actual results of each hedge are within a range of 80-125 percent. The Group makes an assessment for a cash flow hedge of a forecast transaction, as to whether the forecast transaction is highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit or loss. These hedging relationships are discussed below. Fair value hedges When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in consolidated income statement together with changes in the fair value of the hedged item that are attributable to the hedged risk. If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. Any adjustment up to that point to a hedged item, for which the effective interest method is used, is amortised to consolidated income statement as part of the recalculated effective interest rate of the item over its remaining life. Other non-trading derivatives When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are recognised immediately in consolidated income statement. Derivatives held for trading purposes The Group’s derivative trading instruments includes forward foreign exchange contracts. The Group sells these derivatives to customers in order to enable them to transfer, modify or reduce current and future risks. These derivative instruments are fair valued as at the end of reporting date and the corresponding fair value changes is taken to the consolidated income statement. l) Property and equipment Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs.
69. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property or equipment have different useful lives, they are accounted for as separate items of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and is recognised in other income/other expenses in profit or loss. Subsequent costs The cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. Depreciation Depreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset and is based on cost of the asset less its estimated residual value. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives. Land and capital work-in-progress are not depreciated. The estimated useful lives for the current and comparative years are as follows: Buildings 20 years Leasehold improvements, furniture 3-7 years and equipment Vehicles 5 years Depreciation methods, useful lives and residual values are re-assessed at each reporting date and adjusted prospectively, if appropriate. m) Impairment of non-financial assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. n)Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. o) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. p) Financial guarantees Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee was given, being the premium received. Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the statement of income any fee income earned over the period, and the best estimate of the expenditure required settling any financial obligation arising as a result of the guarantees at the reporting date. q) Employee benefits The Group provides for end of service benefits in accordance with the employment policies of the ANNUAL REPORT 2017 69
70. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) Group. The provision is calculated on the basis of the individual’s final salary and period of service at the reporting date. This provision is included in other provisions within other liabilities. With respect to Qatari and other GCC employees, the Group makes a contribution to the Qatari Pension Fund calculated on a percentage of the employees’ salaries, in accordance with the Retirement and Pension Law No. 24 of 2002. The Group’s obligations are limited to these contributions. r) Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. s) Share capital and reserves i) Share issue costs Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments. ii) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s shareholders. Dividends for the year that are declared after the date of the consolidated statement of financial position are dealt with in the subsequent events note. t) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest income and expense For all financial instruments measured at amortised cost and interest bearing financial assets classified as available -for-sale and fair value through profit or loss, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a short period, where appropriate, to the net carrying amount of the financial assets or financial liabilities. Interest that is 90 days or more overdue is excluded from income. Interest on impaired loans and 70 DOHA BANK advances and other financial assets is not recognised in consolidated statement of income. Premium on insurance Premium on insurance contracts are recognized as revenue (earned premiums) proportionately over the period of coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date is reported as unearned premium liability on a 1/365 days basis. Fees and commission income and expense Fees and commission income and expense that are integral to the effective interest rate of a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including account servicing fees, sales commission and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan, the related loan commitment fees are recognised on a straight-line basis over the commitment period. Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received. Income from investment securities Gains or losses on the sale of investment securities are recognised in profit or loss as the difference between fair value of the consideration received and carrying amount of the investment securities. Income from held to maturity investment securities is recognised based on the effective interest rate method. Dividend income Dividend income is recognised when the right to receive income is established. u) Tax expense Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Taxes are calculated based on applicable tax laws or regulations in the countries in which the Group operates. The provision for deferred taxation is made based on the evaluation of the expected tax liability. Currently there is no corporate tax applicable to the Bank in the State of Qatar.
71. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 3. Significant Accounting Policies (continued) However, corporate tax is applicable on foreign branches operating outside the State of Qatar and to one subsidiary in the Qatar Financial Center. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and theamounts used for taxation purposes. Deferred tax is not recognised for: • • • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and temporary differences arising on the initial recognition of goodwill Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. v) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. w) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the chief operating decision maker to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. x) Fiduciary activities Assets held in a fiduciary capacity are not treated as assets of the Group and accordingly are not part of the consolidated statement of financial position. y) Repossessed collateral Repossessed collaterals against settlement of customers’ debts are stated within the consolidated statement of financial position under “Other assets” at their carrying value net of allowance for impairment, if any. According to QCB instructions, the Group should dispose of any land and properties acquired against settlement of debts within a period not exceeding three years from the date of acquisition although this period can be extended after obtaining approval from QCB. z)Comparatives Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. aa) Parent bank financial information Statement of financial position and income statement of the Parent bank disclosed as Supplementary information, are prepared following the same accounting policies as mentioned above except for investment in subsidiaries, associates which are not consolidated and carried at cost. 4 FINANCIAL RISK MANAGEMENT a) Introduction and overview Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and monitoring subject to risk limits and other controls. The key risks Group is exposed are to credit risk, liquidity risk, operational risk and market risk, which includes trading and non-trading risks. The independent risk control process does not include business risks such as changes in the environment, ANNUAL REPORT 2017 71
72. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) technology and industry. They are monitored through the Group’s strategic planning process. The Board of Directors is ultimately responsible for identifying and controlling risks; however, there are separate independent bodies such as the risk management department, internal audit committee, the credit committee, assets and liabilities committee responsible for managing and monitoring those risks. Monitoring and controlling risks are primarily performed based on limits established by the Group. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept. i) Credit risk measurement All credit policies are reviewed and approved by the Risk Management Department and the Board of Directors. The Risk Management team centrally approves all significant credit facilities and limits for all corporate, treasury and capital markets, financial institutions and SME clients of the Group. Such approvals are carried out in pursuance to a set of delegated Credit authority limits and in accordance with the Group’s approved credit policy. Furthermore, all credit facilities are independently administered and monitored by the Credit Control Department. As part of its overall risk management, the Group also uses derivatives and other instruments to manage exposures resulting from changes in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. The risk profile is assessed before entering into hedge transactions, which are authorized by the appropriate level of authority within the Group. The Group further limits risk through diversification of its assets by geography and industry sectors. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. The Group also follows the guidelines issued by Qatar Central Bank with regard to the granting of loans which limits exposure to counterparties. The Group applies an internal methodology to estimate the market risk of positions held and the maximum losses expected, based upon a number of assumptions for various changes in market conditions. The Group has a set of limits of risks that may be accepted, which are monitored on a daily basis. The amount and ty pe of c ol l ateral re quired depend on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk. The risks arising from financial instruments to which the Group is exposed are financial risks, which include credit risk, liquidity risk, market risks and operational risk. b) Credit risk Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations in accordance with the agreed terms. Credit risk makes up the largest part of the Group’s risk exposure; therefore, the Group carefully manages its exposure to credit risk. Credit risk is attributed to financial instruments such as balance with central banks, due from banks, loans and advances to customers, debt securities and other bills, certain other assets and credit equivalent amounts related to off-balance sheet financial instruments. Note 10 to the consolidated financial statements disclose the distribution of the loans and advances to customers by economic sectors. Note 4 to the 72 consolidated financial statements disclose the geographical distribution of the Group’s credit exposure. DOHA BANK Whenever possible, loans are secured by acceptable forms of collateral in order to mitigate credit risk. The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The main types of collateral obtained are cash, mortgages, local and international equities, financial guarantees and other tangible securities. The collaterals are held mainly against commercial and consumer loans and are managed against relevant exposures at their net realizable values. The Group has a credit administration process that ensures compliance with terms of approval, documentation and continuous review to ensure quality of credit and collaterals. While securities such as listed equities are valued regularly, credit policy mandates securities obtained by way of legal mortgage over real estate to be valued at least once in 3 years or more frequently if situation warrants. ii) Analysis of maximum exposure to credit risk before taking account of collateral held or other credit enhancements The table below represents credit risk exposure to the Group, without taking account of any collateral held
73. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Credit risk (continued) or other credit enhancements attached. For assets recorded on the statement of financial position, the exposures set out below are based on the net carrying amounts as reported in the consolidated statement of financial position. 2017 QAR’000 2016 QAR’000 Credit risk exposures relating to assets recorded on the statement of financial position are as follows: Balances with central banks 6,161,687 3,824,450 Due from banks 7,821,983 10,505,250 Loans and advances to customers 59,804,174 59,186,222 Investment securities - debt 16,509,641 13,625,492 669,821 554,396 90,967,306 87,695,810 Other assets Total as at 31 December Other credit risk exposures are as follows: Guarantees 18,380,848 22,246,187 Letters of Credit 5,958,391 7,196,260 Unutilised credit facilities 3,737,358 3,577,504 Total as at 31 December 28,076,597 33,019,951 119,043,903 120,715,761 ANNUAL REPORT 2017 73
74. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Credit risk (continued) iii) Analysis of concentration of risks of financial assets with credit risk exposure Geographical sectors The following table breaks down the Group’s credit exposure based on carrying amounts without taking into account any collateral held or other credit support, as categorized by geographical region. The Group has allocated exposures to regions based on the country of domicile of its counterparties. Qatar QAR’000 Other GCC QAR’000 Balances with central banks 4,279,678 1,866,134 Due from banks 4,326,023 445,895 Loans and advances to customers 46,421,475 7,234,902 Investment securities - debt 13,898,740 635,667 69,561,583 Other assets Balances with central banks Due from banks Rest of the World QAR’000 2017 Total QAR’000 - 15,875 6,161,687 1,403,904 1,646,161 7,821,983 1,169,942 4,977,855 59,804,174 1,487,632 - 1,123,269 16,509,641 8,472 - 25,682 669,821 11,043,035 2,573,846 7,788,842 90,967,306 Qatar QAR’000 Other GCC QAR’000 Other Middle East QAR’000 Rest of the World QAR’000 2016 Total QAR’000 2,319,749 1,385,028 - 119,673 3,824,450 4,396,420 2,396,738 696,609 3,015,483 10,505,250 Loans and advances to customers 43,900,118 9,576,525 820,061 4,889,518 59,186,222 Investment securities - debt 11,436,573 1,714,345 1,812 472,762 13,625,492 492,743 13,923 1,525 46,205 554,396 62,545,603 15,086,559 1,520,007 8,543,641 87,695,810 Other assets Guarantees Letters of Credit Unutilised credit facilities Guarantees Letters of Credit Unutilised credit facilities 74 Other Middle East QAR’000 DOHA BANK Qatar QAR’000 Other GCC QAR’000 Other Middle East QAR’000 Rest of the World QAR’000 2017 Total QAR’000 10,112,460 3,467,079 311,331 4,489,978 18,380,848 5,009,036 129,235 358,342 461,778 5,958,391 2,998,508 622,215 - 116,635 3,737,358 18,120,004 4,218,529 669,673 5,068,391 28,076,597 Qatar QAR’000 Other GCC QAR’000 Other Middle East QAR’000 Rest of the World QAR’000 2016 Total QAR’000 12,455,861 4,674,749 182,969 4,932,608 22,246,187 5,459,057 276,249 130,304 1,330,650 7,196,260 2,727,640 724,758 - 125,106 3,577,504 20,642,558 5,675,756 313,273 6,388,364 33,019,951
75. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Credit risk (continued) Industry sectors The following table breaks down the Group’s credit exposure based on carrying amounts without taking into account any collateral held or other credit support, as categorized by geographical region. The Group has allocated exposures to regions based on the country of domicile of its counterparties. Gross exposure 2017 QAR’000 Gross exposure 2016 QAR’000 23,966,226 20,491,337 Funded and unfunded Government and related agencies 842,863 1,981,446 Commercial 11,091,291 9,300,278 Services 17,503,016 20,129,988 Industry Contracting 10,455,938 10,287,927 Real estate 17,457,955 13,897,943 Personal 8,430,725 10,400,778 Others 1,219,292 1,206,113 18,380,848 22,246,187 5,958,391 7,196,260 Guarantees Letters of credit Unutilised credit facilities 3,737,358 3,577,504 119,043,903 120,715,761 iv) Credit risk exposure The tables below presents an analysis of financial assets by rating agency designation based on ratings published by external rating agencies: 2017 QAR’000 2016 QAR’000 23,063,033 20,201,854 Equivalent grades Sovereign (State of Qatar) 4,562,335 3,581,667 10,406,989 11,970,506 BBB+ to BBB- 3,096,070 3,562,554 BB+ to B- 1,934,023 1,495,400 AAA to AAA+ to A- Below BUnrated ( equivalent internal grading) 82,381 469,757 75,899,072 79,434,023 119,043,903 120,715,761 Unrated exposure represents credit facilities granted to corporations and individuals who do not have external credit ratings. Also, the equivalent internal ratings used by the Group are in line with the ratings and definitions published by the international rating agencies. ANNUAL REPORT 2017 75
76. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Credit risk (continued) v) Credit quality for class of assets The table below shows the credit quality by class of asset for consolidated statement of financial position lines, based on the Group’s credit rating system. Loans and advances to customers Due from banks Investment securities– debt 2017 QAR’000 2016 QAR’000 2017 QAR’000 2016 QAR’000 2017 QAR’000 2016 QAR’000 52,265,262 54,262,221 7,821,983 10,505,250 16,482,565 13,600,441 Neither past due nor impaired (low risk): Standard monitoring - 90,198 - - - - 52,265,262 54,352,419 7,821,983 10,505,250 16,482,565 13,600,441 Standard monitoring 5,925,997 2,347,074 - - - - Special monitoring 2,172,198 2,883,666 - - - - 8,098,195 5,230,740 - - - - Substandard 296,944 327,954 - - 42,857 39,245 Doubtful 350,832 288,082 - - - - Special monitoring Past due but not impaired Impaired Loss Less: Impairment allowance-specific Less: Impairment allowancecollective Carrying amount – net 1,610,914 1,396,266 - - - - 2,258,690 2,012,302 - - 42,857 39,245 (2,706,410) (2,282,717) - - (15,781) (14,194) (111,563) (126,522) - - - - (2,817,973) (2,409,239) - - (15,781) (14,194) 59,804,174 59,186,222 7,821,983 10,505,250 16,509,641 13,625,492 - - - - 5,708,651 6,405,787 Investment securities - debt Held to maturity Held for Trading - - - - - 5,657 Available for sale - - - - 10,816,771 7,228,242 Less: Impairment allowance - - - - (15,781) (14,194) Carrying amount – net - - - - 16,509,641 13,625,492 Total carrying amount 59,804,174 59,186,222 7,821,983 10,505,250 16,509,641 13,625,492 Impaired loans and advances to customers and investment in debt securities Individually impaired loans and advances to customers and investment debt securities for which the Group determines that there is objective evidence of impairment and it does not expect to collect all principal and interest due according to the contractual terms of the loan/investment security agreements. 76 DOHA BANK
77. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Credit risk (continued) Loans and advances to customers past due but not impaired Past due but not impaired loans and advances to customers are those for which contractual interest or principal payments are past due, but the Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the Group. 2017 QAR’000 2016 QAR’000 Up to 30 days 1,492,349 766,042 31 to 60 days 1,716,215 871,716 61 – 90 days 4,889,631 3,592,982 Gross 8,098,195 5,230,740 Rescheduled loans and advances to customers Restructuring activities include extended payment arrangements, approved external management plans, modification and deferral of payments. Restructuring policies and practices are based on indicators or criteria that, in the judgement of local management, indicate that payment will most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied to term loans – in particular, customer finance loans. Collateral The determination of eligible collateral and the value of collateral are based on QCB regulations and are assessed by reference to market price or indexes of similar assets. The Group has collateral in the form of blocked deposits, pledge of shares or legal mortgage against the past dues loans and advances to customers. The aggregate collateral in respect to the past due but not impaired loans are QAR 10,582 million as of 31 December 2017 (2016: QAR 6,943 million). The aggregate collateral in respect to the loans and advances to customers are QAR 57,205 million as of 31 December 2017 (2016: QAR 46,913 million). Repossessed collateral The group has acquired properties held as collateral in settlement of debt of carrying value of QAR 134 million as at 31 December 2017 (2016: Nil). security balance, and any related allowances for impairment losses, when Group Credit determines that the loan or security is uncollectible and after QCB approval. This determination is made after considering information such as the occurrence of significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardized loans, write-off decisions are generally based on a product-specific past due status. The amount written off during the year was QAR 394 million (2016: QAR 315 million). c) Liquidity risk Liquidity risk is the risk that an institution will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades, which may cause certain sources of funding to cease immediately. Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. To mitigate this risk, the Group has diversified funding sources and assets are managed with liquidity in mind, in order to maintain a healthy balance of cash, cash equivalents and readily marketable securities. i) Exposure to liquidity risk The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as including cash and cash equivalents and investment grade debt securities for which there is an active and liquid market less any deposits from banks, debt securities, other borrowings and commitments maturing within the next month. A similar, but not identical, calculation is used to measure the Group’s compliance with the liquidity limit established by the Group’s lead regulator, QCB. Details of the reported Group ratio of net liquid assets to deposits from customers during the year were as follows: 2017 QAR’000 2016 QAR’000 Average for the year 102.50% 95.50% Write-off policy Maximum for the year 122.67% 104.90% The Group writes off a loan or an investment debt Minimum for the year 86.12% 87.14% ANNUAL REPORT 2017 77
78. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) c) Liquidity risk (continued) Maturity analysis of assets and liabilities The table below summarizes the maturity profile of the Group’s assets and liabilities based on contractual maturity dates. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the reporting date to the contractual maturity date, and do not take account of the effective maturities as indicated by the Group’s deposit retention history and the availability of liquid funds. The Group routinely monitors assets and liabilities maturity profiles to ensure adequate liquidity is maintained. Carrying amount QAR’000 Less than 1 month QAR’000 1-3 months QAR’000 3 months – 1 year QAR’000 Subtotal 1 year QAR’000 Above 1 year QAR’000 Undated QAR’000 Cash and balances with central banks 6,669,609 4,380,783 - - 4,380,783 - 2,288,826 Due from banks 7,821,983 4,241,565 1,752,628 1,028,494 7,022,687 799,296 - Loans and advances to customers 59,804,174 7,500,295 2,897,038 6,062,788 16,460,121 43,344,053 - Investment securities 17,512,610 131,765 620,939 2,959,754 3,712,458 12,809,223 990,929 11,126 - - - - - 11,126 Property, furniture and equipment 708,580 - - - - - 708,580 Other assets 967,199 967,199 - - 967,199 - - Total 93,495,281 17,221,607 5,270,605 10,051,036 32,543,248 56,952,572 3,999,461 Due to banks 11,005,061 5,575,610 2,330,768 2,162,168 10,068,546 936,515 - Customer deposits 59,468,326 23,041,228 18,790,178 13,451,078 55,282,484 4,185,842 - 657,669 - - 96,947 96,947 560,722 - Other borrowings 5,432,936 - 145,252 2,582,369 2,727,621 2,705,315 - Other liabilities 2,124,292 2,124,292 - - 2,124,292 - - Total equity 14,806,997 - - - - - 14,806,997 Total 93,495,281 30,741,130 21,266,198 18,292,562 70,299,890 8,388,394 14,806,997 - (13,519,523) (15,995,593) (8,241,526) (37,756,642) 48,564,178 (10,807,536) 31 December 2017 Investment in an associate Debt securities Maturity gap 78 DOHA BANK
79. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) c) Liquidity risk (continued) Carrying amount QAR’000 Less than 1 month QAR’000 1-3 months QAR’000 3 months – 1 year QAR’000 Subtotal 1 year QAR’000 Above 1 year QAR’000 Undated QAR’000 4,260,410 2,222,898 - - 2,222,898 - 2,037,512 Due from banks 10,505,250 5,943,514 749,601 956,616 7,649,731 2,855,519 - Loans and advances to customers 59,186,222 10,533,174 2,965,159 7,539,618 21,037,951 38,148,271 - Investment securities 14,706,110 1,909,720 511,456 525,009 2,946,185 10,679,307 1,080,618 10,343 - - - - - 10,343 Property, furniture and equipment 770,845 - - - - - 770,845 Other assets 925,769 925,769 - - 925,769 - - Total 90,364,949 21,535,075 4,226,216 9,021,243 34,782,534 51,683,097 3,899,318 Due to banks 12,275,336 8,421,017 3,036,060 619,055 12,076,132 199,204 - Customer deposits 55,729,950 22,226,469 14,754,528 17,337,454 54,318,451 1,411,499 - Debt securities 1,819,598 - 1,819,598 - 1,819,598 - - Other borrowings 4,994,474 - 364,150 2,928,876 3,293,026 1,701,448 - Other liabilities 2,165,056 2,165,056 - - 2,165,056 - - Total equity 13,380,535 - - - - - 13,380,535 Total 90,364,949 32,812,542 19,974,336 20,885,385 73,672,263 3,312,151 13,380,535 - (11,277,467) (15,748,120) (11,864,142) (38,889,729) 48,370,946 (9,481,217) 31 December 2016 Cash and balances with central banks Investment in an associate Maturity gap ANNUAL REPORT 2017 79
80. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) c) Liquidity risk (continued) The table below summarises contractual expiry dates of the Group’s contingent liabilities: Carrying amount QAR’000 Upto 3 months QAR’000 3 months to 1 year QAR’000 1-5 years QAR’000 Above 5 years QAR’000 18,380,848 5,374,261 6,397,523 6,438,060 171,004 5,958,391 1,326,526 4,622,253 9,112 500 3,737,358 429,823 1,677,178 1,463,364 166,993 28,076,597 7,130,610 12,696,954 7,910,536 338,497 22,246,187 6,097,173 8,136,881 7,847,552 164,581 7,196,260 1,506,415 1,036,875 72,292 4,580,678 3,577,504 705,170 2,073,448 495,662 303,224 33,019,951 8,308,758 11,247,204 8,415,506 5,048,483 31 December 2017 Guarantees Letters of credit Unutilised credit facilities Total 31 December 2016 Guarantees Letters of credit Unutilised credit facilities Total The table below summarises the maturity profile of the Group’s financial liabilities and derivatives at 31 December based on contractual undiscounted repayment obligations: Carrying amount QAR’000 Gross undiscounted cash flows QAR’000 Less than 1 month QAR’000 1-3 months QAR’000 3 months1 year QAR’000 1-5 years QAR’000 More than 5 years QAR’000 Due to banks 11,005,061 11,022,022 5,578,969 2,333,779 2,162,380 943,841 3,053 Customer deposits 59,468,326 59,751,373 23,057,949 18,848,642 13,590,750 4,254,032 - 657,669 678,341 - - 97,428 580,913 - Other borrowings 5,432,936 5,585,480 - 150,615 2,634,227 2,800,638 - Other liabilities 2,076,793 2,076,793 2,076,793 - - - - 78,640,785 79,114,009 30,713,711 21,333,036 18,484,785 8,579,424 3,053 31 December 2017 Non-derivative financial liabilities Debt securities Total liabilities 80 DOHA BANK
81. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) c) Liquidity risk (continued) Derivative financial instruments: Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis. Total QAR’000 Up to 1 Year QAR’000 1-5 years QAR’000 More than 5 years QAR’000 (7,111,781) (7,111,781) - - 7,194,020 7,194,020 - - 31 December 2017 Derivative financial instruments: Outflow Inflow Carrying amount QAR’000 Gross undiscounted cash flows QAR’000 Less than 1 month QAR’000 1-3 months QAR’000 3 months1 year QAR’000 1-5 years QAR’000 More than 5 years QAR’000 Due to banks 12,275,336 12,301,844 8,429,774 3,045,531 624,849 201,690 - Customer deposits 55,729,950 56,007,999 22,240,996 14,795,865 17,503,288 1,467,850 - Debt securities 1,819,598 1,832,520 - 1,832,520 - - - Other borrowings 4,994,474 5,120,105 - 387,392 2,988,799 1,743,914 - Other liabilities 2,136,080 2,136,080 2,136,080 - - - - Total liabilities 76,955,438 77,398,548 32,806,850 20,061,308 21,116,936 3,413,454 - 31 December 2016 Non-derivative financial liabilities Derivative financial instruments: Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis. 31 December 2016 Total QAR’000 Up to 1 Year QAR’000 1-5 years QAR’000 More than 5 years QAR’000 (30,716,511) (30,716,511) - - 30,748,829 30,748,829 - - Derivative financial instruments: Outflow Inflow ANNUAL REPORT 2017 81
82. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) d) Market risk The Group takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Group separates exposures to market risk into either trading or non-trading portfolios. The market risks arising from trading and non-trading activities are concentrated in Group Treasury and monitored by Market Risk team. Regular reports are submitted to the Board of Directors and ALCO. i) Management of market risks Overall authority for market risk is vested in ALCO. Financial Risk Management department is responsible for the development of detailed market risk management policies (subject to review and approval by ALCO) and for the day-to-day review and monitoring. The Group has adopted a detailed policy framework drafted in accordance with the Qatar Central Bank guidelines for governing investments portfolio including proprietary book. The governance structure includes policies including Treasury and Investment manual, Financial Risk policy and Hedging policy, etc. These policies define the limit structure along with the risk appetite under which the investment activities are undertaken. The limits structure focuses on total investment limits which in accordance with QCB guidelines are 70% of Group’s capital and reserves along with various sub limits such as position and stop loss limits for trading activities. The policies also define various structured sensitivity limits such as VaR and duration for different asset classes within the investment portfolio. The performance of the portfolio against these limits is updated regularly to senior management including ALCO and investment committee. Investment Committee approve all the investment decision for the Group. Financial Risk Management department is vested with the responsibility of measuring, monitoring risk and reporting risk in the portfolio. ii) Exposure to interest rate risk The principal risk to which the banking and trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. ALCO is the monitoring body for compliance with these limits and is assisted by Group Treasury in its day-to-day monitoring activities. A summary of the Group’s interest rate gap position on banking and trading portfolios is as follows: 82 DOHA BANK
83. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) d) Market risks (continued) Repricing in: Carrying amount QAR’000 Less than 3 months QAR’000 3-12 months QAR’000 Above 1 year QAR’000 Non-interest sensitive QAR’000 Cash and cash equivalents 6,669,609 1,811,200 - - 4,858,409 Due from banks 7,821,983 6,859,593 331,611 - 630,779 Loans and advances to customers 59,804,174 57,018,060 224,905 78,643 2,482,566 Investment securities 17,512,610 752,759 2,960,240 12,808,682 990,929 11,126 - - - 11,126 Property, furniture and equipment 708,580 - - - 708,580 Other assets 967,199 - - - 967,199 Total 93,495,281 66,441,612 3,516,756 12,887,325 10,649,588 Due to banks 11,005,061 6,704,202 3,971,888 187,852 141,119 Customer deposits 59,468,326 44,630,023 13,249,203 1,589,100 - 657,669 - 96,947 560,722 - Other borrowings 5,432,936 5,432,936 - - - Other liabilities 2,124,292 - - - 2,124,292 Total equity 14,806,997 - - - 14,806,997 Total 93,495,281 56,767,161 17,318,038 2,337,674 17,072,408 Interest rate sensitivity gap - 9,674,451 (13,801,282) 10,549,651 (6,422,820) Cumulative interest rate sensitivity gap - 9,674,451 (4,126,831) 6,422,820 - 31 December 2017 Investment in an associate Debt securities ANNUAL REPORT 2017 83
84. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) d) Market risks (continued) Repricing in: Carrying amount QAR’000 Less than 3 months QAR’000 3-12 months QAR’000 Above 1 year QAR’000 Non-interest sensitive QAR’000 4,260,410 449,916 70,969 - 3,739,525 Due from banks 10,505,250 8,626,205 1,588,272 - 290,773 Loans and advances to customers 59,186,222 56,365,664 335,657 164,612 2,320,289 Investment securities 14,706,110 904,644 454,039 12,266,809 1,080,618 10,343 - - - 10,343 Property, furniture and equipment 770,845 - - - 770,845 Other assets 925,769 - - - 925,769 Total 90,364,949 66,346,429 2,448,937 12,431,421 9,138,162 Due to banks 12,275,336 9,970,519 2,025,252 71,498 208,067 Customer deposits 55,729,950 38,173,092 16,153,845 1,403,013 - Debt securities 1,819,598 1,819,598 - - - Other borrowings 4,994,474 4,994,474 - - - Other liabilities 2,165,056 - - - 2,165,056 Total equity 13,380,535 - - - 13,380,535 Total 90,364,949 54,957,683 18,179,097 1,474,511 15,753,658 Interest rate sensitivity gap - 11,388,746 (15,730,160) 10,956,910 (6,615,496) Cumulative interest rate sensitivity gap - 11,388,746 (4,341,414) 6,615,496 - 31 December 2016 Cash and cash equivalents Investment in an associate 84 DOHA BANK
85. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) d) Market risks (continued) Sensitivity analysis The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s financial assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include a 100 basis points (bp) parallel fall or rise in all yield curves worldwide and a 10 bp rise or fall in the greater than 12-month portion of all yield curves. An analysis of the Group’s sensitivity to an increase or decrease in market interest rates, assuming no asymmetrical movement in yield curves and a constant financial position, is as follows: 10 bp parallel increase QAR’000 10 bp parallel decrease QAR’000 At 31 December 2017 (6,154) 6,154 At 31 December 2016 (5,673) 5,673 10 bp parallel increase QAR’000 10 bp parallel decrease QAR’000 At 31 December 2017 (31,720) 31,720 At 31 December 2016 (27,285) 27,285 Sensitivity of net interest income Sensitivity of reported equity to interest rate movements Overall non-trading interest rate risk positions are managed by Group Treasury, which uses investment securities, advances to banks, deposits from banks and derivative instruments to manage the overall position arising from the Group’s non-trading activities. iii) Exposure to other market risks Currency risk The Group is exposed to fluctuations in foreign currency exchange rates. The Board of Directors sets limits on the level of exposure by currency, and in total for both overnight and intra-day positions, which are monitored daily. The Group had the following significant net exposures: 2017 QAR’000 2016 QAR’000 156,510 16,193 49,022 1,133 Kuwaiti Dinar 3,073 39,415 Japanese Yen 1,257 230 3,551,605 820,807 Net foreign currency exposure: Pound Sterling Euro Other currencies ANNUAL REPORT 2017 85
86. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) d) Market risks (continued) Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a percentage increase or decrease in the Qatari Riyals against the relevant foreign currencies except for US Dollars which is pegged to the Qatari Riyal. The sensitivity analysis includes only outstanding foreign currency denominated items and the impact of a change in the exchange rates are as follows: Increase / (decrease) in profit or loss 2017 QAR’000 2016 QAR’000 Pound Sterling 7,826 810 Euro 2,451 57 154 1,971 5% increase / (decrease) in currency exchange rate Kuwaiti Dinar Japanese Yen Other currencies 63 11 177,580 41,040 Equity price risk Equity price risk is the risk that the fair value of equities decreases as a result of changes in the equity indices and individual stocks. The equity price risk exposure arises from equity securities classified as available-for-sale and fair value through profit or loss. The Group is also exposed to equity price risk and the sensitivity analysis thereof is as follows: 2017 5% increase / (decrease) in Qatar Exchange 5% increase / (decrease) in Other than Qatar Exchange 2016 Effect on OCI QAR’000 Effect on income statement QAR’000 Effect on OCI QAR’000 Effect on income statement QAR’000 ± 24,442 - ± 31,016 - ± 4,641 - ± 17,193 - ± 29,083 - ± 48,209 - The above analysis has been prepared on the assumption that all other variables such as interest rate, foreign exchange rate, etc. are held constant and is based on historical correlation of the equity securities to the relevant index. Actual movement may be different from the one stated above. e) Operational risks Operational risk is the risk of loss arising from inadequate or failed internal processes, people and systems, or from external events. The Group has detailed policies and procedures that are regularly updated to ensure a robust internal control mechanism. The Group closely reviews the various recommendations issued by the Basel Committee on ‘Sound Practices for the Management and Supervision of Operational Risk’ for implementation. The Group continues to invest in risk management and mitigation strategies, such as a robust control infrastructure, business continuity management or through risk transfer mechanisms such as insurance and outsourcing. The Group has a well-defined Operational Risk Management Framework and an independent operational risk function. The Operational Risk Management Committee oversees the implementation of an effective risk management framework that encompasses appropriate systems, practices, policies and procedures to ensure the effectiveness of risk identification, measurement, assessment, reporting and monitoring within the group. In addition, the Internal Audit department carries out an independent assessment and provides assurance of the actual functioning of the overall Operational Risk Management Framework. 86 DOHA BANK
87. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) e) Operational risks (continued) The Group manages operational risk based on a framework that enables the determination of operational risk profile of business units and how it relates to risk measurement, risk mitigation and priorities. A number of techniques are applied to effectively manage the operational risk across the Group. These include: • Effective staff training, documented processes/procedures with appropriate controls to safeguard assets and records, regular reconciliation of accounts and transactions, introduction process of new products, reviews of outsourcing activities, information system security, segregation of duties, financial management and reporting are some of the measures adopted by the Group to manage Group-wide operational risk; • Reporting of any operational risk event, which is used to help identify where process and control requirements are needed to reduce the recurrence of risk events. Risk events are analyzed, reported, mitigated, recorded on a central database and reported quarterly to the Board of Directors; and • Introduction of a bottom-up ‘Control Risk Self-Assessment’ across business and support units including subsidiaries and overseas branches. This approach results in detailed understanding of inherent and residual risks with evaluation of controls across the Group. Therefore, it enhances the determination of specific operational risk profile for the business and support units while corrective action points are captured and the changes of the operational risk profile are monitored on an ongoing basis. f) Capital management Regulatory capital The Group maintains an actively managed capital base to cover the risks inherent in the business. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision and adopted by the Qatar Central Bank. The primary objective of the Group’s capital management is to ensure that the Group complies with externally imposed capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and to maximizes shareholders’ value. The Group manages its capital structure and makes adjustment to it in light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders or issue capital securities. 2017 QAR’000 2016 QAR’000 Common Equity Tier 1 Capital 9,700,840 8,247,923 Additional Tier 1 Capital 4,000,000 4,000,000 Additional Tier 2 Capital 111,564 126,522 13,812,404 12,374,445 Total Eligible capital Risk weighted assets 2017 Basel III Risk weighted amount QAR’000 2016 Basel III Risk weighted amount QAR’000 72,260,750 72,201,446 Risk weighted assets for market risk 1,350,948 2,275,992 Risk weighted assets for operational risk 5,274,077 4,993,761 78,885,775 79,471,199 Total risk weighted assets for credit risk ANNUAL REPORT 2017 87
88. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 4. FINANCIAL RISK MANAGEMENT (CONTINUED) f) Capital management (contined) 2017 QAR’000 2016 QAR’000 Risk weighted assets 78,885,775 79,471,199 Total eligible capital 13,812,404 12,374,445 17.51% 15.57% Capital adequacy ratio The Bank has followed QCB Basel III capital adequacy ratio (“CAR”) with effect from 1 January 2014 in accordance with QCB regulations. The minimum accepted CAR under QCB Basel III requirements are as follows: • Minimum limit without Capital Conservation Buffer is 10% • Minimum limit including Capital Conservation Buffer is 12.75% The adoption of IFRS 9 on 1 January 2018 is not expected to have a material impact on the total eligible capital based on regulatory guidance to date. 5. USE OF ESTIMATES AND JUDGEMENTS a) Key sources of estimation uncertainty The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. i) Impairment allowances for credit losses Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy. The specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about counterparty’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the Credit Risk function. Minimum impairment on specific counter parties is determined based on the QCB regulations. The Bank reviews its loan portfolio to consolidate impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in the consolidated statement of income, the Bank makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. 88 DOHA BANK
89. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED) a) Key sources of estimation uncertainty (continued) Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances to customers and investment securities measured at amortised cost with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances. ii) Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. Where the fair values of financial assets and financial liabilities cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of liquidity and model inputs such as correlation and volatility for longer dated derivatives. b) Critical accounting judgements in applying the Group’s accounting policies i) Valuation of financial instruments The Group’s accounting policy on fair value measurements is discussed in the significant accounting policies section. The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. • Level 1: Quoted market price unadjusted in an active market for an identical instrument. • Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. • Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premium used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length. ANNUAL REPORT 2017 89
90. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED) b) Critical accounting judgements in applying the Group’s accounting policies (continued) ii) Fair value measurement The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities. Quantitative disclosures fair value measurement hierarchy for assets and liabilities as at 31 December 2017: Date of valuation Level 1 QAR’000 Level 2 QAR’000 Level 3 QAR’000 Total QAR’000 31 Dec 2017 11,216,316 549,509 - 11,765,825 Interest rate swaps 31 Dec 2017 - 59,610 - 59,610 Forward foreign exchange contracts 31 Dec 2017 - 102,253 - 102,253 11,216,316 711,372 - 11,927,688 Assets measured at fair value: Available-for-sale investment securities Derivative instruments: Assets for which fair values are disclosed (note 7) Cash and balances with central banks 31 Dec 2017 - - 6,669,609 6,669,609 Due from banks 31 Dec 2017 - - 7,821,983 7,821,983 Loans and advances to customers 31 Dec 2017 - - 59,804,174 59,804,174 Held to maturity investment securities 31 Dec 2017 3,232,502 2,475,331 - 5,707,833 Other Assets 31 Dec 2017 - - 669,821 669,821 Interest rate swaps 31 Dec 2017 - 27,485 - 27,485 Forward foreign exchange contracts 31 Dec 2017 - 20,014 - 20,014 - 47,499 - 47,499 Liabilities measured at fair value: Derivative instruments: Liabilities for which fair values are disclosed (note 7) Due to banks 31 Dec 2017 - 11,005,061 - 11,005,061 Customer deposits 31 Dec 2017 - 59,468,326 - 59,468,326 Debt securities 31 Dec 2017 657,669 - - 657,669 Other borrowings 31 Dec 2017 - 5,432,936 - 5,432,936 Other liabilities 31 Dec 2017 - 1,364,771 - 1,364,771 There have been no transfers between Level 1, level 2 and Level 3 fair value measurement during the year. 90 DOHA BANK
91. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED) b) Critical accounting judgements in applying the Group’s accounting policies (continued) Fair value hierarchy for financial instruments measured at fair value as at 31 December 2016: Date of valuation Level 1 QAR’000 Level 2 QAR’000 Level 3 QAR’000 Total QAR’000 Available-for-sale investment securities 31 Dec 2016 6,597,526 1,652,081 - 8,249,607 Investment securities classified as held for trading 31 Dec 2016 5,657 - - 5,657 Interest rate swaps 31 Dec 2016 - 55,601 - 55,601 Forward foreign exchange contracts 31 Dec 2016 - 52,145 - 52,145 6,603,183 1,759,827 - 8,363,010 Assets measured at fair value: Derivative instruments: Assets for which fair values are disclosed (note 7) Cash and balances with central banks 31 Dec 2016 - - 4,260,410 4,260,410 Due from banks 31 Dec 2016 - - 10,505,250 10,505,250 Loans and advances to customers 31 Dec 2016 - - 59,186,222 59,186,222 Held to maturity investment securities 31 Dec 2016 3,819,815 2,672,725 - 6,492,540 Other Assets 31 Dec 2016 - - 554,396 554,396 Interest rate swaps 31 Dec 2016 - 9,149 - 9,149 Forward foreign exchange contracts 31 Dec 2016 - 19,827 - 19,827 - 28,976 - 28,976 Liabilities measured at fair value: Derivative instruments: Liabilities for which fair values are disclosed (note 7) Due to banks 31 Dec 2016 - 12,275,336 - 12,275,336 Customer deposits 31 Dec 2016 - 55,729,950 - 55,729,950 Debt securities 31 Dec 2016 1,819,598 - - 1,819,598 Other borrowings 31 Dec 2016 - 4,994,474 - 4,994,474 Other liabilities 31 Dec 2016 - 1,458,503 - 1,458,503 During the reporting period 31 December 2016, there were no transfers between Level 1 and Level 3 fair value measurements. Available for sale equity investments amounting to QAR 52.3 million (2016: QAR 59.3 million) are recorded at cost since the fair value cannot be reliably measured. ANNUAL REPORT 2017 91
92. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED) b) Critical accounting judgements in applying the Group’s accounting policies (continued) iii) Financial asset and liability classification The Group’s accounting policies provide scope for assets and liabilities to be designated at inception into different accounting categories in certain circumstances: • in classifying financial assets or liabilities as trading, the Group has determined that it meets the description of trading assets and liabilities set out in accounting policies. • in designating financial assets at fair value through profit or loss, the Group has determined that it has met one of the criteria for this designation set out in accounting policies. • in classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and ability to hold the assets until their maturity date as required by accounting policies. Details of the Group’s classification of financial assets and liabilities are given in Note 7. iv) Qualifying hedge relationships In designating financial instruments in qualifying hedge relationships, the Group has determined that it expects the hedges to be highly effective over the period of the hedging relationship. In accounting for derivatives as fair value hedges, the Group has determined that the hedged interest rate exposure relates to highly probable future cash flows. v) Impairment of investments in equity and debt securities Investments in equity and debt securities are evaluated for impairment on the basis described in the significant accounting policies section. vi) Going concern The Group’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis. vii) Useful lives of property and equipment The Group’s management determines the estimated useful life of property and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence. 6. OPERATING SEGMENTS The Group organizes and manages its operations by two business segments, which comprise conventional banking and insurance activities. Conventional Banking 92 • Corporate Banking provides a range of product and service offerings to business and corporate customers including funded and non-funded credit facilitates deposits to corporate customers. It also undertakes funding and centralised risk management activities through borrowings, issue of debt securities, use of derivatives for risk management purposes and investing in liquid assets such as short-term placements and corporate and government debt securities. • Retail Banking provides a diversified range of products and services to individuals. The range includes loans, credit cards, deposits and other transactions with retail customers. DOHA BANK
93. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 6. OPERATING SEGMENTS (CONTINUED) Insurance Activities Insurance activities to customers include effecting contracts of insurance, carrying out contracts of insurance, arranging deals in investments and advising on investments. a) By operating segment Details of each segment as of and for the year ended 31 December 2017 are stated below: 2017 Corporate Banking QAR’000 Retail Banking QAR’000 Unallocated QAR’000 Total QAR’000 Insurance QAR’000 Total QAR’000 3,250,115 380,738 - 3,630,853 - 3,630,853 - - - - 7,202 7,202 382,774 228,807 64,474 676,055 7,112 683,167 Segmental revenue 3,632,889 609,545 64,474 4,306,908 14,314 4,321,222 Net impairment loss on loans and advances to customers (490,296) (102,245) - (592,541) - (592,541) Impairment loss on investment securities (142,067) - - (142,067) - (142,067) 1,109,493 423 1,109,916 Interest income Net income from insurance activities Other income Segmental profit 158 Share of results of associates 1,110,074 Net profit for the year Other information Assets 78,699,654 6,452,639 8,082,441 93,234,734 249,421 93,484,155 11,126 Investments in an associate 93,495,281 Total Liabilities 68,614,334 9,065,643 913,438 78,593,415 94,869 78,688,284 Contingent items 28,028,028 48,569 - 28,076,597 - 28,076,597 ANNUAL REPORT 2017 93
94. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 6. OPERATING SEGMENTS (CONTINUED) a) By operating segment (continued) 2016 Corporate Banking QAR’000 Retail Banking QAR’000 Unallocated QAR’000 Total QAR’000 Insurance QAR’000 Total QAR’000 2,776,038 392,957 - 3,168,995 - 3,168,995 - - - - 8,024 8,024 452,121 158,228 54,874 665,223 7,265 672,488 Segmental revenue 3,228,159 551,185 54,874 3,834,218 15,289 3,849,507 Net impairment loss on loans and advances to customers (407,216) (73,008) - (480,224) - (480,224) Impairment loss on investment securities (138,771) - - (138,771) (728) (139,499) 1,050,765 3,062 1,053,827 Interest income Net income from insurance activities Other income Segmental profit (46) Share of results of associates 1,053,781 Net profit for the year Other information Assets Investments in an associate 78,461,105 6,970,182 4,657,665 90,088,952 265,654 90,354,606 - - - - - 10,343 90,364,949 Total 94 Liabilities 65,790,217 10,404,519 679,716 76,874,452 109,962 76,984,414 Contingent items 32,881,346 138,605 - 33,019,951 - 33,019,951 DOHA BANK
95. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 6. OPERATING SEGMENTS (CONTINUED) b) Geographical areas The following table shows the geographic distribution of the Group’s operating income based on the geographical location of where the business is booked by the Group. Qatar QAR’000 Other GCC QAR’000 India QAR’000 Total QAR’000 Net operating income 2,633,167 295,275 17,398 2,945,840 Net profit 1,134,303 (15,286) (8,943) 1,110,074 Total assets 84,640,595 8,329,454 525,232 93,495,281 Total liabilities 71,203,556 7,129,544 355,184 78,688,284 Net operating income 2,424,359 290,870 25,929 2,741,158 Net profit 1,081,566 (33,909) 6,124 1,053,781 Total assets 80,021,671 9,721,550 621,728 90,364,949 Total liabilities 68,015,770 8,516,098 452,546 76,984,414 2017 2016 ANNUAL REPORT 2017 95
96. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 7. FINANCIAL ASSETS AND LIABILITIES a) Accounting classifications and fair values The table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities: Fair value through profit or loss QAR’000 Held to maturity QAR’000 Loans and receivables QAR’000 Availablefor-sale QAR’000 Other amortised cost QAR’000 Total carrying amount QAR’000 Fair value QAR’000 Cash and balances with central banks - - 6,669,609 - - 6,669,609 6,669,609 Due from banks - - 7,821,983 - - 7,821,983 7,821,983 161,863 161,863 31 December 2017 Positive fair value of derivatives Loans and advances to customers 161,863 - - 59,804,174 - - 59,804,174 59,804,174 Measured at fair value - - - 11,818,154 - 11,818,154 11,818,154 Measured at amortised cost - 5,694,456 - - - 5,694,456 5,707,833 Other Assets - - - - 507,958 507,958 507,958 161,863 5,694,456 74,295,766 11,818,154 507,958 92,478,197 92,491,574 47,499 - - - - 47,499 47,499 Due to banks - - - - 11,005,061 11,005,061 11,005,061 Customer deposits - - - - 59,468,326 59,468,326 59,468,326 Debt securities - - - - 657,669 657,669 657,669 Other borrowings - - - - 5,432,936 5,432,936 5,432,936 Other liabilities - - - - 1,364,771 1,364,771 1,364,771 47,499 - - - 77,928,763 77,976,262 77,976,262 Investment securities: Negative fair value of derivatives 96 DOHA BANK
97. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 7. FINANCIAL ASSETS AND LIABILITIES (CONTINUED) a) Accounting classifications and fair values (continued) The table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities: Fair value through profit or loss QAR’000 Held to maturity QAR’000 Loans and receivables QAR’000 Availablefor-sale QAR’000 Other amortised cost QAR’000 Total carrying amount QAR’000 Fair value QAR’000 Cash and balances with central banks - - 4,260,410 - - 4,260,410 4,260,410 Due from banks - - 10,505,250 - - 10,505,250 10,505,250 107,746 107,746 31 December 2016 Positive fair value of derivatives Loans and advances to customers 107,746 - - 59,186,222 - - 59,186,222 59,186,222 5,657 - - 8,308,860 - 8,314,517 8,314,517 Measured at amortised cost - 6,391,593 - - - 6,391,593 6,492,540 Other Assets - - - - 554,396 554,396 554,396 113,403 6,391,593 73,951,882 8,308,860 554,396 89,320,134 89,421,081 28,976 - - - - 28,976 28,976 Due to banks - - - - 12,275,336 12,275,336 12,275,336 Customer deposits - - - - 55,729,950 55,729,950 55,729,950 Debt securities - - - - 1,819,598 1,819,598 1,819,598 Other borrowings - - - - 4,994,474 4,994,474 4,994,474 Other liabilities - - - - 1,458,503 1,458,503 1,458,503 28,976 - - - 76,277,861 76,306,837 76,306,837 Investment securities: Measured at fair value Negative fair value of derivatives Investment securities – unquoted equity securities at cost The above table includes to QAR 52.3 million (2016: QAR 59.3 million) at 31 December 2017 of unquoted equity investments in both the carrying amount and fair value columns that were measured at cost and for which disclosure of fair value was not provided because their fair value was not considered to be reliably measureable. ANNUAL REPORT 2017 97
98. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 8. CASH AND BALANCES WITH CENTRAL BANKS Cash Cash reserve with QCB* Cash reserve with other central banks* Other balances with central banks 2017 QAR’000 2016 QAR’000 507,922 435,960 2,227,944 1,926,658 60,882 110,854 3,872,861 1,786,938 6,669,609 4,260,410 *Cash reserve with QCB and other central banks are mandatory reserves that are not available for use in the Group’s day to day operations. 9. DUE FROM BANKS 2017 QAR’000 2016 QAR’000 610,761 1,331,053 Placements 3,941,114 5,124,797 Loans to banks 3,270,108 4,049,400 7,821,983 10,505,250 2017 QAR’000 2016 QAR’000 56,027,009 54,456,707 5,588,715 5,903,930 Bills discounted 443,389 520,874 Other loans* 584,501 715,293 62,643,614 61,596,804 (21,467) (1,343) (2,706,410) (2,282,717) (111,563) (126,522) 59,804,174 59,186,222 Current accounts 10. LOANS AND ADVANCES TO CUSTOMERS Loans Overdrafts (Note-i) Less : Deferred profit Specific impairment of loans and advances to customers Collective impairment allowance Net loans and advances to customers 98 DOHA BANK
99. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 10. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) a) By type The aggregate amount of non-performing loans and advances to customers amounted QAR 2,258.7 million, which represents 3.61 % of total loans and advances to customers (2016: QAR 2,012.3 million, 3.27% of total loans and advances to customers). During the year, the Group has written-off fully provided non-performing loans amounting to QAR 194 million (2016: QAR 290.7) as per Qatar Central Bank circular no. 68/2011. Specific impairment of loans and advances to customers includes QAR 451 million of interest in suspense (2016: QAR 457 million). *This includes acceptances pertaining to trade finance amounting to QAR 224 million (2016: QAR 308 million). Note-i: Government and related agencies Corporate Retail 2017 QAR’000 2016 QAR’000 3,535,924 4,906,445 50,232,365 45,826,545 8,875,325 10,863,814 62,643,614 61,596,804 b) By industry Loans QAR’000 Overdrafts QAR’000 Bills discounted QAR’000 Other loans QAR’000 Total QAR’000 Government and related agencies 1,357,833 2,178,091 - - 3,535,924 Non-banking financial institutions 1,589,511 - - 5,123 1,594,634 603,026 20,990 31,141 93,217 748,374 10,480,480 906,795 147,383 111,885 11,646,543 Services 5,885,439 313,004 170,074 - 6,368,517 Contracting 9,527,115 1,095,701 31,992 324,575 10,979,383 17,871,715 416,432 17,851 11,938 18,317,936 8,361,916 504,333 9,076 - 8,875,325 349,974 153,369 35,872 37,763 576,978 56,027,009 5,588,715 443,389 584,501 62,643,614 At 31 December 2017 Industry Commercial Real estate Personal Others Less: Deferred profit Specific impairment of loans and advances to customers Collective impairment allowance (21,467) (2,706,410) (111,563) 59,804,174 ANNUAL REPORT 2017 99
100. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 10. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) b) By industry (continued) At 31 December 2016 Loans QAR’000 Overdrafts QAR’000 Bills discounted QAR’000 Other loans QAR’000 Total QAR’000 Government and related agencies 2,359,726 2,546,719 - - 4,906,445 Non-banking financial institutions 1,750,013 - - - 1,750,013 Industry 1,551,236 53,450 67,707 17,278 1,689,671 Commercial 8,290,573 961,795 145,951 273,710 9,672,029 Services 6,352,930 249,268 161,080 11,564 6,774,842 Contracting 9,090,955 1,248,194 95,194 310,208 10,744,551 Real estate 14,147,652 315,635 40,013 11,496 14,514,796 Personal 10,320,926 462,389 7,823 72,676 10,863,814 592,696 66,480 3,106 18,361 680,643 54,456,707 5,903,930 520,874 715,293 61,596,804 Others Less: Deferred profit (1,343) Specific impairment of loans and advances to customers (2,282,717) Collective impairment allowance (126,522) 59,186,222 c) Movement in impairment loss on loans and advances to customers 2017 QAR’000 2016 QAR’000 2,409,239 2,070,296 3,680 (895) 903,964 753,184 (104,578) (98,360) 799,386 654,824 Written off/transfers during the year (394,332) (314,986) Balance at 31 December 2,817,973 2,409,239 Balance at 1 January Foreign currency translation Provisions made during the year Recoveries during the year Net allowance for impairment during the year* *The movement includes the effect of interest suspended on loans and advances to customers as per QCB regulations amounting to QAR 206.9 million during the year (2016: QAR 174.6 million). 100 DOHA BANK
101. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 10. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) c) Movement in impairment loss on loans and advances to customers (continued) Reconciliations of the allowance for impairment losses for loans and advances to customers, by class, is as follows: Corporate lending QAR’000 SME lending QAR’000 Retail lending QAR’000 Real Estate Mortgage lending QAR’000 Total QAR’000 1,960,662 60,389 341,283 46,905 2,409,239 2,527 4 (72) 1,221 3,680 Provisions made during the year 726,420 31,023 146,457 64 903,964 Recoveries during the year (55,884) (2,035) (44,212) (2,447) (104,578) Written off/transfers during the year (328,308) (1,191) (64,721) (112) (394,332) Balance at 31 December 2017 2,305,417 88,190 378,735 45,631 2,817,973 Corporate lending QAR’000 SME lending QAR’000 Retail lending QAR’000 Real Estate Mortgage lending QAR’000 Total QAR’000 1,553,606 68,745 362,421 85,524 2,070,296 (681) - (214) - (895) Provisions made during the year 618,295 18,529 109,429 6,931 753,184 Recoveries during the year (31,279) (4,907) (32,971) (29,203) (98,360) Written off during the year (179,279) (21,978) (97,382) (16,347) (314,986) Balance at 31 December 2016 1,960,662 60,389 341,283 46,905 2,409,239 Balance at 1 January Foreign currency translation Balance at 1 January Foreign currency translation 11. INVESTMENT SECURITIES The analysis of investment securities is detailed below: Available-for-sale Investment securities classified as held for trading Held to maturity* Impairment losses Total 2017 QAR’000 2016 QAR’000 12,065,115 8,524,454 - 5,657 5,708,651 6,405,787 17,773,766 14,935,898 (261,156) (229,788) 17,512,610 14,706,110 *The Group has pledged State of Qatar Bonds amounting to QAR 4,606 million (2016: QAR 2,545 million) against repurchase agreements. ANNUAL REPORT 2017 101
102. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 11. INVESTMENT SECURITIES (CONTINUED) a) Available-for-sale 2017 2016 Quoted QAR’000 Unquoted QAR’000 Total QAR’000 Quoted QAR’000 Unquoted QAR’000 Total QAR’000 Equities 1,077,288 63,518 1,140,806 1,109,292 68,042 1,177,334 State of Qatar debt securities 6,549,715 524,275 7,073,990 3,282,312 1,652,005 4,934,317 Other debt securities 3,717,547 25,234 3,742,781 2,293,850 76 2,293,926 107,538 - 107,538 118,877 - 118,877 (235,772) (11,189) (246,961) (206,805) (8,789) (215,594) 11,216,316 601,838 11,818,154 6,597,526 1,711,334 8,308,860 Mutual funds Less: Impairment losses Total Fixed rate securities and floating rate securities amounted to QAR 10,246.7 million and QAR 570.1 million respectively as of 31 December 2017 (2016: QAR 7,130 million and QAR 98.7 million respectively). Investment securities classified as held for trading The investment securities classified as held for trading comprise quoted bonds amounted to QAR Nil million. (2016: Quoted bonds amounting to QAR 5.3 million. b) Held-to-maturity 2017 2016 Quoted QAR’000 Unquoted QAR’000 Total QAR’000 Quoted QAR’000 Unquoted QAR’000 Total QAR’000 2,886,237 1,639,649 4,525,886 3,351,341 1,675,596 5,026,937 Other debt securities 347,082 835,683 1,182,765 381,721 997,129 1,378,850 Less: Impairment losses (14,194) - (14,194) (14,194) - (14,194) 3,219,125 2,475,332 5,694,457 3,718,868 2,672,725 6,391,593 3,233,319 2,475,332 5,708,651 3,733,062 2,672,725 6,405,787 Floating rate securities - - - - - - Less: Impairment losses (14,194) - (14,194) (14,194) - (14,194) 3,219,125 2,475,332 5,694,457 3,718,868 2,672,725 6,391,593 -By issuer State of Qatar debt securities Total -By interest rate Fixed rate securities Total The fair value of held-to-maturity investments amounted to QAR 5,707.8 million at 31 December 2017 (2016: QAR 6,492.5 million). 102 DOHA BANK
103. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 11. INVESTMENT SECURITIES (CONTINUED) c) Movement in impairment losses on investment securities 2017 QAR’000 2016 QAR’000 Balance at 1 January 229,788 213,602 Provision for impairment loss during the year 142,067 139,499 Recoveries during the year (110,699) (123,313) Balance at 31 December 261,156 229,788 2017 QAR’000 2016 QAR’000 10,343 8,908 Foreign currency translation 693 (257) Acquisitions during the year - 1,738 Share of results 158 (46) Cash dividend (68) - 11,126 10,343 12. INVESTMENT IN AN ASSOCIATE Balance at 1 January Balance at 31 December The financial position and results of the associates based on audited financial statements, as at and for the year ended 31 December is as follows: 31 December 2017 QAR’000 2016 QAR’000 Total assets 45,955 30,140 Total liabilities 30,861 16,295 Total revenue 11,226 8,300 Profit / (loss) 359 (104) Share of profit / (loss) 158 (46) ANNUAL REPORT 2017 103
104. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 13. PROPERTY, FURNITURE AND EQUIPMENT Land and buildings QAR’000 Leasehold improvements QAR’000 Furniture and equipment QAR’000 Vehicles QAR’000 Total QAR’000 811,510 179,691 493,211 9,734 1,494,146 Additions/ transfers 69 19,270 16,777 568 36,684 Disposals / write-off - (3,310) (269) (2,224) (5,803) 811,579 195,651 509,719 8,078 1,525,027 219,911 131,863 363,223 8,304 723,301 32,611 15,349 50,232 628 98,820 - (3,244) (206) (2,224) (5,674) 252,522 143,968 413,249 6,708 816,447 559,057 51,683 96,470 1,370 708,580 Land and buildings QAR’000 Leasehold improvements QAR’000 Furniture and equipment QAR’000 Vehicles QAR’000 Total QAR’000 821,100 156,429 449,557 11,931 1,439,017 Additions/ transfers 91 26,169 62,196 687 89,143 Disposals / write-off (9,681) (2,907) (18,542) (2,884) (34,014) 811,510 179,691 493,211 9,734 1,494,146 187,558 121,561 333,556 10,555 653,230 32,673 13,210 47,127 632 93,642 (320) (2,908) (17,460) (2,883) (23,571) 219,911 131,863 363,223 8,304 723,301 591,599 47,828 129,988 1,430 770,845 At 31 December 2017 Cost: Balance at 1 January Depreciation: Balance at 1 January Depreciation for the year Disposals / write-off Net Book Value At 31 December 2016 Cost: Balance at 1 January Depreciation: Balance at 1 January Depreciation for the year Disposals / write-off Net Book Value 104 DOHA BANK
105. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 14. OTHER ASSETS 2017 QAR’000 2016 QAR’000 190,238 165,942 39,538 53,573 Repossessed collaterals* 134,000 - Positive fair value of derivatives (Note 34) 161,863 107,746 Deferred tax asset 132,205 89,177 12,130 2,122 297,225 507,209 967,199 925,769 Interest receivable Prepaid expenses Sundry debtors Others *This represents the value of the properties acquired in settlement of debts which are stated at their carrying value. The estimated market values of these properties as at 31 December 2017 are not materially different from the carrying values 15. DUE TO BANKS 2017 QAR’000 2016 QAR’000 1,638,675 728,300 148,216 208,068 - 700,000 Short-term loan from banks 3,270,792 8,272,925 Repo borrowings 5,947,378 2,366,043 11,005,061 12,275,336 2017 QAR’000 2016 QAR’000 Current and call deposits 7,972,033 10,022,348 Saving deposits 2,056,231 2,312,654 49,440,062 43,394,948 59,468,326 55,729,950 Balances due to central banks Current accounts Certificate of deposits 16. CUSTOMER DEPOSITS a) By type Time deposits ANNUAL REPORT 2017 105
106. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 16. CUSTOMER DEPOSITS (CONTINUED) b) By sector 2017 QAR’000 2016 QAR’000 29,911,274 21,543,253 Individuals 8,981,229 10,218,732 Corporates 17,318,389 22,291,246 3,257,434 1,676,719 59,468,326 55,729,950 Government and semi government agencies Non-banking financial institutions 17. DEBT SECURITIES The Group has issued subordinated debt notes and senior guaranteed notes as follows: Senior guaranteed notes (b) 2017 QAR’000 2016 QAR’000 657,669 1,819,598 657,669 1,819,598 Note During current year, the Group issued USD 75 million and JPY 11.9 billion senior unsecured debt under its updated EMTN programme. On 14 March 2012, the Group issued US$ 500 million senior guaranteed notes at 98.964% of the nominal value. The notes have a minimum nominal denomination of US$ 200,000. The notes mature in 2017 and carry interest at fixed rate of 3.50% payable semi-annually. 18. OTHER BORROWINGS 2017 QAR’000 2016 QAR’000 5,432,936 4,994,474 2017 QAR’000 2016 QAR’000 Up to 1 year 2,727,621 3,293,026 Between 1 and 3 years 2,705,315 1,701,448 5,432,936 4,994,474 Term loan facilities The table below shows the maturity profile of other borrowings. 106 DOHA BANK
107. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 19. OTHER LIABILITIES Interest payable Accrued expense payable Provision for end of service benefits (Note-i) Staff provident fund * Tax payable Negative fair value of derivatives ( Note 34) Unearned income Cash margins Dividend payable Unclaimed balances Proposed transfer to social and sport fund Others** Total 2017 QAR’000 2016 QAR’000 297,763 281,650 72,124 58,030 131,020 125,207 50,904 58,231 34,678 31,308 47,499 28,976 98,108 83,387 437,537 315,179 54,092 48,178 11,831 8,240 27,752 26,345 860,984 1,100,325 2,124,292 2,165,056 * Staff provident fund contribution was ceased effective July 2016 except for the Qatari and other GCC nationals. **This includes acceptances pertaining to trade finance amounting to QAR 224 million (2016: QAR 308 million). Note-i Provision for end of service benefits Balance at 1 January Provision for the year Provisions used during the year* Balance at 31 December 2017 QAR’000 2016 QAR’000 125,207 216,122 19,222 35,245 (13,409) (126,160) 131,020 125,207 * 50% of the end of service benefits have been paid to all staff in 2016. ANNUAL REPORT 2017 107
108. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 20. EQUITY a) Share capital Ordinary shares 2017 2016 On issue at the beginning of the reporting period 310,047 258,372 On issue at 31 December 310,047 258,372 In thousands of shares At 31 December 2017, the authorised share capital comprised 310,047 thousands ordinary shares (2016: 258,372 thousands). These instruments have a par value of QAR 10. All issued shares are fully paid. On 9 May 2017, the Bank closed its right issue subscription and received QAR 1,292 million from its shareholders towards the Bank’s offer to increase its share capital through the issuance of 51,674,450 new shares at a premium of QAR 15, in addition to a nominal value of QAR 10 per share, as resolved by the bank’s Extraordinary General Assembly held on 6 March 2017. Shares were listed on Qatar Exchange as on 12 July 2017 and the paid up capital of the Bank has been increased to QAR 3,100,467,020. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Group. b) Legal reserve In accordance with Qatar Central Bank’s Law No. 13 of 2012, 10% of the net profit for the year is required to be transferred to legal reserve until the legal reserve equals 100% of the paid up capital. This reserve is not available for distribution except in circumstances specified in the Qatar Commercial Companies’ Law No. 11 of 2015 and is subject to the approval of QCB. No transfer was made during the year as the legal reserve is in excess of 100% of the paid up capital. The legal reserve includes share premium received on issuance of new shares in accordance with Qatar Commercial Companies Law 11 of 2015. c) Risk reserve In accordance with the Qatar Central Bank regulations, a minimum requirement of 2.5% of the net loans and advances to customers except for facilities granted to Government, is required as risk reserve to cover any contingencies. The Group has an outstanding balance of QAR 1.37 billion under its risk reserve as at year ended 2017 which is in line with the minimum requirement (2016: QAR 80 million transferred to risk reserve). 108 DOHA BANK
109. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 20. EQUITY (CONTINUED) d) Fair value reserve This reserve comprises the fair value changes recognised on available-for-sale financial assets. 2017 QAR’000 2016 QAR’000 Balance at 1 January (103,412) (269,676) Net unrealized (loss) gain on available-for-sale investment securities (100,156) (34,035) 136,013 200,299 35,857 166,264 (67,555) (103,412) Reclassified to consolidated statement of Income Net change in fair value of available – for – sale investment securities Balance at 31 December e) Foreign currency translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. f) Proposed dividend The Board of Directors of the Group has proposed a cash dividend of 30% of paid up share capital amounting to QAR 930.1 million - QAR 3.00 per share (2016: 30% of paid up share capital amounting to QAR 775.1 million - QAR 3.00 per share) which is subject to approval at the Annual General Meeting of the shareholders. g) Instrument eligible as additional capital 2017 QAR’000 2016 QAR’000 Issued on 31 December 2013 2,000,000 2,000,000 Issued on 30 June 2016 2,000,000 2,000,000 4,000,000 4,000,000 The Group has issued regulatory Tier I capital notes totaling to QAR 4 billion. These notes are perpetual, subordinated, unsecured and each has been priced at a fixed rate for the first six years and shall be re-priced thereafter. The coupon is discretionary and the event on non-payment is not considered as an event of default. The notes carry no maturity date and have been classified under Tier 1 capital. 21. INTEREST INCOME Balance with central banks Due from banks and non-banking financial institutions Debt securities Loans and advances to customers 2017 QAR’000 2016 QAR’000 3,429 1,774 98,624 100,393 566,699 446,879 2,962,101 2,619,949 3,630,853 3,168,995 ANNUAL REPORT 2017 109
110. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 22. INTEREST EXPENSE Due to banks Customer deposits Debt securities 2017 QAR’000 2016 QAR’000 361,654 231,118 996,384 798,725 17,344 78,506 1,375,382 1,108,349 2017 QAR’000 2016 QAR’000 88,002 108,741 667 645 258,167 232,601 136,667 134,113 32,810 26,848 516,313 502,948 2017 QAR’000 2016 QAR’000 1,051 1,185 50,737 41,984 51,788 43,169 2017 QAR’000 2016 QAR’000 25,643 47,169 80,901 55,077 106,544 102,246 2017 QAR’000 2016 QAR’000 10,571 (5,095) 39,251 60,679 49,822 55,584 23. FEE AND COMMISSION INCOME Credit related fees Brokerage fees Bank services fee Commission on unfunded facilities Others 24. FEE AND COMMISSION EXPENSE Bank fees Others 25. FOREIGN EXCHANGE GAIN Dealing in foreign currencies Revaluation of assets and liabilities 26. INCOME FROM INVESTMENT SECURITIES Net gains/(loss) on investment securities Dividend income 110 DOHA BANK
111. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 27. OTHER OPERATING INCOME Recoveries from the loans and advances previous written-off Rental income Others 2017 QAR’000 2016 QAR’000 31,199 28,875 12,797 12,509 18,280 13,495 62,276 54,879 28. STAFF COSTS Staff cost Staff pension fund costs End of service benefits Training 2017 QAR’000 2016 QAR’000 505,151 469,159 5,168 9,845 19,222 35,245 1,568 2,055 531,109 516,304 2017 QAR’000 2016 QAR’000 33,329 33,424 27,534 42,529 44,727 51,841 19,736 15,221 123,441 100,686 37,468 38,159 10,494 11,734 6,909 7,189 169,026 158,662 472,664 459,445 29. OTHER EXPENSES Advertising Professional fees Communication and insurance Board of Directors’ remuneration Occupancy and maintenance Computer and IT costs Printing and stationary Travel and entertainment costs Others ANNUAL REPORT 2017 111
112. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 30. TAX EXPENSE 2017 QAR’000 2016 QAR’000 35,508 32,207 158 29 35,666 32,236 (36,943) (34,019) (1,277) (1,783) Current tax expense Current year Adjustments for prior years Deferred tax expense Temporary differences Income tax expense reported in the statement of income 31. BASIC AND DILUTED EARNINGS PER SHARE Earnings per share of the Group is calculated by dividing profit for the year attributable to the equity holders (further adjusted for interest expense on tier 1capital notes) of the Bank by the weighted average number of ordinary shares in outstanding during the year: Profit for the year attributable to the equity holders of the Group Deduct : Interest on Tier 1 capital notes Net profit attributable to equity holders of the Group Weighted average number of outstanding shares (in thousands) Earnings per share (QAR) 2017 QAR’000 2016 QAR’000 1,110,074 1,053,781 (220,000) (220,000) 890,074 833,781 295,152 267,575 3.02 3.12 2017 2016 295,152 267,575 The weighted average number of shares has been calculated as follows: In thousands of shares Weighted average number of shares at 31 December 112 DOHA BANK
113. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 32. CONTINGENT LIABILITIES AND OTHER COMMITMENTS 2017 QAR’000 2016 QAR’000 3,737,358 3,577,504 18,380,848 22,246,187 5,958,391 7,196,260 207,200 161,142 28,283,797 33,181,093 7,091,767 30,696,684 3,256,877 1,822,890 10,348,644 32,519,574 Contingent liabilities Unused facilities Guarantees Letters of credit Others Total Other commitments Forward foreign exchange contracts Interest rate swaps Total Unused facilities Commitments to extend credit represent contractual commitments to make loans and revolving credits. The majority of these expire within a year. Since commitments may expire without being drawn upon, the total contractual amounts do not necessarily represent future cash requirements. Guarantees and Letters of credit Guarantees and letters of credit commit the Group to make payments on behalf of customers in the event of a specific event. Guarantees and standby letters of credit carry the same credit risk as loans. Lease commitments The Group has entered into commercial leases on certain buildings. These leases have an average duration between three and five years. There are no restrictions placed upon the Group by entering into these leases. F u t u re m i n i m u m l e a s e p a y m e n t s u n d e r n o n - c a n c e l l a b l e l e a s e s a s a t D e c e m b e r 3 1 a re a s f o l l o w : 2017 QAR’000 2016 QAR’000 Less than one year 12,304 14,375 Between one and five years 20,957 21,830 3,918 2,584 37,179 38,789 More than five years ANNUAL REPORT 2017 113
114. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 33. CASH AND CASH EQUIVALENTS 2017 QAR’000 2016 QAR’000 4,380,783 2,222,899 5,924,892 6,693,115 10,305,675 8,916,014 Cash and balances with central banks* Due from banks and other financial institutions maturing within 3 months *Cash and balances with central banks do not include the mandatory cash reserve. 34. DERIVATIVES Notional / expected amount by term to maturity At 31 December 2017: Positive fair value QAR’000 Negtive fair value QAR’000 Notional amount QAR’000 within 3 months QAR’000 3 - 12 months QAR’000 1-5 years QAR’000 More than 5 years QAR’000 102,253 20,014 7,091,767 4,555,558 2,536,209 - - 59,610 27,485 3,256,877 7,283 20,028 993,765 2,235,801 Derivatives held for trading: Forward foreign exchange contracts Derivatives held for fair value hedges: Interest rate swaps Notional / expected amount by term to maturity At 31 December 2016: Positive fair value QAR’000 Negative fair value QAR’000 Notional amount QAR’000 within 3 months QAR’000 3 - 12 months QAR’000 1-5 years QAR’000 More than 5 years QAR’000 52,145 19,827 30,696,684 26,292,656 4,404,028 - - 55,601 9,149 1,822,890 - 25,491 733,398 1,064,001 Derivatives held for trading: Forward foreign exchange contracts Derivatives held for fair value hedges: Interest rate swaps 35. RELATED PARTIES Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, Related parties include entities over which the Group exercises significant influence, major shareholders, directors and key management personnel of the Group. The Group enters into transactions, arrangements and agreements involving directors, senior management and their related concerns in the ordinary course of business at commercial interest and commission rates. 114 DOHA BANK
115. DOHA BANK Q .P.S.C. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2017 35. RELATED PARTIES (CONTINUED) The related party transactions and balances included in these consolidated financial statements are as follows: 2017 2016 Board of directors QAR’000 Others QAR’000 Board of directors QAR’000 Others QAR’000 2,599,973 - 1,350,895 - 371,327 13,055 394,631 19,506 998,210 - 754,262 - 8,305 - 8,305 - Interest , commission and other income 49,751 1,131 40,669 - Interest, commission and other expense 10,035 430 7,825 515 Assets: Loans and advances to customers Liabilities: Customer deposits Unfunded items: Contingent Liabilities and other commitments Other assets Income statement items: No impairment losses have been recorded against balances outstanding during the period with key management personnel. Key management personnel (including Board of Directors) compensation for the year comprised: Salaries and other benefits End of service indemnity benefits and provident 2017 QAR’000 2016 QAR’000 63,763 57,282 3,167 6,352 66,930 63,634 36. COMPARATIVES The comparative figures have been reclassified where necessary to preserve consistency with the current year. However, such reclassification did not have any effect on the consolidated net profit or equity for the comparative year. ANNUAL REPORT 2017 115
116. DOHA BANK Q .P.S.C. SUPPLEMENTARY INFORMATION as at and for the year ended 31 December 2017 FINANCIAL STATEMENTS OF THE PARENT SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS Statement of Financial Position – Parent Bank As at 31 December 2017 QAR’000 2016 QAR’000 6,669,495 4,260,410 7,756,325 10,434,909 59,804,174 59,186,222 17,511,786 14,707,791 11,126 10,343 707,951 770,292 903,385 848,286 93,364,242 90,218,253 11,005,061 12,275,336 59,483,483 55,745,593 657,669 1,819,598 5,432,936 4,994,474 2,032,648 2,058,409 78,611,797 76,893,410 3,100,467 2,583,723 5,080,853 4,305,737 1,372,000 1,372,000 (62,581) (100,001) (13,451) (24,991) 930,140 775,117 345,017 413,258 10,752,445 9,324,843 4,000,000 4,000,000 14,752,445 13,324,843 93,364,242 90,218,253 ASSETS Cash and balances with central banks Due from banks Loans and advances to customers Investment securities Investment in an associate Property, furniture and equipment Other assets TOTAL ASSETS LIABILITIES Due to banks Customer deposits Debt securities Other borrowings Other liabilities TOTAL LIABILITIES EQUITY Share capital Legal reserve Risk reserve Fair value reserves Foreign currency translation reserve Proposed dividend Retained earnings TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE BANK Instrument eligible as additional capital TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 116 DOHA BANK
117. DOHA BANK Q .P.S.C. SUPPLEMENTARY INFORMATION as at and for the year ended 31 December 2017 FINANCIAL STATEMENTS OF THE PARENT (CONTINUED) SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS (CONTINUED) Income Statement – Parent Bank For the year ended 31 December Interest income Interest expense Net interest income Fee and commission income Fee and commission expense Net fee and commission income Foreign exchange gain Income from investment securities Other operating income Net operating income Staff costs Depreciation and amortisation Impairment loss on investment securities Net impairment loss on loans and advances to customers Other expenses Profit for the year before tax Tax expense Profit for the year 2017 QAR’000 2016 QAR’000 3,630,853 3,168,995 (1,375,497) (1,109,061) 2,255,356 2,059,934 516,313 502,948 (51,788) (43,169) 464,525 459,779 106,544 102,246 49,524 54,020 59,405 54,541 215,473 210,807 2,935,354 2,730,520 (521,984) (505,068) (98,563) (93,388) (142,067) (138,771) (592,541) (480,224) (471,997) (464,462) (1,827,152) (1,681,913) 1,108,202 1,048,607 1,291 2,158 1,109,493 1,050,765 ANNUAL REPORT 2017 117
118. DOHA BANK CONTACT DIRECTORY 118 Sheikh Fahad Bin Mohammad Bin Jabor Al Thani Chairman Tel : 40155551 Fax: 44432008 Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani Managing Director Tel: 40155565 Fax: 44432008 Dr. Raghavan Seetharaman Chief Executive Officer Tel: 40155575 Fax: 44325345 Mr. Mokhtar Abdel Monem Elhenawy Legal Advisor to the Board and Company Secretary Tel: 40155488 Fax: 40155482 Mr. Jamal Eddin H. Al Sholy Chief Compliance Officer Compliance Tel: 40155405 Fax: 40155449 Dr. Mohammad Omar Abdelaziz Daoud Chief Internal Auditor Internal Audit Tel: 40155455 Fax: 40155454 Mr. David Challinor Chief Financial Officer Tel: 40155705 Fax:40155701 Mr. Ahmed Ali J Al-Hanzab Head of Administration Tel: 40155655 Fax: 40155658 Mr. Abdullah Asad Al-Asadi Executive Manager, Shareholders Affairs Tel: 40154858 Fax: 40154862 Mr. Mohammad Abid Mohammad Hanif Head of Information Technology Tel: 40155009 Fax: 44313270 Mr. Frank Hamer Chief International Banking Officer Tel: 40154848 Fax: 40154822 Mr. Braik Ali HS Al-Marri Acting Chief Retail Banking Officer Tel: 40155515 Fax: 40154756 Sh. Mohamed Fahad M J Al-Thani Acting Chief Human Resources Officer Tel : 40153333 Fax : 4015 5660 Mr. Krishnan C.K. Chief Wholesale Banking Officer Tel: 40154999 Fax: 40154891 Mr. Khalid Latif Chief Risk Officer Tel: 40155777 Fax: 40155770 Mr. Khalifa Al Kaabi Head of Recovery Tel: 40153555 Fax: 44416631 Mr. Khalid Al Naama Head of Public Sector Tel: 40154878 Fax: 40154870 Mr. Brett Graeme Pennington Head of Insurance Tel: 40154045 Fax: 40154099 Mr. Hassan Ali Kamal Corporate Branch Manager Tel: 40155755 Fax: 40155745 Mr. Peter Edward Roberts Chief Operating Officer Tel : 40155300 Mr. Yousuf Ahmed Mandani Branch Manager - Main Branch Tel: 40153555 Fax: 44416631 DOHA BANK
119. DOHA BANK BRANCH DIRECTORY 1 ) Main Branch (202) P.O Box 3818 Tel:40153555 / 3550 Fax:44416631 / 44456837 Telex: 4534-DOHBNK Swift: DOHBQAQA 2) Mushaireb (203) P.O Box: 2822 Tel: 44025340 / 5341 Fax: 44025335 / 44025336 Telex: 4825-DBMSB DH Swift: DOHBQAQA 3) Museum (204) P.O Box: 32311 Tel: 40153152 / 53 Fax:40153150 Telex: 4534-DOHBNK Swift: DOHBQAQA 4) Central Market (206) P.O Box: 3818 Tel: 40153188 / 89 / 87 Fax: 40153186 Swift: DOHBQAQA 5) City Center (210) P.O Box 31490 Tel: 40153350 / 3351 Fax: 44115018 Swift: DOHBQAQA 6) West Bay (211) P.O Box: 9818 Tel: 40153111/3116/3105 Fax: 40153100 Telex:4883-DBBAY DH Swift: DOHBQAQA 7) Al Kheratiyat (212) P.O Box: 8212 Tel:40153515 / 3516 Fax: 44783326 / 44780618 Telex: 5051 DOHB QA QA Swift: DOHBQAQA 8) Bin Omran (213) P.O Box: 8646 Tel: 40153322 / 3323 Fax: 44874670 Swift Code: DOHBQAQA 9) C-Ring Road (215) P.O Box:3846 Tel:40153727 / 44659385 Fax:44659288 Telex: 4534 Swift: DOHBQAQA 10) Gharafah (216) P.O Box: 31636 Tel.: 40153377 / 3379 Fax: 40153380 Swift Code: DOHBQAQA 11) D-Ring Road (220) P.O Box 31420 Tel: 40153500 / 3505 Fax: 44257646 Swift Code: DOHBQAQA 12) Old Airport Br. (221) P.O Box 22714 Tel: 40153698/3695 Fax:40153699 Swift: DOHBQAQA 13) Corporate Br. (222) P.O Box 3818 Tel: 40155755 / 5757 / 5750 Fax:40155745 Swift: DOHBQAQA 19) Dukhan (230) P.O Box: 100188 Tel: 40153310 / 3311 Fax: 44711090 Telex: 4210-DBDKN DH Swift: DOHBQAQA 20) Al Khor (231) P.O Box: 60660 Tel: 40153388 / 3389 Fax: 44722157 Swift: DOHBQAQA 21) Ras Laffan (233) P.O Box: 31660 Tel: 40153390 / 3391 Fax: 44748664 Telex: 4825- DBMSB DH Swift: DOHBQAQA 22) Al Ruwais (235) P.O Box: 70800 Tel: 40153304 / 3305 / 3306 Fax: 44731372 Swift: DOHBQAQA LOCAL BRANCHES 14) Al Mirqab (225) P.O Box: 8120 Tel: 40153266 / 3267 Fax: 40153264 Swift Code: DOHBQAQA 23) Wakra (237) P.O Box: 19727 Tel: 40153177 / 78 / 40153182 Fax: 40153185 Swift: DOHBQAQA 15) Salwa Road (226) P.O. Box: 2176 Tel: 44257636 / 7626 Fax: 44681768 Telex: 4744-DBSWA DH Swift: DOHBQAQA 24) Mesaieed (240) P.O Box: 50111 Tel: 40153342 / 44771984 / 5 40153343 / 44760277 Fax: 44770639 Telex: 4164 DBUSB DH Swift: DOHBQAQA 16) Industrial Area (227) P.O Box: 40665 Tel: 40153600 / 3601 Fax:44606175 Swift Code: DOHBQAQA 17) Abu Hamour (228) P.O Box: 47277 Tel: 40153253 / 54 Fax:40153250 Swift Code: DOHBQAQA 18) Abu Samra (229) P.O Box: 30828 Tel:44715634 / 44715623 / 4655 Fax: 44715618 / 31 Swift Code: DOHBQAQA 25) Al Rayyan (260) P.O Box: 90424 Tel: 44257135 / 36 Fax: 44119471 Swift: DOHBQAQA 26) Mall of Qatar (265) P.O Box 24913 Tel: 40153701 / 05 / 3709 / 3711 Fax: 44986625 Swift Code: DOHBQAQA 27) Doha Festival City (266) P.O Box 2731 Tel: 40153299/300 Fax: 44311012 Swift Code: DOHBQAQA ANNUAL REPORT 2017 119
120. PAY OFFICES Office Name Telephone No . Fax No. QP, Central Office Bldg, Mesaieed +974 44771309 +974 44771309 QP, Pay Office, Dukhan +974 44712298 +974 44712660 Pakistan Embassy +974 44176196 +974 44176196 E-BRANCHES Office Name Telephone No. Fax No. Lulu Hypermarket-D Ring Road +974 44660761 / 66730305 +974 44663719 Lulu Hypermarket-Gharafa +974 44780659 / 77866470 +974 44780615 QP Handasa +974 44375738 / 66603646 +974 44376022 Lulu Al Khor (Al Khor Mall) +974 40153128 / 66545149 +974 44726147 Chamber of Commerce (D Ring Road) +974 44674515 +974 44674035 CARDS DELIVERY CENTER 120 Office Name P.O. Box Telephone No. Fax No. Card Delivery Center - City Center 3818 +974 40154150 +974 44456036 DOHA BANK
121. OVERSEAS BRANCHES & REPRESENTATIVE OFFICES INTERNATIONAL BANKING HEAD OFFICE Mr. Frank Hamer Chief International Banking Officer P.O. Box 3818, Doha, Qatar Tel: +974 4015 4848 Fax: +974 4015 4822 Mobile: +974 6692 6217 E-mail: fhamer@dohabank.com.qa OVERSEAS BRANCHES Kuwait Branch Mr. Loai Fadel Mukamis  Chief Country Manager Ahmed Al-Jaber Street Abdullatif Al-Sarraf Tower, Block No.1, Plot No.3 P.O. Box 506, Safat 13006, Sharq, Kuwait Tel: +965 2291 7217 Fax: +965 2291 7229 Mob: +965 6651 1165 Email: lmukamis@dohabank.com.kw Dubai (UAE) Branch Mr. Alaga Raja Country Head of UAE, Ground Floor, 21st Century Tower, Sheikh Zayed Road P.O. Box 125465, Dubai, UAE Tel: +9714 407 3100 Fax: +9714 321 9972 Mob:+971 50 770 1494 Email: Rajaa@dohabank.ae Abu Dhabi (UAE) Branch Al Otaiba Tower, Najda Street P.O Box 27448, Abu Dhabi, UAE Tel: + 971 2 6944888 Fax: + 971 2 6944844 Mumbai Branch (India) Mr. Manish Mathur Country Manager - India Sakhar Bhavan, Ground Floor Plot No 230, Block No III Back bay Reclamation Nariman Point, Mumbai 400 021, India Tel: +91 22 6002 6561 Fax: +91 22 2287 5289 / 90 Mob: +91 96199 12379 Email: mmathur@dohabank.co.in Chennai Branch (India) Mr. Sathish Kumar Balappan Branch Manager Old Door No. 35, New Door No. 9 Mount Road, Anna Salai, Near Anna Statue Chennai - 600 002, Tamil Nadu Tel: +91 44 40064805 / 40064800 Fax: +91 44 40064804 Mob: +91 99440 44410 Email: sBalappan@dohabank.co.in *Opened in Feb 2018 Kochi Branch (India) Mr. Benny Paul 1st Floor, Lulu Mall 34/1000, NH 47, Edappally, KOCHI – 682024, Kerala State Tel: +91 484 4100061 / 4100167 Fax: +91 484 4100165 Mob: +91 97475 52208 Email: bpaul@dohabank.co.in REPRESENTATIVE OFFICES Singapore Representative Office Mr. M. Sathyamurthy Deputy Head – International Banking 7 Temasek Boulevard #08-03A, Suntec Tower One Singapore, 038987 Singapore Tel: +65 6513 1298 Mob: +65 8 126 6333 Email: sathyamurthy@dohabank.com.sg Australia Representative Office Mr. Hilton Wood Chief Representative Level 36, 1 Farrer Place, Governor Phillip Tower Sydney NSW 2000, Australia Tel: +612 8211 0628 Fax: +612 9258 1111 Mobile: +614 1903 2419 Email: hilton.wood@dohabank.com.au Japan Representative Office Mr. Kanji Shinomiya Chief Representative Kioicho Building 8F B-3,3-12 Kioicho, Chiyoda-ku Tokyo, 102-0094, Japan Tel: +813 5210 1228 Fax: +813 5210 1224 Mob: +81 90 1776 6197 Email: kanji.shinomiya@dohabank.jp Seoul Representative Office Mr. Young Joon Kwak Chief Representative 1418 Jongro 19, Jongro Gu, Seoul, 03157, South Korea Tel: +82 2 723 6440/ 44 Fax: +82 2 723 6443 Mob: +82 103 897 6607 Email: jaykwak@dohabank.co.kr China Representative Office Mr. Peter Lo Chief Representative Suite 506B, Shanghai Center 1376 Nanjing Road West, Shanghai, China Postal code : 200040 Tel: +8621 6279 8006 / 8008 Fax: +8621 6279 8009 Mob: +86 13 9179 81454 Email: peterlo@dohabanksh.com.cn Hong Kong Representative Office Mr. Ivan Lew Chee Beng Chief Representative Level 16, The Hong Kong Club Building, 3A Charter Road, Central, Hong Kong Tel: +852 3974 8571 Mob: +852 9666 5237 Email: ivanlew@dohabank.com.hk Turkey Representative Office Mr. Nezih Akalan Chief Representative Bagdat Palace Apt. Bagdat Cad.No. 302/1, D:14 Caddebostan Kadikoy, 34728, Istanbul, Turkey Tel: +90 216 356 2928 / 2929 Fax: +90 216 356 2927 Mob: +90 532 331 0616 Email: nezihakalan@dohabankturkey.com Frankfurt Representative Office Mr. Maik Gellert Chief Representative 18th Floor, Taunusturm, Taunustor 1 60310 Frankfurt am Main, Germany Tel: +49 69 505060-4211 Fax: +49 69 505060-4150 Mobile: +49 170 321 4999 E-mail : office@dohabank.eu United Kingdom Representative Office Mr. Richard H. Whiting Chief Representative 67 / 68 First Floor, Jermyn Street London SW1Y 6NY UK Tel: +44 20 7930 5667 Mobile: +44 790 232 2326 Email: office@dohabank.co.uk Sharjah (UAE) Representative Office Mr. Savio Ansylem Pereira Acting Chief Representative First Floor 104, Index Tower Al Majaaz Area, Sharjah, U.A.E. Tel: +9714 4073184 / +9716 552 5656 / 5612 / 2615 Fax: +9716 552 5657 Mobile: +9716 552 5657 Email: sansylem@dohabank.ae Canada Representative Office Mr. Venkatesh Nagoji Chief Representative The Exchange Tower 130 King Street West, Suite 1800 Toronto, ON M5X 1E3 Tel: +1 416 865 2032 Fax: +1 416 947 0167 Mob: +1 647 871 6892 Email: venkatesh.nagoji@dohabank.com.ca South Africa Representative Office Mr. Andre Leon Snyman Chief Representative 90 Rivonia Road, 2nd Floor, North Wing, Sandton, 2057, Johannesburg, South Africa Tel : +27 10 286 1156 Fax : +27 11 881 5611 Mob: +27 60 60 93129 Email : asnyman@dohabank.co.za BangladeshRepresentative Office Mr. Ajay Kumer Sarker Chief Representative Police Plaza, Concord Shopping Mall, 8th Floor, Tower – A, Unit-L, Plot# 02, Road # 144, Gulshan-1, Dhaka – 1212, Bangladesh Tel: +88 02 55045154 Fax: +88 02 55045153 Mob: +8801713081733 Email: asarker@dohabank.com.qa Sri Lanka Representative Office Mr. Eranda Wishanake Weerakoon Chief Representative Level 26, East Tower, World Trade Centre, Echelon Square, Colombo 01, Sri Lanka Tel: +94 11 743 0237 Fax: +94 11 744 4556 Mob: +94 77 390 8890 Email: eWeerakoon@dohabank.com.lk *Opened in Feb. 2018 ANNUAL REPORT 2017 121