Description
From the very beginning, Commercial Bank has played a part in serving the people, businesses and community of Qatar.
Annual Report
2012
Annual Report 2012 1
His Highness
Sheikh Tamim bin Hamad Al Thani
Heir Apparent
His Highness
Sheikh Hamad bin Khalifa Al Thani
Emir of the State of Qatar
From the very beginning, Commercial Bank has played
a part in serving the people, businesses and community
of Qatar. Our origins are those of a pioneer, being the ?rst
private sector bank in the country and one that has focused
constantly on bringing innovations to the market.
This year our Annual Report takes its theme from the
24-hour world in which we now operate. It shows glimpses
of life in Qatar through diferent times of the day – from
dawn to dusk and through the night. It shows our customers,
employees and managers as they go about their lives and
re?ects the contribution that Commercial Bank makes to
the communities in which we operate.
This year’s report also marks an evolution of our
brand, one that expresses our ongoing belief that
everything is possible. It re?ects our aim to help
our customers succeed in their ambitions and to make
the most of the opportunities our economy ofers.
In future, our iconic four-crescent symbol and name
will be given a dynamic prominence, and the new design
will project a modern image relevant to the next generation
of digitally empowered customers.
Annual Report 2012 3
Contents
Business at a Glance 5
Financial Highlights 6
Chairman’s Report 10
Board of Directors 12
Managing Director’s Report 14
Management Review of Operations 18
Annual Corporate Governance Report 41
Independent Auditors’ Report 52
Consolidated Statement of Financial Position (“Balance Sheet”) 53
Consolidated Income Statement 54
Consolidated Statement of Comprehensive Income 55
Consolidated Statement of Changes in Equity 56
Consolidated Statement of Cash Flows 58
Notes to the Consolidated Financial Statements 59
6.00am
Fish Market on the Doha Corniche
Doha, once a small ?shing and pearl
diving village, now boasts an impressive
city skyline and a per capita GDP that
ranks amongst the highest in the world.
Since its foundation in 1975 the Bank has
played a role in the everyday lives of the
people of Qatar.
Annual Report 2012 5
Business at a Glance
About Commercial Bank
Headquartered in Doha, Commercial Bank
ofers a full range of corporate, retail and
investment banking services. We also own
and operate exclusive Diners Club franchises
in Qatar and Oman. Our country-wide network
includes 29 branches and 165 ATMs.
The Bank has been pro?table every year
since it was founded in 1975. Our successful
strategy has diversi?ed our income streams
and expanded our GCC footprint, through
strategic partnerships with the National Bank
of Oman in Oman and United Arab Bank
in the United Arab Emirates. Our continual
investment in technology and people,
together with our strong capital base,
provides a solid foundation for further growth.
Commercial Bank has a robust ?nancial
position, with total assets of QAR 80.0 billion
at 31 December 2012, and a capital adequacy
ratio of 17% – well above the minimum
required by the Qatar Central Bank. The Bank
enjoys strong credit ratings of A from Fitch, A1
from Moody’s and A- from Standard & Poors.
The Bank is listed on the Qatar Exchange
and was the ?rst Qatari bank to list its Global
Depository Receipts, as well as bonds, on the
London Stock Exchange.
Commercial Bank continues to play
an important role in Qatar’s economic
development and is dedicated to supporting
Qatar’s community and social infrastructure,
through our Corporate Social Responsibility
programmes and sponsorship of prestigious
sporting events, which help to raise Qatar’s
international pro?le.
Our business segments
Wholesale Banking Provides a range
of conventional commercial and investment
banking services and products to large,
medium and small enterprises, including
corporate lending, trade ?nance,
syndicated loans, deposits, letter of
credit and guarantees.
Retail Banking Provides a full suite of
conventional retail banking services and
products to retail customers in Qatar,
including current and deposit accounts,
wealth management, mortgage lending,
personal and vehicle loans and credit card
and other card services.
Associates and subsidiaries
National Bank of Oman (S.A.O.G.) Operates
through 66 branches in Oman, one in Egypt
and one in the United Arab Emirates.
United Arab Bank (P.J.S.C.) Operates through
15 branches in the United Arab Emirates.
Asteco Qatar W.L.L. A joint venture property
management company.
Massoun Insurance Services L.L.C. A joint
venture that provides tailored corporate
and personal insurance products to the
Bank’s customers.
Gekko L.L.C. A joint venture company
that provides contactless payment
infrastructure and customer database
management solutions.
Orient 1 Limited A fully owned subsidiary that
owns and manages an exclusive Diners Club
franchise in Qatar and Oman.
Global Card Services L.L.C. A limited liability
company that issues Diners Club Credit Cards
and acquires merchant rights in Oman.
Commercial Bank Investment Services (S.P.C.)
A fully owned subsidiary that provides direct
access to the Qatar Exchange, online trading
and brokerage services.
History
• 1975 Commercial Bank founded as Qatar’s
?rst private sector bank
• 1997 First licensed broker on the Doha
Securities Market
• 2005 Acquires stake in National Bank
of Oman
• 2006 First Qatari bank to issue bonds
totalling USD 500 million on the LSE
• 2007 Acquires stake in United Arab Bank
• 2008 First Qatari bank to list GDRs
on the LSE
• 2009 Launches Regulation S/144A Lower
Tier II and Senior Global Bond Ofering
totaling USD 1.6 billion
• 2010 First Qatari bank to list bond issue
on the SIX Swiss Exchange
• 2011 Incorporates Commercial Bank
Investment Services
• 2012 Launches Regulation S USD 500
million Senior unsecured bonds
Total assets
QAR80.0bn
up 12%
Capital strength
17.0%
Total Regulatory Capital Ratio
The Commercial Bank of Qatar (Q.S.C.) 6
Key highlights
• Record net pro?t for the year up 7%
to QAR 2.012 billion compared with
QAR 1,884 billion achieved in 2011
• Net operating income up 4% to
QAR 2.98 billion, increased from
QAR 2.86 billion in 2011
• Non-interest income up 21% to
QAR 1.12 billion compared with
QAR 926 million for the same period
in 2011 due to higher gains from the
Bank’s investment portfolio and an
increase in foreign exchange income
• Net provisions for loans and advances
were QAR 140 million, down 42% from
QAR 239 million provided in the same
period for 2011
• Total assets up 12% to QAR 80.0 billion
• Loans and advances to customers up
17% to QAR 48.6 billion, with growth
in lending in both the Corporate and
Retail businesses
• Customers’ deposits up 9% to
QAR 41.4 billion
• Contribution of Commercial Bank’s
associates to the Bank’s net pro?t
increased by 27% to QAR 259 million
compared with QAR 203 million
for 2011
Financial Highlights
Net pro?t
QAR2.012bn
up 7%
Customers’ deposits
QAR41.4bn
up 9%
Earnings per share
QAR8.13
up from QAR 7.71
Customer loans and advances
QAR48.6bn
up 17%
Annual Report 2012 7
Financial highlights
QAR million, except per share amounts
and as stated otherwise 2012 2011 2010 2009 2008
Net operating income 2,984 2,864 2,562 2,778 2,769
Net pro?t 2,012 1,884 1,635 1,524 1,702
Total assets 80,038 71,638 62,520 57,317 61,485
Lending to customers 48,594 41,712 33,567 31,929 33,898
Basic/diluted earnings per share in QAR 8.13 7.71 7.24 7.08 8.76
Dividends declared per ordinary share
including bonus shares in QAR 6.00 6.00 7.00 6.00 7.00
Closing market price per ordinary share
in QAR (at year end) 70.90 84.00 92.00 61.50 88.40
Book value per ordinary share in QAR 60.37 57.51 55.11 55.47 48.39
Long-term debt (at year end) 12,177 11,054 10,994 9,924 6,096
Shareholders’ equity (at year end) 14,939 14,230 12,500 12,010 9,978
Return on average shareholders’ equity 13.80% 14.10% 13.34% 13.86% 21.01%
Return on average assets 2.65% 2.81% 2.73% 2.56% 3.19%
Capital adequacy ratio 17.00% 17.91% 18.49% 18.86% 15.66%
Full-time employees (at year end) 1,114 1,115 1,207 1,239 1,241
Forward-looking statements
This document contains certain forward-
looking statements with respect to certain
plans and current goals and expectations
of Commercial Bank and its associated
companies relating to their future ?nancial
condition and performance. These forward-
looking statements do not relate only to
historical or current facts. By their nature
forward-looking statements involve risk
and uncertainty because they relate to future
events and circumstances including a number
of factors which are beyond Commercial
Bank’s control. As a result, Commercial Bank’s
actual future results may difer materially
from the plans, goals and expectations set
forth in Commercial Bank’s forward-looking
statements.
Any forward-looking statements made by or
on behalf of Commercial Bank speak only as
of the date they are made. Commercial Bank
does not undertake to update forward-
looking statements to re?ect any changes in
Commercial Bank’s expectations with regard
thereto or any changes in events, conditions
or circumstances on which any such statement
is based. The information, statements
and opinions contained in this presentation
do not constitute a public ofer under any
applicable legislation or an ofer to sell or
solicitation of an ofer to buy any securities
or ?nancial instruments or any advice
or recommendation with respect to such
securities or other ?nancial instruments.
62,520
71,638
80,038
10 11 12
Total Assets
Million (QAR)
2,562
2,864
2,984
10 11 12
Net Operating Income
Million (QAR )
33,567
41,712
48,594
10 11 12
Lending to Customers
Million (QAR )
1,635
1,884
2,012
10 11 12
Net Pro?t
Million (QAR )
12,500
14,230
14,939
10 11 12
Shareholders’ Equity
Million (QAR )
7:30am
The American School, Doha
School starts early in Qatar, with the
drop-of before work starts. There are
more than 100,000 young people at
private schools in Qatar and the Bank
provides education loans to many of
these students’ families. The American
School is also one of the Bank’s
corporate clients.
Commercial Bank has successfully grown
its lending and diversi?ed revenue streams
to deliver a record pro?t for the full year.
Qatar’s economy is expected to be driven by the
Government’s spending programme in 2013 and
Commercial Bank is well positioned to support
the future economic growth of Qatar and to
deliver ongoing value to its shareholders.
Abdullah bin Khalifa Al Attiyah
Chairman
Annual Report 2012 11
Chairman’s Report
I am pleased to present The Commercial
Bank of Qatar’s Annual Report for the year
ended 31 December 2012 on behalf of the
Board of Directors.
2012 has been another difcult year for
the world economy. Many of the emerging
markets that have driven global activity
have seen their growth slow, while demand
in established economies has remained
subdued. In Europe, Government ?nances
are under substantial pressure and many
Eurozone economies are struggling with
austerity, recession and high unemployment.
The US economic recovery remains fragile
and fragmented as bi-partisan agreement
to reduce debt has yet to be reached.
Overall, the global economic outlook has
deteriorated and growth forecasts for the
majority of the world’s economies were
reduced in the second half of 2012.
Against this backdrop, Qatar’s economy has
continued to grow. Real GDP growth for 2012
is expected to be 6.3%, which is strong growth
by current global standards. The economic
growth in 2012 was supported by Government
investment in infrastructure, healthcare,
education and housing alongside increased
contribution from other sectors of the
economy. Credit demand in 2012 has
been dominated by the Public Sector with
continuing low levels of demand from the
Private Sector. The banking sector has
continued to strengthen and is well capitalised
under the strong guidance and oversight of
the Government and the Qatar Central Bank.
Commercial Bank has again reported
excellent ?nancial results in 2012. The net
pro?t of QAR 2,012 million is a record annual
result and an increase of 7% over the
net pro?t of QAR 1,884 million achieved
in 2011. This strong performance in 2012
is a demonstration of the Bank’s agility
in developing the strength of its product
ofering, broadening its client relationships,
successfully growing its lending as well as the
ongoing diversi?cation of the Bank’s revenue
streams, speci?cally capturing opportunities
in the investment portfolio. The Bank remains
well capitalised, with a diversi?ed funding base
and continued growth in its customer
deposits during 2012.
Our banking associates, United Arab Bank
(UAB) and National Bank of Oman (NBO) have
both had excellent years increasing revenue
and pro?tability and growing their lending.
UAB delivered another record net pro?t
of AED 410 million, up 24%, while NBO
increased its net pro?t by 19% to OMR 41
million. Both banks are strongly positioned
to deliver further growth in their domestic
markets and we continue to focus on
strengthening our regional alliance.
The Board of Directors is recommending
a cash dividend payout of 74% of net
pro?t, which equates to QAR 6 per share,
for approval at the Annual General
Assembly. The level of dividend recognises
our shareholders’ ongoing loyalty and the
Bank’s strong ?nancial performance in 2012.
Although global economic forecasts
for the year ahead suggest that conditions
will continue to be challenging, Qatar’s
economy remains relatively well insulated
and is expected to be driven mainly by the
Government’s spending programme in 2013.
While the public sector dominated credit
growth in 2012, we expect a broader based
demand to develop in the year ahead.
Commercial Bank continues to play an integral
role in the growth and development of Qatar
and is committed to playing a central role
as the economy expands and diversi?es.
The Government has identi?ed small and
medium enterprises as a vital component
in Qatar’s economic future, and we are helping
to support and nurture these businesses
through our Enterprise Business which we
launched at the start of the year.
The Bank is well positioned to support the
growth in investment in infrastructure that
will arise from Qatar’s successful bid for the
2022 World Cup. The Bank is committed to its
role in Qatar’s social and cultural development.
Our programme of corporate social
responsibility aims to develop local talent,
aid society by supporting socio-economic
initiatives and promote the bene?ts of sport,
culture and the arts.
On behalf of the Board of Directors, I would
like to express our sincere appreciation
for the continuing visionary leadership
of His Highness the Emir and His Highness
the Heir Apparent, and for the guidance
and support received from His Highness the
Prime Minister, His Excellency the Minister
of Economy and Finance and His Excellency
the Governor of Qatar Central Bank.
Commercial Bank is committed to delivering
the highest standards of service and value to
both our customers and to our shareholders,
and in successfully delivering that ambition,
we owe thanks to the loyalty, dedication and
hard work of all our employees.
Abdullah bin Khalifa Al Attiyah
Chairman
The Commercial Bank of Qatar (Q.S.C.) 12
Board of Directors
Standing from left:
Sh. Ahmed Bin Nasser Bin Faleh Al Thani - Director
Mr. Khalifa Abdullah Al Subaey - Director
Mr. Omar Hussain Alfardan - Director
Mr. Jassim Mohammad Jabor Al Mosallam - Director
Mr. Andrew Stevens - Group Chief Executive Ofcer
Mr. Abdullah Mohd Ibrahim Al Mannai - Director
Sh. Jabor Bin Ali Bin Jabor Al Thani - Director
Seated from left:
Sh. Abdullah Bin Ali Bin Jabor Al Thani - Vice Chairman
H.E. Abdullah Bin Khalifa Al Attiyah - Chairman
Mr. Hussain Ibrahim Alfardan - Managing Director
10.30am
Qatar Foundation
Qatar Foundation is home to eight
world- class universities, and central
to Qatar’s development as a modern
knowledge-based economy.
Commercial Bank has direct links
with the Foundation through MEEZA,
a Qatar Foundation joint venture,
which provides cloud services to the
Bank’s corporate customers, especially
small and medium enterprises (SMEs).
many SMEs have already bene?ted from
this added-value service.
Commercial Bank has successfully achieved
strong earnings in a challenging operating
environment. The Bank has protected its core
business in 2012 whilst delivering alternative
sources of income. Our asset quality remains
strong and we remain both well capitalised
and funded to target growth sectors of the
economy in the year ahead.
Hussain Ibrahim Alfardan
Managing Director
Annual Report 2012 15
Managing Director’s Report
Commercial Bank has delivered another
record performance in 2012, achieving
strong earnings in a challenging operating
environment. Our business strategy has
seen the Bank protect its core business in
2012, grow its domestic corporate and retail
businesses and deliver alternative sources
of income. There have also been continued
strong performances by our alliance banks.
The Bank’s net pro?t of QAR 2,012 million
for the year ended 31 December 2012 was
7% higher than the pro?t for 2011.
Commercial Bank’s net operating income
was 4% higher in 2012, at QAR 2,984 million.
Intense competitive pricing pressure and
the regulatory cap on retail product pricing
reduced lending yields, which were partially
ofset by a reduction in funding costs, leading
to 4% decline in net interest income as
contraction in net interest margins outweighed
the bene?ts of higher lending volumes.
Non-interest income rose by 21% to
QAR 1,118 million, due to higher gains from
our investment portfolio and an increase
in foreign exchange income, partially ofset by
lower levels of net fee and commission income.
Our asset quality remains strong even as we
grew total assets by 12% to QAR 80.0 billion
at 31 December 2012. Lending to customers
rose by QAR 6.9 billion to QAR 48.6 billion, with
growth generated in both the Wholesale and
Retail businesses, while the non-performing
loan ratio reduced to 1.09%, compared
with 1.20% at the end of 2011. To support the
growth in lending, customers’ deposits grew
by 9% to QAR 41.4 billion.
Commercial Bank remains both well
capitalised and funded to target growth
sectors in the year ahead. The capital
adequacy ratio was 17.0% at 31 December
2012 compared with 17.9% at the end of 2011
which is well above the Qatar Central Bank’s
required minimum level of 10%. During 2012,
we continued to diversify our sources of
funding. In February, the Bank repaid a
syndicated loan facility of USD 650 million
and arranged a new USD 455 million medium
term loan with a club of international banks.
In April, we issued USD 500 million of ?ve-year
unsecured ?xed rate notes in the international
capital markets, under our Euro Medium Term
Note Programme.
Commercial Bank’s banking associates, United
Arab Bank and National Bank of Oman, have
once again delivered outstanding results,
including a record net pro?t from United Arab
Bank in the UAE; our alliance banks contributed
QAR 259 million to the net pro?t for 2012,
up 27% on 2011. The three banks bene?t
signi?cantly from a close working relationship
to deliver new product oferings and
synergies across both operational efciency
and service delivery. I would like to thank the
Board of Directors, executive management
and staf at both banks for their contribution
and the excellent performance as we continue
to develop the regional alliance.
Commercial Bank provides a high-quality
service ofering to its customers through the
channels that meet their speci?c needs. We
continued to expand our branch network with
the opening of new local community branches
in Al Mesilla and Al Kharaitiyat which brought
the total number of branches in Qatar to
twenty nine; we intend to open more branches
in 2013. We are also investing in our online
and mobile banking platforms, ensuring our
customers have access to diverse, convenient
and cost-efective ways of banking.
I would like to express my sincere appreciation
for the visionary and inspirational leadership
of His Highness the Emir, Sheikh Hamad bin
Khalifa Al Thani, and His Highness the Heir
Apparent, Sheikh Tamim bin Hamad Al Thani,
for promoting the Qatar economy during
continued difcult times in global ?nancial
markets. I would also like to thank
His Highness the Prime Minister, His
Excellency the Minister of Economy
and Finance, and His Excellency the Governor
of the Qatar Central Bank for their guidance
and support of the banking sector throughout
the year.
I would also like to thank Commercial Bank’s
management and staf for their tireless
contribution to our continued success,
and acknowledge my appreciation for the
continued support and encouragement
of the Chairman, the Board of Directors and
our shareholders.
Qatar’s economy is expected to continue
to grow strongly in 2013 with an increasing
contribution from the non-hydrocarbon
sector. The Government’s capital spending
on infrastructure and the broader public
spending programme will help to ensure
that growth seen in 2012 across a variety of
sectors will continue in 2013. I look forward to
2013 with con?dence that Commercial Bank
is well positioned to play a central role in the
ongoing development of the Qatar economy
and build on its strengths to target growth
sectors in the year ahead.
Hussain Ibrahim Alfardan
Managing Director
1:00pm
Katara
Katara – with its beautiful theatres,
concert halls and exhibition galleries –
is host to a multicultural programme
of international, regional and local
festivals, workshops, performances and
exhibitions. In 2012, Commercial Bank
signed a strategic partnership with
Katara, representing a long-term
commitment to encouraging and
supporting the development of culture
and the arts in Qatar.
Commercial Bank has maintained the progress
seen in the ?rst half of the year to deliver a record
full year pro?t. This performance demonstrates
the Bank’s agility in broadening its client
relationships as well as the diversi?cation of
its income streams to capture new opportunities
for growth. In 2013, we will build on the success
of 2012 by capturing market growth, developing
core income across our Wholesale and Retail
businesses and broadening the strength of
our international presence.
Andrew C. Stevens
Group Chief Executive Ofcer
Annual Report 2012 19
Commercial Bank has delivered strong results
in 2012 in an operating environment in which
we have seen a slowdown in growth across
the world and ongoing ?nancial problems
in established markets. In Qatar the economy
has continued to grow in line with market
expectations whilst the banking sector has
been extremely competitive. The Bank has
worked hard to maintain its market share in
a lower margin environment in which pricing
pressure has remained and has successfully
grown its lending book, diversi?ed its revenue
and funding streams and maintained strong
asset quality.
The Bank achieved a record full year net pro?t
of QAR 2,012 million in 2012, an increase of
7%, compared with the net pro?t of QAR 1,884
million achieved in 2011. Commercial Bank’s
record performance demonstrates the Bank’s
agility in broadening its client relationships
as well as the ongoing diversi?cation of its
income streams to capture new opportunities
for growth.
Credit demand has been dominated by the
Public Sector which was up by 46% since the
beginning of the year, with continuing slower
demand from the Private Sector which grew
by 14%. Our loan book was 17% higher at
QAR 48.6 billion with increased lending in
both our Corporate and Retail businesses. We
have also continued to grow our deposit base
which increased by 9% for the full year, whilst
further diversifying our funding sources in the
?rst half of the year though the arrangement
of a USD 455 million term loan with a club
of international banks and the issuance of
USD 500 million ?ve-year unsecured ?xed rate
notes in the international debt capital markets.
Our afliated banks in the UAE and Oman have
delivered outstanding ?nancial performances
throughout 2012 with strong growth in lending
and operating income and a 27% year-on-
year improvement in pro?tability.
On 24 December 2012, we announced
that the Bank had commenced negotiations
with Anadolu Endustri Holding A.S. for the
acquisition of a majority stake in Alternatifbank
A.S. in Turkey. This proposed acquisition is
consistent with our strategy. For many years
we have communicated that our strategy
includes looking for opportunities to expand
internationally outside Qatar. Our focus is to
become a pan-GCC player but opportunities
within the GCC have been limited in recent
years and we have spoken about the potential
to broaden our presence beyond the GCC,
if we found a relevant opportunity, and that
opportunity ful?lled a number of criteria.
We believe that the proposed acquisition
of a majority stake in a commercial bank
of an appropriate size, operating in a stable
economy with good growth prospects, in
a country that is strategically and culturally
aligned presents a natural next step in the
execution of our international expansion.
The negotiations for the acquisition of 70.8%
majority of the shares in Alternatifbank are
ongoing and are planned to be completed
during March 2013.
Although global economic forecasts for
the year ahead suggest that conditions will
continue to be challenging, Qatar’s economy
remains relatively well insulated and will be
driven mainly by the Government’s spending
programme and the services sector.
In 2013, we will build on the success of 2012
by capturing lending growth in our domestic
market, and internationally in conjunction
with our alliance partners. We will develop
our core income across our Wholesale and
Retail businesses without compromising risk
management or asset quality and will seek
to broaden the strength of our international
presence in order to deliver solid returns to
our shareholders.
Management Review
of Operations
The Commercial Bank of Qatar (Q.S.C.) 20
Ensuring our customers have a positive
experience of the Bank is vital to our success,
whether they access our services in branch,
by telephone or online. Our brand and
reputation depend on those experiences.
‘Everything is possible’ is a mindset that is
embedded across all our businesses and is
manifested in our everyday behaviour and
actions; we aim to challenge ourselves
constantly to bring this promise to life and
to live up to it in all that we do.
Financial Results
Commercial Bank delivered a record
?nancial performance in 2012 with net pro?t
of QAR 2,012 million, up by 7% compared
with QAR 1,884 million reported in 2011,
re?ecting strong growth in a challenging
operating environment.
Net Operating Income
Net operating income increased by 4%
to QAR 2,984 million for the year ended
31 December 2012 up from QAR 2,864 million
achieved in 2011.
Net interest income was QAR 1,866 million for
the year ended 31 December 2012, 4% lower
than in 2011, re?ecting growth in lending to
customers ofset by a reduction in the net
interest margin to 2.95% in 2012 from 3.46%
in 2011. The decline in net interest margin
resulted from lower average yields on lending
due to intensely competitive pricing pressure
and the full year impact of regulatory changes,
which capped pricing for retail products
in 2011, partially ofset by a reduction in the
average cost of funds as a result of proactive
management of the Bank’s funding mix. The
Bank’s focus on low cost funding as the core
tool in the management of its funding base
led to a 31% increase in low cost funds in 2012.
Non-interest income was up 21% to
QAR 1,118 million for 2012 compared with
QAR 926 million in 2011. The increase in non-
interest income was due to higher gains on
the disposal of available-for-sale securities
from the Bank’s investment portfolio and
an increase in foreign exchange income,
partially ofset by lower levels of net fee
and commission income. 2012 has seen
lower levels of loan-related fee income, in
part ofset by higher trade ?nance and other
ancillary fee income.
Operating Expenses
Total operating expenses were up 17% to
QAR 1,028 million for 2012 compared with
QAR 875 million in 2011.
Staf costs were up by 10% to QAR 499
million re?ecting annual salary increments
for staf and investment in staf training and
development. General and Administrative
expenses, and depreciation were also
up re?ecting continued investment in the
development of the Bank’s infrastructure,
service delivery capability and distribution
network.
The cost to income ratio increased to 31.7%
in 2012 compared with 28.5% in 2011.
The Bank’s strategic outsourcing programme
has enabled the Bank to improve its
technology ofering and service delivery
to customers, to enhance controls and
achieve cost synergies whilst allowing it to
expand its scale of operation and channel
delivery across businesses.
Provisions for Impairment Losses
The Bank’s net provisions for impairment
losses reduced to QAR 202 million in 2012
compared with QAR 307 million in 2011, and
comprised provisions of QAR 140 million for
loans and advances and QAR 62 million for
?nancial investments.
In 2012, net impairment provisions on loans
and advances to customers comprised
QAR 130 million against the corporate lending
portfolio, net of a recovery of QAR 29 million
from a legacy Islamic banking customer,
and QAR 10 million against the retail book
compared with QAR 25 million in 2011.
Asset quality remains strong with an
improvement in the non-performing loan ratio
to 1.09% at 31 December 2012 from 1.20%
at the end of 2011 due to lower levels of non-
performing loans and a growing loan book.
The Bank also sets aside a risk reserve against
its lending as part of shareholders’ equity.
At 31 December 2012, the risk reserve was
QAR 925 million, representing 2% of total
lending, meeting the minimum level set by
the Qatar Central Bank for the end of 2012; the
new regulation requires all banks to maintain
a risk reserve of 2.5% by the end of 2013.
Operating Expenses
QAR million 2012 2011
Staf costs 499 453
General and administrative
expenses 407 308
Depreciation 122 114
Total operating expenses 1,028 875
Provisions for Impairment Losses
QAR million 2012 2011
Net provision/(recovery) for
impairment on loans and advances 140 239
Impairment losses on
?nancial investments 62 68
Total provisions for
impairment losses 202 307
Management Review
of Operations Continued
Net interest income
Investment & dividend income
Net fee income
FX income
Other income
Net Operating Income
Financial Results
QAR million 2012 2011
Net interest income 1,866 1,938
Non-interest income 1,118 926
Net operating income 2,984 2,864
Operating expenses -1,028 -875
Provisions for impairment losses -202 -308
Share of results of associates 258 203
Net pro?t for the year 2,012 1,884
2.00pm
Commercial Bank, D-Ring Branch
The ?agship D-Ring Branch is within
easy access to the Airport and
strategically placed for the up-market
Al Hilal residential area. The branch
provides customers with a range
of services from Sadara Privileged
Banking to Investment and Brokerage.
The branch also ofers extended
opening hours, part of the Bank’s
strategy to make its services more
accessible throughout the day and
ensure that they ?t around our
customers’ working lives.
The Commercial Bank of Qatar (Q.S.C.) 22
Management Review
of Operations Continued
Impairment provisions on the Bank’s
investment portfolio decreased to
QAR 62 million for the year ended 31
December 2012 compared with QAR 68
million in 2011, re?ecting a general
improvement in the valuations of certain
classes of investments.
Total Assets and Funding
The Bank’s total assets increased by 12%
to QAR 80.0 billion at 31 December 2012
compared with QAR 71.6 billion at the end
of 2011. The increase in total assets was due
to growth of QAR 6.9 billion in lending to
customers and higher balances held with
the Qatar Central Bank and other ?nancial
institutions which were up QAR 1.3 billion,
partially ofset by a reduction of QAR 0.6
billion in Financial Investments.
Loans and advances to customers were
up 17% to QAR 48.6 billion at 31 December
2012, compared with QAR 41.7 billion at the
end of 2011. The growth in lending in 2012 was
generated by both the Corporate and Retail
businesses, and was mainly through credit
growth in the Private Sector in Services,
Contracting, Commercial and Real Estate
relating mainly to mortgage lending within the
Retail book.
Financial Investments reduced to QAR 11.2
billion at 31 December 2012, 5% lower than
at the end of December 2011. The decrease
since the end of 2011 re?ects, mainly, the
maturity and sales of Government Bonds
and Qatar Central Bank Treasury Bills ofset
by investment in new issues of Treasury Bills.
Customers’ deposits have grown by 9%
to QAR 41.4 billion at 31 December 2012,
compared with QAR 38.0 billion in 2011,
supporting growth in lending. The increase
in deposits has come mainly from higher
demand and call balances.
During 2012, the Bank has arranged a USD 455
million term loan with a club of international
banks and issued, in April, USD 500 million
of ?ve-year unsecured ?xed rate notes in the
international capital markets, under its Euro
Medium Term Note Programme. The Bank
has also repaid a syndicated loan facility
of USD 650 million which matured in
February 2012.
Capital
The Bank’s capital position remains strong
with a capital adequacy ratio of 17.0% as at
31 December 2012 compared with 17.9% at
the end of 2011, well above the Qatar Central
Bank’s required minimum level of 10%.
The Tier 1 ratio reduced to 15.4% from 16.4%
in 2011; the reduction in both ratios re?ects,
primarily, an increase in Risk Weighted Assets
pertaining to the growth in the business
during the year.
The Board of Directors has recommended
a cash dividend payout for 2012 of 74% of
net pro?t, which equates to QAR 6 per share,
for approval at the Annual General Assembly.
Associates and Subsidiaries
Commercial Bank’s associated companies
contributed QAR 259 million to the Bank’s
?nancial performance in the year ended
31 December 2012, which represented 13%
of the Bank’s total net pro?t, compared with
QAR 203 million in 2011. Commercial Bank’s
two banking associates, National Bank
of Oman and United Arab Bank, have
delivered outstanding ?nancial performance
throughout 2012 with strong growth in lending
and operating income, and a 27% year-on-
year improvement in pro?tability.
National Bank of Oman
National Bank of Oman (NBO) achieved strong
results in 2012, with net pro?t after tax growing
19% to OMR 40.7 million, compared with OMR
34.2 million for the same period in 2011.
Operating income grew by OMR 6.4 million
to OMR 98.6 million, from OMR 92.2 million in
2011 due, mainly, to an increase in net interest
income which was up 16% to OMR 67.2 million.
Interest income was up 15% and the cost
of funds improved to 1.98% compared
with 2.13% in 2011. Net interest spread
was higher at 3.09% for the year ended
31 December 2012.
Operating expenses increased by 7% to
OMR 46.7 million in 2012, mainly due to higher
staf costs and marketing expenses. NBO’s
net impairment losses for 2012 were OMR 5.3
million, 48% lower than 2011 predominantly
due to a reduction of OMR 3.3 million in credit
losses and lower investment provisions which
were down OMR 0.8 million in 2012.
Loans
Investments
Investments in associates
Liquid assets
Other assets
Total Assets
Government
Government and semi-Government agencies
Industry
Commercial
Services
Contracting
Real Estate
Consumption
Other
Loans and advances
Annual Report 2012 23
During 2012, NBO grew its customer lending
by 14% to OMR 1.9 billion and Customers’
deposits increased by 18% to OMR 1.9 billion
compared with the end of 2011.
The Board has proposed a cash dividend
of OMR 0.0175 per share, subject to
approval by the Oman Central Bank and
the General Assembly.
The launch of Islamic banking in Oman
opens up new opportunities for banks and
NBO was the ?rst conventional bank to
commence Islamic banking operations
launching its Sharia compliant Islamic window
under the brand name ‘Muzn’. Muzn seeks
to ofer a rich mix of Islamic products and
services which cater to institutional, corporate
and retail clientele.
The outlook for Oman’s economy
looks positive in 2013 with an increase
in government spending and focus on
infrastructure projects expected to boost
economic growth. The Wholesale and
Investment Banking franchise will continue
to support domestic project ?nancing
and related activity while mortgages, small
businesses, cards and low cost deposits
will remain the focus of Retail Banking.
United Arab Bank
United Arab Bank (UAB) delivered a record
net pro?t of AED 410 million for the year
ended 31 December 2012 which represents
an increase of 24% over the 2011 results
of AED 330 million. UAB has continued
to capitalise on the solid foundations that
were laid in previous years. It has traditionally
enjoyed one of the highest interest margins
in the UAE along with one of the lowest levels
of non-performing loans. This has allowed
UAB to focus on implementing its strategy for
increasing market share.
The total operating income for the year ended
31 December 2012 increased by 32% to AED
765 million, from AED 581 million for 2011.
Growth in the number of customers has led
to an increase in UAB’s loans and advances
of 35% to AED 10.9 billion as at 31 December
2012, with Customers’ deposits at AED 10.1
billion, testament to the trust placed in UAB
by its retail, commercial and institutional
customers.
UAB has remained committed to ensuring
the appropriate quality and mix of its assets
with its non-performing loan ratio at 1.6% at
31 December 2012, the same level as in 2011.
Liquidity is efectively managed with the
Advances to Stable Resources Ratio at 86%,
well below the cap of 100%. The Capital
Adequacy Ratio is robust at 19% and remains
well above the minimum required by the UAE
Central Bank of 12%.
UAB has proposed a cash dividend of 25%
of its paid-up capital for 2012, subject to
approval by the UAE Central Bank and the
General Assembly.
UAB’s branch expansion plans continue
with the opening of branches across the UAE,
particularly in Abu Dhabi, providing UAB’s
customers with a more extensive network.
In parallel, further investment has been
made in the call centre and internet banking
infrastructure to ensure efcient alternative
banking channels for its customers.
A new core banking system went live in early
2012, with UAB winning recognition for the
implementation project. Several back ofce
processes were also outsourced to a globally
recognised third party service provider,
which has resulted in operational activities
being performed to the highest standards
of control and efciency. There has also been
a signi?cant uplift in UAB’s risk management
practices to support the evolving breadth
and complexity of its businesses. UAB is well
positioned for 2013 to build on the strong
momentum achieved in 2012.
Associates
QAR million 2012 2011
National Bank of Oman 123 102
United Arab Bank 134 102
257 204
Asteco Qatar W.L.L. (0) –
Gekko L.L.C. – (2)
Massoun Insurance Services L.L.C. 2 1
Share of results of associates 259 203
Due to banks and ?nancial institutions
Customers’ deposits
Other borrowed funds
Other liabilities
Shareholders’ funds
Funding mix
Share capital
Legal reserve
Other reserves
Risk Reserve
Proposed dividend
Retained earnings
Shareholders’ equity
2.30pm
Customer service training,
Commercial Bank Academy
The new Academy is a dedicated
Commercial Bank training facility.
The Bank runs a comprehensive range
of training programmes for all staf,
from high school leavers to future
leaders. Last year, 470 employees
went through the Academy. The Future
Leaders programme is speci?cally
designed to fast track the careers
of the next generation of Qatari leaders.
During 2012, selected employees took
part in intensive courses at the Academy,
developed in conjunction with the
Judge Business School at the University
of Cambridge.
Annual Report 2012 25
Asteco Qatar W.L.L.
Asteco Qatar is a Qatari incorporated joint
venture company between Commercial
Bank, United Development Company, Qatar
Insurance Company and Asteco Property
Management in the UAE. The company
provides real estate brokerage and
sales, facilities and management services,
commercial and residential lettings, property
valuations and property consultancy services.
Massoun Insurance Services L.L.C.
Massoun Insurance Services is a Qatari
incorporated joint venture company between
Commercial Bank and Qatar Insurance
Company. The company was incorporated
in 2010 and provides a range of insurance
products which have been tailored to meet
the speci?c needs of the Bank’s retail and
corporate customers.
Gekko L.L.C.
Gekko is a Qatari incorporated joint venture
company between Commercial Bank and
United Development Company. The company
provides contactless payment infrastructure
and customer database management
solutions with its ?rst implementation based at
The Pearl Qatar.
Orient 1 Limited
Orient 1 is a fully owned subsidiary of the Bank
incorporated in Bermuda and is engaged in
supporting the credit card operations of the
Diners Club franchise in the Sultanate of Oman.
Global Card Services L.L.C.
Global Card Services is a limited liability
company registered in the Sultanate of Oman.
The principal activities of the Company are to
issue Diners Club credit cards in the Sultanate
of Oman and to acquire merchant rights and
other related services.
Commercial Bank Investment Services
Commercial Bank Investment Services (CBIS)
was launched in early 2011 as a fully owned
subsidiary of Commercial Bank. CBIS provides
direct access to the Qatar Exchange and
ofers seamless online trading capabilities for
individuals, institutions, corporate and foreign
counterparties. In addition to its electronic
trading platform, CBIS also provides access
to three fully equipped brokerage lounges.
CBIS has increased its share of the brokerage
services market in 2012 to 2.90%.
Business Unit Review
Commercial Bank’s two principal business
units are Wholesale Banking and Retail
Banking. Wholesale Banking brings together
all of the Bank’s oferings to small, medium
and large corporates, both locally and
internationally, while Retail Banking provides
personal banking and wealth management
services to high net worth individuals, afuent
segment and consumers. The Bank’s net
operating income for the year ended 31
December 2012, by business unit, was:
Wholesale Banking
Commercial Bank ofers a comprehensive
range of ?nancial services to domestic and
international companies investing, trading
or implementing projects in Qatar. These
services include banking, treasury, investment
banking, cash management, trade,
transaction banking, corporate ?nance and
advisory services.
Business Performance
Wholesale Banking’s business continued to
grow during 2012 despite the slower demand
in the Private Sector. Net operating income
was up by 2% to QAR 2,173 million for the
year ended 31 December 2012. Net interest
income was QAR 166 million lower re?ecting,
primarily, the competitive pricing pressures
which have seen a reduction in yields on
Corporate lending, whilst other income was
up QAR 209 million compared with 2011.
Loans and advances to customers increased
by 12% to QAR 37.3 billion at 31 December
2012 due to, mainly, to growth in lending to
Services, Contracting, Commercial and Real
Estate industries within the private sector.
Customers’ deposits increased 6% to
QAR 29.6 billion re?ecting the Bank’s strong
corporate customer relationships. Asset
quality improved with Wholesale non-
performing loans increasing by only
QAR 9 million in 2012 and the provision
for impairment losses reducing to QAR 130
million from QAR 209 million in 2011.
Domestic Banking
Domestic Banking provides comprehensive,
cross-product banking solutions to
local corporates based in Qatar. In 2012,
Domestic Banking continued to focus on the
development and deepening of corporate
Business unit review
QAR million 2012 2011
Wholesale Banking 2,173 2,130
Retail Banking 770 695
Subsidiaries 9 8
Other 32 31
Net Operating Income 2,984 2,864
The Commercial Bank of Qatar (Q.S.C.) 26
Management Review
of Operations Continued
relationships through leveraging its existing
customer base more efectively along with
developing new relationships.
Stafed with dedicated relationship managers
who are driven to respond with solutions,
Domestic Banking originates and builds
strong customer links, which are nurtured
in an atmosphere of trust and by cultivating
a deep understanding of the local market
in the context of individual customer needs.
Commercial Bank ?rmly believes in the true
spirit of partnership. This belief, together
with the Bank’s long-standing roots and
reputation in Qatar, gives the team an edge
in its thorough understanding of the ?nancial,
economic and cultural challenges facing
today’s corporate customers. Domestic
Banking is able to anticipate and respond
quickly to speci?c requirements with tailored
and reliable solutions meeting individual
customer needs.
Commercial Bank’s specialist product
expertise in treasury, trade ?nance and retail,
allows the team to provide customer-focused
solutions relevant in various ?nancial systems,
at diferent levels of maturity, and in diferent
stages of development.
It is these capabilities, even when faced with
the challenging market witnessed in 2012,
which fuelled a number of transactions in the
real estate, contracting and services industries
that showcased the collective abilities of the
Domestic Banking team and its strength in
maintaining the customer relationships that
the Bank values most.
Commercial Bank exhibited at the
Qatar Motor Show on 25 – 28 January
2012, promoting its vehicle loans to
over 120,000 visitors.
Annual Report 2012 27
In 2012, Commercial Bank was one of the key
sponsors of the annual International Chamber
of Commerce (ICC) conference and hosted
a training seminar for its Corporate Banking
customers and staf. The seminar, conducted
by industry experts from ICC Trade Finance,
highlighted Commercial Bank’s extensive
experience in transaction banking and
trade, provided insight into real-life practices
and issues, and helped participants gain
a thorough understanding of the recent
changes to Uniform Customs and Practice
for Documentary Credits 600, the global
standard practices for letters of credit.
Government, Public Sector and
International Banking
Government, Public Sector and International
Banking are strategically important business
units for the Bank. As a major Qatari bank,
Commercial Bank continues to maintain
close relationships with government
and public sector institutions in Qatar.
International Banking division manages
banking relationships and business dealings
with Multinational Companies operating
in Qatar as well as global Financial Institutions
and cross-border international corporate
clients. The business unit, together with
the Bank’s Treasury, plays an important role
in diversifying the Bank’s funding sources,
arranging bilateral and syndicated loans
for the Bank, as well as expanding treasury
and corporate deposit relationships with
multinational companies, regional sovereign
wealth funds, asset managers, and other
non-banking ?nancial institutions.
Commercial Bank’s cross-border business
strategy remains conservative and its
primary focus is on business with banks
and corporates in the GCC region. The Bank
also actively participates in trade ?nance
transactions for ?nancial institutions
in countries with large and growing trade
and investment links with Qatar and the
GCC. The Bank works closely with its Alliance
Banks partners to exploit quality lending
opportunities throughout the GCC and to
implement a coordinated group ?nancial
institutions strategy, in line with their shared
business objectives.
Commercial Bank has a strong presence
in Qatar’s infrastructure and contract ?nance
sector, and is a major issuer of guarantees
for large projects in Qatar. Qatar’s successful
bid to host the 2022 Football World Cup
has fast-tracked more than USD 160
billion of infrastructure projects in sports,
transportation, tourism, airlines, energy,
utilities and other sectors over the next ?ve
years. Concurrent high government spending
on the education, health, infrastructure and
real estate sectors continues to stimulate the
Qatar economy, and will boost private sector
and contract ?nance activity. With a large
client list of foreign companies operating
in Qatar, and specialist sector expertise, the
Multinational Companies business unit is well
positioned to bene?t from the expected surge
in contract ?nance. The unit works closely
with various embassies and trade promotion
agencies in Qatar, and has presented to
visiting business delegations from countries
such as Korea, Malaysia and Finland.
Commercial Bank is a major trade bank for
many Public Sector companies. The Financial
Institutions Group has expanded its global
network of correspondent bank relationships
and continued to grow its trade ?nance book.
The International Funds Transfer division
maintained its record of superior service
quality and consistently high performance.
Once again, Commercial Bank was among
the region’s select small number of institutions
to receive the Commerzbank ‘STP Award 2011’
for excellence in payments and the Citibank
Performance Excellence Awards for high
efciency. The Financial Institutions Group
also arranged the Bank’s two-year club
loan facility for USD 455 million with a group
of international banks. The Trade Finance
and Transaction Banking unit continued
to upgrade its product and service ofering
during the year by establishing four new
in-branch trade and cash service centres
within the Bank’s corporate branch network.
Commercial Bank expanded its strategic
collaboration with Hana Bank, Korea, by
establishing a Korean Business Desk, through
which both banks now ofer a wide range of
conventional and innovative corporate and
investment services to Korean companies
operating in the GCC region, and to Qatari
Commercial Bank is the title sponsor
of the Qatar Masters. Televised globally,
it is one of the key events in the Qatar
sporting calendar. The sponsorship
represents the Bank’s commitment to
supporting the Qatar government’s vision
of making Qatar a destination for world-
class sporting events.
The Commercial Bank of Qatar (Q.S.C.) 28
Management Review
of Operations Continued
companies looking to do business in
Korea. The Korea Business Desk will enable
Commercial Bank and Hana Bank to work
together as the preferred partner bank
in their respective countries, combining
business synergies, resources and
market knowledge.
With activity reviving in the syndicated loan
markets, Commercial Bank was associated
with several successful ?nancings, all of
which were signi?cantly oversubscribed.
In particular, the Bank was:
• Mandated Lead Arranger on a QAR 3.7
billion 10-year dual tranche syndicated
facility for Bawabat Al Shamal Real Estate
Company, to ?nance the development of
the Doha Festival City project. Commercial
Bank led the banking group and execution
of one of the biggest private sector
transactions closed in 2012;
• Mandated Lead Arranger and Book
runner for the USD 200 million short- term
oil import ?nancing facility for Bangladesh
Petroleum Corporation, guaranteed by
Bangladesh Bank;
• Mandated Lead Arranger for the USD 138
million and EUR 135 million dual tranche
term loan facility for Ulker Biskuvi Sanayi,
which produces Turkey’s best known brands
of snack foods;
• Mandated Lead Arranger and Conventional
Facility Agent for USD 55 million
conventional facility for Turkiye Petrol
Ra?nerileri in Turkey engaged in re?ning
and distributing petroleum products;
• Mandated Lead Arranger in the USD 190
million short-term loan facility for Bank of
Ceylon, the largest bank in Sri Lanka and
fully government owned;
• Lead Arranger in the USD 400 million SBLC
backed term loan ?nancing for Videocon
Hydrocarbon Holdings Limited, supporting
their activities in the oil and gas ?eld sectors;
• Arranger role in the USD 150 million term
loan facility for NMC Healthcare PLC, a
leading hospital chain operator in the UAE.
Commercial Bank actively supports initiatives
that are relevant to the Qatar and GCC banking
sector, and closely interacts with key global
trade and development institutions such
as the ICC Banking Commission, SWIFT,
Institute of International Finance, International
Finance Corporation, IMF, Arab Trade
Finance Program, ISDA and other
development institutions.
Commercial Bank sponsored or participated
in major banking industry events and
conferences. These included being:
• Gold sponsor of the ICC Banking
Commission meeting in Qatar which was
attended by approximately 400 banking
leaders and executives from 50 countries,
and had a theme of “Reframing the Future
of Trade Finance”;
• Gold sponsor of the Qatar Projects 2012
Conference, which had a theme of “The
journey to 2022”, including the projects that
are expected to be awarded in Qatar in the
run-up to the 2022 World Cup;
• Gold sponsor of the Qatar Capital Markets
conference, which focused on lessons learnt
from ?nancial conditions in regional and
international markets, and the necessity
to develop bond markets in ?scal surplus
countries;
• Platinum sponsor for INTERCEM Doha,
the world’s leading cement industry event,
which attracted over 500 delegates from
45 countries;
• Diamond sponsor of the 14th Forum of the
Arab Business Community, which focused
on the challenges and opportunities in the
Arab world;
• Platinum sponsor of Cityscape Qatar,
the leading real estate exhibition, which
attracted over 2,000 participants and
had more than 100 exhibitors from around
the world.
The Bank also took part in the IMF, IIF,
SIBOS and Asian Development Bank
annual meetings.
For the Government, Public Sector and
International Banking group, the outlook for
business growth in the coming years remains
positive. The management team has been
signi?cantly strengthened, with the addition of
senior and experienced international bankers.
In 2013, the Bank will support Qatar’s vision
and infrastructure projects, grow its business
with the Qatar Government and public sector
institutions, grow its share of trade ?nance
business, strengthen its business and
presence in target markets (international
?nancial centres and growth regions), and
align its business growth to its cross-border
strategy, preferred sectors, client needs and
product platforms.
Enterprise Banking
Enterprise Banking provides a comprehensive
range of products and value-added services
to support small and medium enterprises
(SMEs), thereby nurturing Qatar’s
entrepreneurial business community and
encouraging growth in this sector. Our focus
on this core sector demonstrates the Bank’s
commitment to the Qatar Government’s
Vision 2030, which identi?es SMEs as the
key constituent of the country’s economic
future. Through Enterprise Banking, we
also partner with Qatar Development Bank’s
‘Al Dhameen’ programme, which extends
investment and working capital facilities to
economically-viable SMEs and makes credit
more accessible.
The Bank now provides dedicated relationship
managers for SME customers in ?ve branch
locations at Umm Lekhba, Al Rayyan, D Ring,
Bin Omran and Hamad Al Kabeer. The highly
specialised team advises existing and
potential entrepreneurs on:
• Working capital ?nance and term lending;
• Trade Finance facilities;
• Deposits, remittances, insurance and
treasury solutions;
• Retail solutions for employees;
• Business Technology Solutions;
• Access to Advisory and Mentoring services.
3.30pm
Construction site, Doha
The Qatar skyline changes by the day
with the rise of new developments.
Gross domestic investment is expected
to reach QAR 820 billion over the period
2011 – 2016. Commercial Bank plays a
key role in lending to private real estate
investors, developers and contractors.
The Commercial Bank of Qatar (Q.S.C.) 30
During the year, Enterprise Banking rolled out
a programme designed to provide tailored
lending to SMEs. The credit programme
speci?cally caters to the Enterprise market’s
characteristics, providing a smoother ?ow
and faster turnaround times while taking
into consideration SMEs’ risk pro?le and
factors such as the lack of detailed ?nancial
information. This initiative provides enhanced
customer service and supports the Bank’s
objective of providing quick, easy and
comprehensive solutions to SMEs.
Commercial Bank’s SME services also
include a range of business technology
solutions, provided through the Bank’s
exclusive partnership with MEEZA, a Qatar
Foundation Joint Venture. The suite of product
solutions include cloud technology for email,
webhosting, SharePoint services as well as
HR and payroll solutions and relieves small
business customers of administrative
problems and the need for, and investment in,
technology and operational resources. These
solutions were formally launched in January
2012, and as the ?rst of their kind in the region,
were well received by customers, allowing
them to increase their efciency and focus on
growing their business. The Bank’s insurance
joint venture, Massoun Insurance Services has
developed a new product ‘SME Shield’ which
provides wider protection and competitive
insurance rates for SME Customers.
The Bank also supports SMEs by providing
education and training to help them to grow.
In May 2012, the Bank partnered with the
College of North Atlantic, Qatar (CNA-Q) to
host a workshop on ‘Strategic Growth’ for
Enterprise customers. The workshop was
conducted by an industry expert from CNA-Q
and was attended by numerous business
owners and key decision-makers. It addressed
opportunities and challenges for SMEs, laying
the foundation for future workshops and
seminars. The workshop was followed in
December 2012 by a second workshop
on ‘Capitalising on Strengths’. Commercial
Bank was the Silver sponsor of the ?rst Qatar
International Trade Exhibition for Partners
and Franchise which brought together SMEs
from the Middle East and around the world
to showcase their products and services
to young Qatari entrepreneurs for potential
partnerships, dealerships or franchises in
Qatar and the Middle East.
Treasury
The Treasury department manages the
Bank’s funding and liquidity requirements.
It also provides a full suite of foreign exchange
and interest rate products and services for
its customers, which help them to hedge
their market risks. Commercial Bank’s
Treasury ranks at number two in the Qatari
market for treasury activities and is regarded
by correspondent banks as a market maker in
US Dollar/Qatari Riyal spot, forwards and swap
dealings. Customer transactions are done
on a matched basis, resulting in no trading or
market risk for the Bank.
During the year, the Treasury division
identi?ed and executed new opportunities for
investment in QCB Treasury Bills, secondary
trading on T-Bills and high yield placements.
There has been an overall improvement in
market activity and consequently the Bank
witnessed an increase in foreign exchange
?ows in 2012.
Treasury has been instrumental in reducing
the Bank’s cost of funds during 2012
and continued to focus on balance sheet
optimisation and liquidity management,
and maintaining key liquidity ratios well
above the minimum prescribed by the Qatar
Central Bank.
Retail Banking
Retail Banking ofers a comprehensive
suite of products to its customers, including
deposits and loans, credit cards, insurance
and wealth management solutions. Customer
centricity is the cornerstone of its approach,
and it tailors its products and services to meet
or exceed customers’ needs.
Business Performance
Retail Banking continued to grow in
2012, delivering a strong core business
performance, with lending to customers
up 32% to QAR 11.3 billion and deposits
up 17%, QAR 1.7 billion, to QAR 11.8 billion.
Management Review
of Operations Continued
Commercial Bank’s exclusive agreement
with MEEZA, signed on 12 January 2012,
will provide the Bank’s business
customers with access to cloud-based
HR and IT solutions.
Annual Report 2012 31
Net operating income increased by QAR 75
million to QAR 770 million with net interest
income 23% higher than 2011 despite the
regulatory restriction on banking fees and
interest rates.
The strong increase in revenues is a testament
to Retail Banking’s focus on sustained and
pro?table growth, as it continued to leverage
corporate synergies and the expanded
branch network. There has also been an
improvement in the asset quality of the loan
book with a lower provision for impairment
losses of QAR 10 million in 2012 compared
with QAR 30 million in 2011.
Commercial Bank employees participated
in the Qatar Central Bank marathon,
held on the Doha Corniche, to celebrate
Qatar’s ?rst National Sports Day on
14 February 2012.
Strategic Initiatives in 2012
Retail Banking continued to develop new
products and services, releasing a wide
range of asset, liability and insurance products
during the year. It focused its retail asset
growth on secured mortgage lending, semi-
secured vehicle ?nancing and expanding
the credit card base. This asset growth
was centred on customer pro?tability and
leveraging organic growth opportunities.
In line with the Bank’s strategy of changing
the funding pro?le, Retail Banking introduced
deposit products ofering attractive medium
and longer-term interest rates. New products
included ‘Term Saver’, a customer deposit
account ofering higher interest rates
which helps the bank to maintain long-term
relationships with Retail and Private Banking
customers. Retail Banking also launched
a ‘60-Day Notice’ deposit product.
5.00pm
Phone in hand
Smartphone penetration in Qatar
is amongst the highest in the world.
Commercial Bank was ?rst to launch
a Mobile Banking app, and continues
to invest in its SMS, Mobile and Internet
Banking platforms. The Bank has
recently upgraded its website which
is now a key channel for acquisition of
new customers and a portal to all of the
Bank’s services. Ongoing investment
in the website will allow customers to
complete a wider range of transactions
at their convenience, 24 hours a day.
Annual Report 2012 33
Aligned to its premium brand, the Bank
launched best-in-class and by ‘invitation only’
Diners Club Black and World MasterCard card
products, targeting Private Banking clients.
The Bank also re-launched Accolades, a
reinvigorated cards loyalty programme, which
enhances customer loyalty by ofering an
unrivalled selection of rewards for credit card
customers. The Accolades programme allows
customers to redeem vouchers with more
than 100 valuable partners and brands.
Commercial Bank has a leading position in the
vehicle ?nance market. Initiatives to enhance
the Bank’s ofering during the year included
a Vehicle Finance event in collaboration with
authorised car dealers. The event ofered
customers special discounted rates for vehicle
loans and insurance, and was extended due
to high demand. The Bank also gave exclusive
ofers on vehicle loans for customers who
visited its stand during The Qatar Motor Show.
Retail Banking continues to make progress
against its strategic agenda, transforming
the way it does business by streamlining
operational processes and seamlessly
integrating electronic delivery channels.
The Bank’s robust mobile banking platform
is now compatible with iPad, Android and
all smartphones, in addition to the iPhone,
BlackBerry and mobile web. The platform was
further enhanced to enable customers to pay
Qtel bills, buy airtime and make bill enquiries,
and to allow customers to pay Kahramaa bills.
Commercial Bank also signed an agreement
with a local exchange house which enables
Payroll card holders to enjoy easy access
to remittance services through the Bank’s
country-wide ATM network. This ful?ls an
important need for expatriate customers
and re?ects the growth of remittances.
Commercial Bank understands that young
adults of Qatar are its future. In the latter
part of 2012, the Bank launched a new Retail
Banking segment, Pioneer Banking, ofering
more tailored solutions to serve customers
in the age group of 18 – 35 living in Qatar.
The Bank recognises that this particular age
group consists of digital natives who seek
dependable, quick and convenient technology
solutions from their bank. Therefore, more
focus was placed on building a stronger digital
brand proposition during the past year to ofer
this audience a more proactive connection
on the Bank’s social networking channels,
in addition to ‘on the go’ banking services
through the Bank’s streamlined mobile
banking platform.
Retail Banking continues to identify new
revenue streams, in particular in wealth
management and bancassurance. During
the year, Private Banking partnered with
Commercial Bank Investment Services to ofer
personalised wealth management solutions
which included initiating a six-month free
brokerage service, aimed at boosting stock
market activity and acquiring brokerage
accounts. The Bank is designing wealth
management and investment products that
can be integrated with its Private Banking and
Sadara Privileged Banking propositions.
The Sadara ofering was also enhanced to
provide customers with independent wealth
management. The Sadara Investment
Relationship Managers ofer services ranging
from a review of customers’ ?nancial situations
to advice on speci?c investments. In addition,
the Bank launched the Sadara Privileged
Remote Relationship Management Unit,
providing a premium relationship banking
service by telephone and email for customers
who are constantly on the move.
As part of its strategy to expand distribution,
the Bank opened branches at Al Mesilla and
Al Kharaitiyat during the year, taking the
network to 29 branches. This expansion
strategy aligns the Bank’s branch network
with Qatar’s geographical developments, to
support the growing population and ensure
the highest standards of service are always
within convenient reach for customers.
In this way, Commercial Bank can be a partner
for each community, aiding its ?nancial
development and working closely with all
segments of society.
The branches are a key touchpoint for
customers, so Commercial Bank has taken
a series of steps to leverage its investment in
the network. This has included an awareness
campaign in leading English and Arabic
newspapers, as well on the Bank’s website,
A series of open door customer events
were held between 13-27 March 2012
to showcase Commercial Bank’s ?agship
branches. The D-Ring branch boasts
a brokerage lounge where customers
can keep an eye on equity markets from
around the world, via newsfeeds and
stock tickers.
The Commercial Bank of Qatar (Q.S.C.) 34
under the title ‘Open the doors to a Unique
Banking Experience’. The campaign promoted
Commercial Bank’s state-of-the-art branches
and highlighted the range of services,
products and channels available to
customers. The Bank also ran a number
of events for high net worth and afuent
customers at its ?agship branches, giving
them a private tour of the branch and an
overview of the Bank’s premium services.
Retail Banking continued to undertake
initiatives to further enhance its service.
This included rolling out a system allowing
scanning and electronic submission of
applications and supporting documents,
to speed up account opening and processing.
The branch network is supplemented by 165
ATMS that are strategically located to meet
customers’ needs. To ensure all customers
?nd it easy to do business with the Bank,
a number of ATMs have been installed
for people with special needs, such as
visual impairments or physical disabilities.
These ATMs ofer voice-enabled services
and are designed to be accessible for
wheelchair users.
Risk Management
The provision of ?nancial services to
customers carries signi?cant risks.
Accordingly, identifying, assessing and
mitigating risk is a key priority for Commercial
Bank. The Bank has a comprehensive risk
governance framework in place, covering
accountability, oversight, measurement and
reporting of risk, encapsulated through the
Board-approved Risk Charter which also
outlines the Bank’s enterprise-wide risk
management activities and details high-level
organisation, authorities and processes
relating to all aspects of risk management.
During 2012, Commercial Bank continued to
deploy clear risk management objectives, and
a well-established strategy to deliver them,
through core risk management processes.
Responsibility for risk management resides
at all levels within Commercial Bank from the
Board and the Executive Committee down
to each business manager and risk ofcer.
Our risk management practices are well
embedded and are cascaded down from
the Board of Directors, sub-committees of
the Board, to Management Committees and
Executive Management.
Commercial Bank’s Board is involved in
risk decisions through the:
• Board Risk Committee (for risk policies,
enterprise-wide risk reviews and portfolio
monitoring);
• Board Executive Committee (for credit
decisions and lending strategy); and
• Board Audit and Compliance Committee
(for compliance and internal audit matters).
Commercial Bank’s risk governance structure
ensures that risk governance is able to
respond with ?exibility due to timely, complete
and enterprise-wide risk information, enabling
the Board to make critical decisions to
minimise risk.
At management level, risk governance is
implemented by adopting and integrating the
necessary systems to identify, manage and
report risk. The level and nature of aggregate
risk arising in the business are captured by
systems and reports.
Commercial Bank has actual or potential
exposures to four principal categories of risk:
Credit, Market, Liquidity and Operational.
Credit risk is the risk of a potential loss when
a customer or market counterparty fails to
ful?l its contractual obligation to the Bank.
The risk arises mainly from wholesale and
retail loans and advances, due from banks
and non-trading investments. The Bank’s
credit risk management framework includes
policies and procedures to monitor and
manage this risk, and a comprehensive
structure of delegated authorities.
Market risk is the risk of potential loss in
value or earnings arising from changes in
market factors such as interest rates, foreign
exchange rates, equity prices, commodity
prices and credit spreads. This risk is
managed by the Bank’s Asset and Liability
Committee (ALCO), which provides speci?c
guidelines for market risk management.
Liquidity risk comprises two key risks:
liquidity risk and structural risk. Liquidity risk
is the risk that the Bank is unable to meet
its obligations as they fall due. Structural
risk concerns the management of non-
contractual risk, which primarily arises from
the impact on the Bank’s balance sheet of
changes in interest rates on income or foreign
exchange rates on capital ratios. The Board
of Directors has delegated responsibility
for liquidity management to ALCO, which
establishes parameters and determines
strategic levels for these two risks.
Operational risk is inherent in the Bank’s
business activities and arises from events
associated with its processes, people and
systems, and from external factors other than
credit, market and liquidity risk. Reputational
risk is addressed through various operational
risk management tools and is managed
through a well-de?ned operational risk
management cycle that comprises four major
stages: risk identi?cation, risk assessment,
controls and monitoring and reporting.
During 2012, the Bank strengthened its risk
management processes further by improving
its market risk management, monitoring and
reporting capabilities, extending its internal
credit risk rating application to all business
segments, fully integrating risk-based
decisions and automating the operational risk
incident reporting process.
Commercial Bank complies with the provisions
of the applicable Basel II Framework, as
advised by the Qatar Central Bank. The Bank
is also working closely with the Qatar Central
Bank, alongside other banks, on the
consultation process for implementing
Basel III in Qatar.
The governance framework, policies and
administrative procedures and practices
relating to the Bank’s risk management
align with global best practice, the
recommendations of the Basel Committee
and the guidelines of the Qatar Central Bank.
Annual Report 2012 35
Corporate Social Responsibility
Commercial Bank’s Corporate
Communications Department is responsible
for promoting and maintaining efective
communication between the Bank and its
existing and potential customers, key
stakeholders and employees. This includes
adopting integrated marketing campaigns
that target all consumer segments within each
business division.
In 2012, the Bank enhanced its brand equity
by focusing largely on customer marketing
communications, as well as industry
conferences, seminars, public events
and cultural projects. Corporate Social
Responsibility (CSR) is part of the Bank’s ethos,
and Commercial Bank has therefore invested
heavily in various community, sports,
education, social, humanitarian and health
initiatives in Qatar.
Committed to supporting the
community in Qatar
Commercial Bank’s corporate citizenship
agenda is to support and encourage the
Qatari community where we operate
in a positive way. The Bank aims to be an
outstanding corporate citizen by supporting
socio-economic initiatives that bene?t society
as a whole, and initiated numerous campaigns
and charity events in 2012.
Community outreach was a priority and the
Bank focused on engaging with all segments
of Qatari society. The Bank sponsored
events such as a spelling bee competition
for children, blood donation camps, Al Sadd
Stadium’s Disability Legacy programme and
various other sports, cultural, educational
and CSR initiatives. In early 2012, the Bank
supported four notable charities, which
contribute signi?cantly to Qatar’s social
infrastructure and ofer funds and services to
people in need. Driven by its commitment to
create a more humanitarian society, the Bank
presented donations to The Qatar Society for
Rehabilitation of Special Needs, Qatar National
Cancer Society, Qatar Foundation for the Care
of Orphans ‘Dhreima’ and Qatar Foundation
for Elderly People Care.
Commercial Bank also supported the
promotion of Qatari arts and culture
programmes during the year and became
a strategic partner of the Katara Cultural
Village which has been designed to reinforce
Qatar’s ?ourishing cultural environment.
The collaboration symbolises the Bank’s
commitment to supporting cultural activities
in Qatar and making the country a regional
arts and cultural hub.
Bringing sports and business together
Commercial Bank believes that sport plays
an integral role in today’s society. It promotes
a better quality of life through healthier
choices and encourages other values
such as competition, endurance and good
sportsmanship.
In 2012, Commercial Bank proudly celebrated
Qatar’s First National Sports Day with two
days of fun-packed activities for its employees
and their families. Employees also took part in
Qatar Central Bank’s Marathon which was held
at the Doha Corniche.
Commercial Bank also co-sponsored
‘Sailing Arabia – The Tour 2012’, the regional
sailing event across the Arabian Peninsula,
through its sponsorship of the ‘Team
Commercialbank’ boat. The event was a great
initiative aimed at reinvigorating the region’s
rich maritime heritage.
Title sponsorship of the Commercial Bank
Qatar Masters and the Grand Prix of Qatar
MotoGP re?ects the Bank’s promotion of
excellence in sports and its keen interest in
enhancing Qatar’s international sporting
reputation. The events, which are viewed
by a global audience of millions, demonstrate
the Bank’s commitment to the Qatari
Government’s vision of placing Qatar
on the map as a venue for world-class
sporting events.
In the latter part of 2012, Commercial Bank
signed an agreement with Aspire Zone
Foundation to be the principal sponsor of
its ‘Step into Health’ programme. ‘Step into
Health’ is designed to engage the people of
Qatar in a self-managed lifelong programme
which promotes a moderate amount of daily
healthy activity.
Employee Development
Commercial Bank is committed to developing
local talent in Qatar and building the region’s
professional skills and human and intellectual
capital. As part of this, the Bank is dedicated
to creating a robust talent and knowledge
pool within Qatar’s youth community who will
proudly represent their country at a national
and international level in the future.
In April 2012, Commercial Bank was a Diamond
sponsor at the annual Qatar Career Fair,
a knowledge-based community forum
with signi?cant investment in developing
local talent. The Bank’s involvement was
an overwhelming success, with the Bank
subsequently receiving a large number of
job applications for a variety of positions.
Through a partnership with the College
of North Atlantic - Qatar (CNA-Q), The Bank
has a Banking Associate Programme which
provides Qatari National school graduates
with the banking and work-based skills to
develop into senior bankers of the future.
Thirty-one students participated in this
highly successful programme before
being appointed into roles within the Bank’s
branch network.
In 2012, the Bank launched Induction
Programmes for new joiners. The ?rst
programme was delivered to Qatari Banking
Associate students who are sponsored
through banking training at CNA-Q. The
second programme was run for recent
Qatari and expatriate joiners to the bank.
The Commercial Bank of Qatar (Q.S.C.) 36
Investing in the future of our employees
Most recently, Commercial Bank launched
several proprietary educational and
professional career advancement
programmes for the Bank’s talented
employees and high potential candidates.
These include the Future Leaders
Programme, Graduate Development
Programme, Accelerated Leadership
Programme and Career Management
Programme. These programmes are
designed to empower employees and enable
them to excel in their ?elds. Coaching and
mentoring are an integral part of all of the
Bank’s talent programmes, to optimise fully
and accelerate the learning experience and
allow talented employees to bene?t from
the broader experience of the coach and
mentor population. Training programmes
are run at the Commercial Bank Academy,
which was inaugurated by the Bank’s
Managing Director in September 2012.
This purpose designed learning centre ofers
training facilities of the highest order, in line
with the Bank’s ongoing partnership with
world-class learning providers.
Through the launch of our Accelerated
Leadership and Future Leaders programmes
in conjunction with some of the world’s leading
universities and business schools, including
Judge Business School (Cambridge), London
Business School, HEC (Paris), The Centre for
Creative Leadership (Brussels) and INSEAD
(Paris), we have been able to accelerate the
career progression of our most talented
potential leaders. The success of the
signi?cant investment that the Bank has made
is evidenced through the recent promotions
of a number of talented Qatari staf into senior
leadership roles in the Bank.
Commercial Bank is proud to be launching the
Youth Leadership Acceleration Programme,
in partnership with HEC (Paris) in Qatar. The
programme is designed to encourage youth
participants to grow into leaders who will
contribute to the future of Qatar in line with
the country’s Vision 2030 plans and is set to
be launched in the ?rst quarter of 2013.
Supporting women in business
Commercial Bank strongly encourages the
development of women in Qatar. All of the
Bank’s development programmes have
a high percentage of female participants
and are designed to empower women,
in particular, with the skills and con?dence
required to succeed. The Bank is inspired by
its female workforce and their commitment
to excellence.
The Bank sponsored the third Qatar
International Businesswomen Forum in
October 2012, showing its commitment to
playing a part in encouraging the economic
empowerment of women. The Qatar
International Businesswomen Forum
emphasised the role of women in the
development of economies of scale
throughout the Arab world. The event
was used as a platform to highlight the
achievements of Qatari businesswomen
and female entrepreneurs from the region,
as well as the achievements of successful
businesswomen from around the world.
Preserving Qatari Values and Traditions
Commercial Bank believes in putting the
nation ?rst and encouraging national pride
by observing Qatar’s traditional values, whilst
looking towards the future with ambition.
The Bank recognises that the people of Qatar
are its greatest asset and is committed to
promoting cultural practices that preserve
Qatar’s heritage for generations to come.
The Bank celebrated the 2012 National Day
with the citizens and residents of Qatar by
launching a non-pro?t-making public activity,
recognising the human endeavours involved
in building this great nation. The ‘Doing
Good For Qatar’ campaign was designed to
encourage the Qatari community to spread
the joy of giving to others by volunteering
time, efort or money, to any causes or ideas
that show gratitude and also bene?t the
country. The campaign celebrated the
Qatari values of giving back to society by
encouraging all individuals to make public
The Future Leaders programme launched
in June 2012, is run in partnership with
Cambridge University. The programme
will fast track the careers of the
Bank’s top performing and highest
potential employees.
Annual Report 2012 37
pledges for any cause or purpose that is
close to their hearts, thus inculcating good
citizenship and strong societal values within
the community. To encourage and reward
participation in the campaign, Commercial
Bank rewarded several pledge-takers
selected in a random draw at the campaign’s
conclusion.
Commercial Bank proudly continued its
annual tradition of celebrating Qatari values
by hosting a Garangao festival for Qatar’s
younger generation on the 14th day of the
Holy Month of Ramadan. To engage all levels
of the community, families were welcomed at
Commercial Bank branches to enjoy various
fun-?lled Garangao festivities. In keeping
with Qatari customs and traditions, children
of all ages were given Garangao bags ?lled
with an assortment of traditional treats
and mementos.
In association with the Ministry of Social
Afairs, Department of Developing Productive
Families, the Bank again hosted a ‘traditions
tent’ at the 2012 Commercial Bank Qatar
Masters, featuring traditional Qatari hospitality
and displaying elements from the country’s
rich heritage. Visitors enjoyed viewing a
traditional arts and crafts display, including
falconry and henna painting, available
throughout the four-day golf tournament,
showcasing the Bank’s commitment to
promoting Qatar to an international audience.
Acknowledgement
Commercial Bank’s record performance
has demonstrated its agility in broadening its
business as well as the ongoing diversi?cation
of its income streams to capture new
opportunities and deliver improvement in
the Bank’s performance. This has only been
possible through the dedication and hard
work of our valued employees and the
leadership team. We are also extremely
grateful for the ongoing support and guidance
provided by the Chairman, Vice Chairman,
Managing Director and Members of the
Board. Under their leadership, we have
continued to achieve growth and have
sustained our reputation of being one of
Qatar’s most preferred and trusted banks.
In conclusion, we would like to thank His
Excellency Sheikh Abdullah bin Saud Al Thani.
Under his wise leadership, we have raised
the Bank’s credibility and brand equity in the
region. The Qatar Central Bank has shown
prudence with clear and consistent leadership,
expertise and direction, enabling the Qatar
?nancial market to achieve high growth,
despite the worldwide economic problems.
‘Everything is possible’ is a mindset engraved
in our core. Commercial Bank’s legacy mirrors
the nation’s, and this holds true for its vision
forward as well. The Bank has a vital interest
in its people’s progress, in line with Qatar’s
national vision 2030. We are proud to be
inspired by Qatar and its people, and look
forward to the future with ambition and
con?dence.
Andrew C Stevens
Group Chief Executive Ofcer
Responsibility statement
To the best of our knowledge, ?nancial
statements prepared in accordance
with International Financial Reporting
Standards give a true and fair view of the
assets, liabilities, ?nancial position and
pro?t of The Commercial Bank of Qatar
(Q.S.C.). We con?rm that the management
review, together with the notes to the
?nancial statements, includes a fair review
of development and performance of the
business and the position of the Group
together with a description of the principal
risks and opportunities associated with
the expected development of the Group.
26 February 2013
For and on behalf of the Board
of Directors:
Mr. Hussain Ibrahim Alfardan
Managing Director
Mr. A. C. Stevens
Group Chief Executive Ofcer
7:30pm
Souq Waqif, Doha
The Souq comes alive in early evening
with merchants selling everything from
pots and pans to herbs and spices. Since
its origins as Qatar’s ?rst commercial
bank, supporting trade and commerce
has always been at the heart of
Commercial Bank’s operations. Today,
the Bank has over 6,500 Point of Sale
terminals installed at merchant outlets
across Qatar and is the largest provider
of Merchant services in the market.
12:05am
The Pearl, Qatar
Home to local and international
residents, The Pearl ofers a unique
waterside living environment with
upmarket shops and restaurants.
Fitting in with today’s modern and busy
lifestyles, Commercial Bank is continuing
to invest in its Internet Banking service,
enabling customers to do everything
from check their balance to pay urgent
bills, all from the comfort of their own
home at a time that suits them.
Annual Report 2012 41
Annual Corporate Governance
Report 2012
1. Introduction
The Bank is committed to strong corporate
governance practices that allocate rights
and responsibilities among the Bank’s
shareholders, the Board and executive
management to provide for the efective
oversight and management of the Bank in a
manner that enhances shareholder value.
The Bank is required to comply with the
Corporate Governance Guidelines for Banks
and Financial Institutions issued by Qatar
Central Bank (the QCB Guidelines) and the
Corporate Governance Code for Joint Stock
Companies listed on markets regulated by the
Qatar Financial Markets Authority (the QFMA
Code). In addition, the Bank seeks to adopt
international best practices for Corporate
Governance, including but not limited to those
developed by the Organisation for Economic
Cooperation and Development (OECD), the
Bank for International Settlements (BIS) and
the International Institute of Finance (IIF).
The shares of the Bank, represented by Global
Depository Receipts, are listed on the London
Stock Exchange. Debt securities issued
or guaranteed by the Bank are listed on the
London Stock Exchange and on the SIX Swiss
Exchange. The Bank complies with the listing
rules of those exchanges as well as those of
the Qatar Exchange.
In view of the increasing focus on corporate
governance and risk management, the
Bank has taken active measures to further
enhance and raise its corporate governance
standards during 2012. Through the
combined eforts of the Board of Directors,
executive management and employees, the
Bank has adopted governance charters and
documents which are in line with applicable
regulatory requirements and leading
corporate governance practices. These
standards are reviewed by the Board annually
to ensure that the Bank maintains best
practices in corporate governance. The Board
Charter, Board Committees Charter and
Corporate Governance Charter are available
on the Bank’s website www.cbq.qa and are
also available in print to any shareholder upon
request.
2. The Board of Directors
2.1 Role of the Board and Executive
Management
The Board oversees the conduct of the
Bank’s business and is primarily responsible
for providing efective governance over the
Bank’s key afairs, including the appointment
of executive management, approval
of business strategies, evaluation of
performance and assessment of major
risks facing the Bank.
In discharging its obligations, the Board
exercises judgment in the best interests of
the Bank and relies on the Bank’s executive
management to implement approved
business strategies, resolve day-to-day
operational issues, keep the Board informed,
and maintain and promote high ethical
standards. The Board delegates authority in
management matters to the Bank’s executive
management subject to clear instructions in
relation to such delegation of authority and
the circumstances in which executive
management shall be required to obtain
Board approval prior to taking a decision
on behalf of the Bank.
The Board has established clear rules in
relation to the dealings of the Board and
employees in securities issued by the Bank.
2.2 Board Composition and Directors’
Quali?cations
The size of the Board is in accordance with the
Bank’s Articles of Association, which currently
provide for nine Directors. The organisation
of the Board shall (i) be determined from
time to time according to the requirements
of the Bank, and (ii) be subject to the Directors’
independence provisions set out below. The
Board is required to consist of a balance of
Non-Executive and Independent Directors.
The position of Chairman of the Board and
Managing Director of the Bank may not be
held by the same individual.
The Board is collectively required to possess
professional knowledge, business expertise,
industry knowledge and ?nancial awareness
sufcient to enable the Board to carry out
its responsibilities, and Directors shall have
experience and technical skills in the best
interests of the Bank.
2.3 Secretary of the Board of Directors
The Secretary of the Board is entrusted to
record, coordinate and register all meetings
of the Board along with maintaining custody
of records, reports and other materials sent
to and received by the Board. The Secretary’s
functions also include distribution of
information and coordination among
members of the Board and between the
Board and its stakeholders. The Secretary
is also entrusted to ensure the timely access
of members of the Board to all minutes of
meetings, information, documents and
records relating to the Bank.
2.4 Electing Directors
During 2012, the Bank has established
a Nomination Committee which is
tasked to uphold the transparency in the
nomination process for Board membership.
This Committee is responsible for
recommending Board Members’
appointments and nomination for election
in the General Assembly.
Nominations and appointments are made
in accordance to formal, rigorous and
transparent procedures as per QFMA
Corporate Governance Code and in line with
the Bank’s Articles of Association and relevant
governance charters. To be elected to the
Board, a nominee Director must receive a
majority of votes cast in the election. Members
The Commercial Bank of Qatar (Q.S.C.) 42
Corporate Governance
Continued
of the Board shall be elected for a period of
three years, and a director may be re-elected
more than once.
A Director’s membership to the Board
shall terminate in the event that, amongst
other things, the Director is convicted of
an ofence of dishonour or breach of trust
or is declared bankrupt.
Vacancies on the Board are ?lled in
accordance with the Bank’s Articles
of Association.
2.5 Directors’ Responsibilities
The responsibilities of the Chairman of the
Board are as de?ned in the Bank’s Articles of
Association, the Commercial Companies Law
and Directors’ Job Descriptions.
Directors shall be given appropriate and
timely information to enable them to maintain
full and efective control over strategic,
?nancial, operational, compliance and
governance issues of the Bank.
Directors shall act in accordance with the
Bank’s Articles of Association, the Commercial
Companies Law, the Board Charter, Board
Committees Charter and Corporate
Governance Charter.
Other than resolutions passed at each Annual
General Assembly absolving the Board of
Directors from responsibility, and provisions
in the Articles of Association requiring
that disputes against directors can only be
brought in accordance with a resolution by the
General Assembly, there are no provisions in
efect protecting the Board of Directors and
executive management from accountability.
2.6 Directors’ Independence
At least one third of the Board shall comprise
Independent Directors and a majority of the
Board shall comprise Non-Executive Directors.
Directors must notify the Board as soon as
reasonably practicable in the event of any
change in circumstances which may afect
the evaluation of their independence. Non-
Executive Directors must be able to dedicate
suitable time and attention to the Board, and
their directorship must not con?ict with any
other interests of such Directors.
2.7 Board Meetings
The Board shall hold meetings at least once
every two months pursuant to either (i) written
notice from the Chairman of the Board or his
Deputy at least one week prior to the meeting,
or (ii) the request of another member of the
Board of Directors.
Notice of meetings issued by the Chairman
of the Board shall include the meeting agenda.
Directors may request that a matter be
included on the meeting agenda.
Directors are expected to make every efort
to attend, in person, all scheduled Board
meetings and meetings of the committees
of the Board on which they serve. A Board
meeting shall only be validly called if a majority
of Directors are in attendance (whether in
person or by proxy) and provided that at least
four Directors are present in person.
Voting in Board meetings shall be in
accordance with the Bank’s Articles of
Association. Matters considered, and
decisions taken, by the Board shall be
recorded by means of minutes kept by
the secretary of the Board.
As per the Board Charter, the Board meets
a minimum of six times (once every two
months at a minimum). The Board met a
total of seven times in 2012 to conduct its
duties and responsibilities.
2.8 Board Committees
Board committee members are appointed
by the Board. Each Board committee has its
own written terms of reference, duties and
authorities as determined by the Board and
de?ned in the Board Committees Charter
and applicable job descriptions.
The standing Board committees are as
follows:
Board Risk Committee
The Committee comprises three Board
Members, and the current Members are Sh.
Abdullah bin Ali bin Jabor Al Thani (Chairman),
Sh. Ahmed bin Nasser bin Faleh Al Thani and
Mr. Omar Hussain Al Fardan:
The Terms of Reference provide that the
Committee is responsible for (i) all aspects of
enterprise risk management including but not
restricted to credit risk, market risk, liquidity
risk and operational risk, (ii) setting forth
risk policies, criteria and control mechanisms
for all activities involving any types of risk, and
(iii) overseeing all Bank risks through the
Management Risk Committee (MRC).
The Committee is required to meet at least
four times a year. The Board Risk Committee
met a total of four times in 2012.
Policy, Strategy and Governance Committee
The Committee comprises four Board
Members, and the current Members are H.E.
Abdullah bin Khalifa Al Attiyah (Chairman), Sh.
Abdullah bin Ali bin Jabor Al Thani, Mr. Hussain
Ibrahim Al Fardan and Mr. Omar Hussain Al
Fardan together with Mr. Andrew C. Stevens
(Group Chief Executive Ofcer):
The Terms of Reference provide that the
Committee (i) reviews and develops the long
term strategy, brand, vision and mission of
the Bank, (ii) reviews and develops the annual
business plan and budget in line with the
long term strategy and changes in economic,
market, and regulatory environments,
(iii) monitor and evaluate the Bank’s
performance periodically against the strategy,
business plan and budget, (iv) review and
pre-approve the Bank’s proposed policies
prior to ?nal approval being sought from the
Board of Directors unless the Board delegates
its “?nal approval authority” to the Committee
and (v) on a periodic basis, reviews and
assesses any changes to international
and local corporate governance practices
and applicable regulations that could
impact Commercial Bank’s activities and
recommends any required changes in
practices and documentation to the Board
of Directors for review and approval.
The Committee is required to meet at least
four times a year, and at least once in each
?nancial quarter of the year. The Policy,
Strategy and Governance Committee met
a total of 10 times in 2012.
Annual Report 2012 43
Board Executive Committee
The Committee comprises four Board
Members, and the current Members are
H.E. Abdullah bin Khalifa Al Attiyah (Chairman),
Sh. Abdullah bin Ali bin Jabor Al Thani,
Mr. Hussain Ibrahim Al Fardan and Mr. Omar
Hussain Al Fardan:
The Terms of Reference provide that the
Committee (i) acts as a consultative body to
the Board, which handles matters that require
the Board’s review, but may arise between
Board meetings. In addition, this Committee
deliberates matters, speci?cally credit
matters, in detail which are not discussed
at length in the meetings of the Board, and
assists the Board in detailed reviews and
analysis which could be done prior to a Board
meeting and (ii) is also delegated certain
approval authorities by the Board including
the granting of major credit facilities and
undertaking major investments within the
approved limits as per the Bank’s approved
delegation of authority matrixes.
The Committee is required to meet at least
once a month (12 times a year). The Board
Executive Committee has met a total of 19
times in 2012.
Board Audit and Compliance Committee
The Committee comprises three Board
Members, and the current Members are
Mr. Khalifa Abdullah Al Subaey (Chairman), Sh.
Jabor bin Ali bin Jabor Al Thani and Sh. Ahmed
bin Nasser bin Faleh Al Thani as well as Mr.
Abdulla Mohammed Ibrahim Al Mannai
(alternate member):
The Terms of Reference provide that the
Committee is responsible for (i) overseeing
the quality and integrity of the accounting,
auditing, internal control and ?nancial
reporting practices of the Bank, (ii) setting
forth compliance and Anti-Money Laundering
& Combating Financing Terrorism (AML/CFT)
requirements, and de?ning criteria and
control mechanisms for all activities
involving Bank-wide related risks and
(iii) recommending the appointment of the
External Auditors to the Board and in turn the
Board will review and recommend the same
for approval in the Annual General Meeting.
The Board Audit and Compliance Committee
is required to meet four times a year or more
frequently if needed. The Board Audit and
Compliance Committee met a total of six times
in 2012.
Board Remuneration Committee
The Committee comprises three Board
Members, and the current Members are Sh.
Jabor bin Ali bin Jabor Al Thani (Chairman), Mr.
Abdulla Mohammed Ibrahim Al Mannai and
Mr. Hussain Ibrahim Al Fardan as well as Mr.
Jassim Mohammed Jabor Al Mosallam
(alternate member):
The Terms of Reference provide that the
Committee is responsible for (i) setting the
Bank’s remuneration framework for the Board
Members, management and employees, as
outlined in the Directors’ remuneration policy
and Human Resources policy on management
and employee compensation and bene?ts,
respectively. Remuneration shall take into
account the responsibilities and scope of
the functions of the Board Members and the
management as well as the performance of
the Bank. Compensation includes ?xed and
performance related components that are
based on the long-term performance of
the Bank. The Committee is also responsible
for (ii) presenting the Bank’s remuneration
framework to the Board, with the Directors’
Remuneration Policy being subject to further
approval by the shareholders in the General
Assembly.
The Board Remuneration Committee is
required to meet twice a year. The Board
Remuneration Committee met once in 2012.
Board Nomination Committee
The Committee comprises two Board
Members, and the current Members are
Sh. Jabor bin Ali bin Jabor Al Thani (Chairman)
and Mr. Jassim Mohammed Jabor Al Mosallam
as well as Mr. Abdulla Mohammed Ibrahim
Al Mannai (alternate member):
The Terms of Reference provide that the
Committee (i) oversee the establishment
of a nomination process for Board Members,
(ii) follow “Fit and Proper Guidelines for
Nomination of Board Members” annexed
to the QFMA Corporate Governance Code,
(iii) review candidate pro?les of all new Board
Members applying for election to the Board
considering current Board composition, (iv)
recommend appointment of new members
to the Board for recommendation to the
General Assembly, (v) review members for
re-election and provide opinion to the Board
for communication to the General Assembly
and (vi) facilitate the performance of an annual
self-assessment exercise for the full Board.
The Board Nomination Committee is required
to meet twice a year. The Board Nomination
Committee has not yet met since it was
formed in October 2012.
2.9 Directors’ Remuneration
Remuneration of Directors is in accordance with
QCB Circular No. 75/2011 and in compliance with
the QCCL (Law 5 of 2002), QFMA Corporate
Governance Code and the Bank’s Articles
of Association. This remuneration framework
shall be presented to the shareholders in the
General Assembly for approval and shall be
made public. In conformity with the Bank’s
Remuneration Policy for the Board,
remuneration shall take into account the
responsibilities and scope of the functions
of the Board Members as well as the
performance of the Bank. Remuneration may
take the form of (i) ?xed salaries, (ii) directors’
fees, (iii) in-kind bene?ts or (iv) a percentage
of the Bank’s pro?ts. Directors may receive
multiple forms of remuneration provided that
remuneration by way of a percentage of the
Bank’s pro?ts shall not, after deduction of
expenses, depreciation and reserves and
distribution of dividends of not less than
5% of the Bank’s capital, exceed 10% of the
net pro?t of the Bank. The amount of such
remuneration shall be approved annually by
the General Assembly, taking into account the
level of pro?tability of the Bank.
Total remuneration earned by the Board
in 2012 (including ?xed remuneration and
meeting attendance fees) was QAR 46.08
million. (2011: QAR 41.45 million).
2.10 Independent Advisors
The Board and its committees may retain
counsel or consultants with respect to any
issue relating to the Bank’s afairs. Costs and
expenses incurred pursuant to appointment
of independent advisors or consultants shall
be borne by the Bank.
The Commercial Bank of Qatar (Q.S.C.) 44
Corporate Governance
Continued
For 2012, total costs incurred by the Bank with
respect to retaining counsel and consultants
amounted to QAR 20.3 million.
2.11 Independent and Non-Executive Members of the Board of Directors
As at 31 December 2012, the Board of Directors of the Bank comprised the following members:
Director Position First Appointment Expiry of Current
Appointment
Status
H.E. Abdullah bin
Khalifa Al Attiyah Chairman 1975 2014
Non-Executive,
Independent
Sh. Abdullah bin
Ali bin Jabor Al Thani
Vice
Chairman 1990 2014
Non-Executive,
Non-Independent
Mr. Hussain Ibrahim
Al Fardan
Managing
Director 1975 2014
Non-Executive,
Non-Independent
Mr. Omar Hussain
Al Fardan Member 2002 2014
Non-Executive,
Non-Independent
Mr. Jassim Mohammed
Jabor Al Mosallam Member 1975 2014
Non-Executive,
Independent
Mr. Khalifa Abdullah
Al Subaey Member 1987 2014
Non-Executive,
Independent
Sh. Jabor bin Ali bin
Jabor Al Thani Member 2002 2014
Non-Executive,
Independent
Mr. Abdulla Mohammed
Ibrahim Al Mannai Member 1987 2014
Non-Executive,
Independent
Sh. Ahmed bin Nasser
bin Faleh Al Thani Member 2009 2014
Non-Executive,
Independent
The status of Board Members as Non-
Executive, Independent or Non-Independent
is determined in accordance with the QCB
Guidelines.
Details of the education, experience and
principal membership in other banks, ?nancial
institutions or companies, of Board Members
is set out below:
Sh. Abdullah bin Ali bin Jabor Al Thani
Vice Chairman
Chairman of the Board Risk Committee and
a Member of the Board Executive Committee
and the Policy, Strategy and Governance
Committee.
Director of National Bank of Oman and United
Arab Bank. Owner of Vista Trading Company.
Partner in Dar Al Manar, Domopan Qatar, Banz
Group Qatar and Al Aqili Furnishings.
Mr. Hussain Ibrahim Al Fardan
Managing Director
Member of the Board Executive Committee,
the Policy, Strategy and Governance
Committee and the Remuneration Committee.
Started his career as a banker in Standard
Chartered Bank. Chairman of Alfardan Group
and United Development Company. Director
of Qatar Insurance Company. Chairman of
QIC International LLC. Founding member and
Director of Investcorp Bahrain. Vice Chairman
of Gulf Publishing and Printing Company and
Qatar Businessmen’s Association.
Mr. Omar Hussain Al Fardan
Board Member
Member of the Board Executive Committee,
the Policy, Strategy and Governance
Committee and the Board Risk Committee.
President and Director of companies
comprising Alfardan Group. Director of United
Development Company. Vice Chairman of
United Arab Bank. Chairman of National Bank
of Oman. President of Resorts Development
Company. Chairman of Qatar District Cooling
Company. Vice Chairman of Middle East
Dredging Company. Director of Qatar Red
Crescent Society.
Mr. Jassim Mohammed Jabor Al Mosallam
Board Member
Member of the Nomination Committee
and Alternate Member of the Remuneration
Committee.
Owner of Al Mosallam Trading Company.
Director of Qatar German Medical Devices
Company and Qatar Clay Bricks Company.
H.E. Abdullah bin Khalifa Al Attiyah
Chairman
Chairman of the Board Executive Committee
and the Policy, Strategy and Governance
Committee.
State Minister. Vice Chairman of Qatar
Insurance Company and United Development
Company and Chairman of Gulf Publishing and
Printing Company. Owner of Contraco
Contracting Company.
Annual Report 2012 45
Mr. Khalifa Abdullah Al Subaey
Board Member, representing Qatar
Insurance Company
Chairman of the Audit and Compliance
Committee.
Started his career in the Finance Department
of Qatar Petroleum. President and CEO of
Qatar Insurance Company, Managing Director
of QIC International LLC, Q-Re Insurance
Company and Damaan Islamic Insurance
Company (BEEMA). Director of United
Development Company.
Sh. Jabor bin Ali bin Jabor Al Thani
Board Member
Chairman of the Remuneration Committee
and the Nomination Committee and a Member
of the Audit and Compliance Committee.
Director of Gulf Publishing and Printing
Company and Qatar Clay Bricks Company.
Owner of Al Maha Contracting Co.
Mr. Abdulla Mohammed Ibrahim Al Mannai
Board Member
Member of the Remuneration Committee
and Alternate Member of the Nomination
Committee and the Audit and Compliance
Committee.
Owner of AMPEX, Qatar Marble and Islamic
Mozaic Company. Member of the Qatar
Businessmen’s Association.
Sh. Ahmed bin Nasser bin Faleh Al Thani
Board Member, representing Naser Bin
Faleh Group
Member of the Board Risk Committee and
the Audit and Compliance Committee.
Director of United Development Company.
Partner in Waset Trading Company and
Ali Bin Nasser Al Thani and Brothers.
3. Executive Management
Executive Management (de?ned as the group
of persons with operational responsibility
for the Bank appointed by the Board)
is responsible for the overall day-to-day
management of the Bank
As at 31 December 2012, Executive Management of the Bank comprised the following:
Director Position
Mr. Andrew C. Stevens Group Chief Executive Ofcer (GCEO)
Mr. Abdulla Al Raisi Deputy Chief Executive Ofcer
Mr. Nicholas Coleman EGM & Group Chief Financial Ofcer
Mr. Sandeep Chouhan EGM & Group Chief Operating Ofcer
Mr. Abduljalil Borhani EGM, Strategic Clients
Mr. Stephen Mullins EGM, Corporate Banking
Mr. Jerold Williamson EGM & Chief Risk Ofcer
Mr. James Kneller EGM & Head of Organizational Efectiveness
Mr. Alex Carre de Malberg EGM & Global Head, Comcap
Mr. Dean Proctor EGM, Retail & Consumer Banking
Mr. Fahad Badar EGM, Government & International Banking
Mr. Sarmad Lone Senior EGM & Head of Wholesale Banking
Mr. Jeremy Davies EGM & Chief Marketing Ofcer
Mr. Khoda Fartash EGM & Group Chief Legal Ofcer
Mr. Gary Williams Senior AGM & Chief Internal Auditor
Mr. Mohamad Mansour AGM & Head of Compliance & AML/CFT Unit
3.1 Education, Experience
and Afliations
Andrew C. Stevens
Group CEO, Commercial Bank of Qatar
Mr. Stevens began his banking career in
1980 with Standard Chartered Bank in Dublin,
Ireland; he was later posted to Hong Kong,
Bahrain, and their regional headquarters for
Africa, Middle East and South Asia, and then
seconded to lead the African business of
Standard Chartered Bank in Uganda.
Since joining Commercial Bank of Qatar in
1989, Mr. Stevens has been heavily involved
leading wholesale changes at the bank. In
1994, he was appointed as the Bank’s ?rst
AGM of Retail Banking; was appointed as
Director of Orient 1 in 1998, a 100% owned
subsidiary, set up to manage credit card
businesses across the Middle East.
In April of 2001, he was appointed General
Manager of Commercial Bank of Qatar and in
2005, Chief Executive Ofcer. Mr. Stevens
spearheaded the eforts that led to the
acquisition of a 35% stake in the National Bank
of Oman (NBO) in 2005, followed by the
acquisition of 40% in United Arab Bank (UAB),
Sharjah, UAE, in 2008.
Mr. Stevens holds a B.Com (Hons) in Banking
and Finance from Birmingham University, UK.
He presently serves as a director on the
boards of both NBO and UAB. He is also a
director of Qatar Insurance International LLC
and serves on the Visa’s International Senior
Client Council.
Mr. Abdulla Al Raisi
Graduated from Portland State University in
1982 with a B.Sc. in Political Science & Social
Science. Joined Commercial Bank in 1998;
Deputy Chief Executive Ofcer since March
2007. Previously with QAFCO. Over 26 years
experience, including extensive banking
experience, in Arab Gulf States Folklore Center
and Doha Bank respectively. Chairman of
Commercial Bank Investment Services.
The Commercial Bank of Qatar (Q.S.C.) 46
Corporate Governance
Continued
Mr. Fahad Badar
Joined Commercial Bank in 2000 and
currently serves as EGM Government &
International Banking. Over 11 years of
experience in various areas of the retail,
corporate banking and operations divisions,
where he has built strong relationships and
an excellent reputation amongst key industry
stakeholders, from customers to peers.
He has a BA in Banking & Finance from
the University of Wales and an MBA from
Durham University.
Mr. Sarmad Lone
Joined Commercial Bank in 2012 as
Senior EGM & Head of Wholesale Banking
responsible for the Domestic Corporate,
International, Multi-National, Government,
Public Sector, Investment Banking (Comcap)
and Enterprise/SME businesses. He has
previously worked for more than 20 years
with Morgan Stanley and Citibank in MENA and
Asia. His last assignment with Morgan Stanley
was Head of Investment Banking Middle East
and North Africa. Before that, he held various
senior management positions in Corporate
and Investment Banking Group at Citibank.
He was designated as a Senior Credit Ofcer
(SCO) at Citibank.
Mr. Jeremy Davies
Joined Commercial Bank in 2012 as EGM &
Chief Marketing Ofcer. Began marketing
career at multinational advertising agency
J Walter Thompson in 1990, after graduating
in Law from Exeter University. Completed MBA
at the Judge Business School, Cambridge, and
became the founder and Managing Director
of JWT’s brand & digital consultancy. Joined
the cable group NTL in 2001 as Marketing
Director. Appointed Brand & Communications
Director at Abbey National/Santander in
2003. In 2008, joined the E.ON Group as
UK Brand and Communications Director, with
responsibility for all UK marketing activities, as
well as internal communications, PR and public
afairs; appointed as Marketing Director of
E.ON’s new Energy Solutions Business in 2011,
driving customer satisfaction improvements
across E.ON’s core markets across Europe.
Mr. Nicholas Coleman
Graduated from London Guildhall University
with a BA (Hons) in Economics. Joined
Commercial Bank as EGM & Group Chief
Financial Ofcer in 2008. Over 22 years
experience as a seasoned banker with
The Bank of New York in London, National
Westminster Bank in London and Morgan
Stanley in London. Previously with Arthur
Young in Kuwait. Fellow of the Institute of
Chartered Accountants in England and Wales.
Director of United Arab Bank, Orient 1 Limited,
Commercial Bank Investment Services, Gekko
LLC and CBQ Finance Limited.
Mr. Sandeep Chouhan
Graduated from the National Institute of
Technology, India. Joined Commercial Bank
as Group Chief Operating Ofcer in June
2008. Previously with Barclays Bank in
London. Over 20 years global experience in
banking operations and technology, including
?ve years with Morgan Stanley and eight
years with Citigroup across EMEA, Asia and
USA. Chartered Professional of the British
Computer Society. Director of Orient 1 Limited.
Mr. Abdul Jalil Borhani
Graduated from Northern Arizona University
in Business Administration in 1992. Joined
Commercial Bank in 1993, beginning his career
in corporate banking as relationship ofcer;
promoted to EGM, Corporate Banking Ofcer in
January 2009. Currently EGM, Strategic Clients.
Mr. Stephen Mullins
Joined Commercial Bank in 2009 as Group
Chief Credit Ofcer and promoted to EGM
Corporate Banking in September 2010. Over
35 years of banking experience including 24
years with National Westminster Bank Group,
two years with ICICI Bank and eight years as
Regional Head of Credit with Nedbank in their
regional ofce in Hong Kong. Associate of the
Institute of Bankers.
Mr. Jerold Williamson
Graduated from Loughborough University
in the UK in 1981 in Banking and Finance.
Joined Commercial Bank in 2011 as Chief Risk
Ofcer. Previously with Midland Bank/HSBC,
and Lloyds TSB Bank, with over 30 years
experience in international, corporate, and
retail banking, encompassing business, credit,
internal audit and risk roles. Director of CBQ
Finance Limited.
Mr. James Kneller
Joined Commercial Bank as EGM & Head
of Organisational Efectiveness in 2011. Prior
to joining, he led a management and business
coaching consultancy based in London
and before this, spent four years with
Banco Santander as HR Director during the
integration of their UK acquired businesses.
He spent ?ve years working within the Saudi
Arabian based ALJ Group as both an HR
Director and Business Head and has also
held senior HR positions with Dixons, Granada
Group and Sainsburys.
Mr. Alex Carre de Malberg.
Graduated from HEC (MBA), University of
Massachusetts (MsChE) and ENSIC (Chemical
Engineer). Joined Commercial Bank in 2011 as
EGM & Global Head, Comcap, the investment
banking, research and asset management
division and parent of Commercial Bank
Investment Services, the brokerage arm of
Commercial Bank. Over 19 years of investment
banking experience, of which the last ?ve
years were in the Gulf previously as co-head
of Rothschild Middle East and head of
investment banking at Abu Dhabi Investment
Company. Started his investment banking
career in New York with Lazard Freres, then
Hong Kong and Singapore with Peregrine and
one of its spin-ofs, until he joined Rothschild in
Paris in 1998. Director of Commercial Bank
Investment Services.
Mr. Dean M. Proctor
Joined Commercial Bank in 2012 as EGM
Retail & Consumer Banking. Previously
CEO of Arbuthnot Latham & Co. Ltd, a private
bank in the UK, for three years. Concurrently
an Executive Director and Board Member
of Arbuthnot Banking Group a UK listed
company. Previously with Citibank working
in the UK as Managing Director, UK Retail &
Wealth Management including Egg Banking
Plc and internationally as Head of Credit
Cards for the Middle East based out of the
UAE. Spent 14 years with Lloyds Bank Plc
working in retail and corporate banking across
all divisions. Chairman of Massoun Insurance
Services and a Director of Asteco Qatar and
Commercial Bank Investment Services.
Annual Report 2012 47
Mr. Khoda Fartash
Joined Commercial Bank in 2007 and
currently serves as EGM & Group Chief Legal
Ofcer. Previously with the law ?rm Allen &
Overy in London, Frankfurt and Milan. He has
12 years experience as a banking and ?nance
lawyer and is a quali?ed English Solicitor and
registered foreign lawyer at the Milan Bar.
Graduated from Oxford University in 1997
with a BA (Hons) in Oriental Studies (Arabic).
Mr. Gary Williams
Joined Commercial Bank in 2010 as Senior
AGM and Chief Internal Auditor. Previously with
Standard Chartered Bank for 25 years, the last
12 of which were in Group Internal Audit and
Operational Risk Assurance positions. Roles in
the Group Internal Audit function included
postings in the UK, Singapore, Hong Kong and
South Korea. Final role in Standard Chartered
Bank, prior to joining Commercial Bank was
to establish and manage the Operational
Risk Assurance function in 20 countries across
the Africa, Middle East and Pakistan regions
for the Bank.
Mr. Mohamad Mansour
Started banking career at the Treasury Bills
Department of the Central Bank of Lebanon.
Founding member and a former Senior
Investigator and Research Analyst of the
Financial Information Unit at the Central Bank
of Lebanon; led numerous money laundering
and terrorism ?nancing investigations with
regional and international counterparts as
well as conducting the Bank’s examinations on
anti money laundering programs. A Certi?ed
Anti Money Laundering Specialist (CAMS), and
Certi?ed Compliance Ofcer, actively involved
with local and international regulators on
enhancing the AML/CFT implementation,
raising awareness and introducing the latest
AML & CFT information technology solutions.
3.2 Executive Committees
Executive Management functions through
a number of committees, which support
the role of the Group Chief Executive Ofcer
(GCEO). The number of executive committees
and their responsibilities are determined
by the Board; membership of the various
committees is determined by the GCEO.
A summary of their main activities is set
out below.
Management Executive Committee (EXCO)
EXCO is chaired by the GCEO and meets on
a regular basis, monthly, or as required by the
business. Its principal function is to develop
the annual business plan and budget for the
Bank, and to monitor performance against it.
Management Risk Committee (MRC)
The MRC is the highest authority at
management levels on all risk-related issues
of the Bank, and reports on all risk policy and
portfolio issues to the Board Risk Committee.
It monitors and controls levels of credit, retail
and operational risk to ensure that the risk
strategies and policies approved by the Board
are adhered to and implemented. The MRC
also sets up and monitors the policies and
procedures relating to the management
of business continuity. The Chief Risk Ofcer
serves as chairman of the MRC, which meets
at least four times a year, and more frequently
if necessary.
Asset and Liability Committee (ALCO)
ALCO is a decision making body for
developing policies relating to asset and
liability and market risk management with
the objective of maximising shareholder
value, enhancing pro?tability, and protecting
the Bank from facing adverse consequences
arising from changes in extreme market
conditions and compliance with regulatory
guidelines. Its key functions are to formulate
policies on market risk, liquidity risk and
interest rate risk, and to ensure that such
risks are efectively addressed, controlled,
monitored and managed. The Group Chief
Financial Ofcer serves as chairman of ALCO.
Meetings of ALCO are held once a month or
more frequently if necessary, particularly in
the case of a volatile operating environment.
Group Special Assets Management (GSAM)
Committee
Special Assets are those assets of the Bank
which require extensive monitoring and
control in order to minimise risk, prevent
losses, maximise recoveries and restore
pro?ts through rehabilitation, restructuring,
workout, collection or legal actions. The GSAM
Committee supervises these activities, reviews
related policies and procedures and monitors
actions being taken on all accounts within
the Special Asset portfolio. The Group Head
of Special Assets Management serves as
chairman of the committee. Meetings are held
at least four times a year, or more frequently as
deemed appropriate by the chairman.
Management Credit Committee (MCC)
The MCC reviews, recommends and
implements approved credit policies
and procedures relating to the Bank.
The Committee reviews the delegated
authorities related to credit and recommends
amendments to the Board where appropriate.
It also escalates its decisions relating to credit
facilities which exceed its authority to the BEC.
The Chief Risk Ofcer serves as chairman of
MCC. Meetings are held as and when required.
Investment Committee
The Investment Committee reviews the
delegated authorities related to investments
and recommends amendments to the Board
where appropriate. The Committee also
assumes the responsibility to review and
approve the range of investment products
across the Bank. It also monitors and reviews
the performance of all the investment
portfolio activities. The Group Chief Executive
Ofcer serves as chairman of the committee.
Meetings are held at least four times a year,
or more frequently as deemed appropriate
by the Chairman.
The Commercial Bank of Qatar (Q.S.C.) 48
Corporate Governance
Continued
Crisis Management Committee (CMC)
The CMC is mainly responsible in heading
incidents which may result in a crisis situation
for the Bank. The Committee ensures that
a bank-wide Crisis Management Plan (CMP)
is developed and communicated to all
stakeholders including the establishment of
a Crisis Management Team. It also ensures
formal drills and training are conducted and
a comprehensive communication process is
developed regarding Crisis Management. In
the event of an incident which may conceivably
result in the activation of the Bank’s Crisis
Plan, the Bank’s Call Tree will be used to
communicate the incident to the Deputy
Chief Executive Ofcer who will confer with the
Group Chief Executive Ofcer as required and
decide whether the Bank’s Recovery Plans
require to be actioned. In the event that the
Bank’s Recovery Plans are activated this will
be rapidly communicated to all stakeholders
by way of activation of the Bank’s mobile
phone Call Trees. The Group Chief Executive
Ofcer serves as Chairman of the committee.
Meetings are held as and when required.
3.3 Senior Management Remuneration
Total remuneration earned by the senior
management in 2012 in QAR thousands was:
Fixed Remuneration 43,415
Discretionary Remuneration 21,980
Other Bene?ts 4,884
Total (2011: 53,611) 70,279
4. Ownership Structure
In accordance with Article (7) of the Bank’s
Articles of Association, no person (whether
natural or juridical) shall own at any time
more than 5% of the total shares in the Bank
by any means other than inheritance, with the
exception of (i) Qatar Investment Authority,
Qatar Holding LLC or any of their associated
companies and (ii) a custodian or depository
bank holding shares in respect of an ofering
of Global Depositary Receipts.
As at 31 December 2012, 85.13% of the
total number of shares in the Bank were
held by Qatari nationals (whether individuals
or entities) and 14.8% of such shares by
foreign investors. As at 31 December 2012, in
percentage terms, the largest shareholdings
in the Bank were as follows.
Qatar Holding LLC 16.67%
Al Watani Fund 3 2.98%
Al Watani Fund 4 2.63%
Al Watani Fund 8 2.60%
Qatar National Bank SAQ 2.05%
5. Compliance, Internal Audit
and Risk Governance
5.1 Compliance Culture
The Bank promotes a robust compliance
culture across the organization and requires
everyone, from the Board down to staf,
to consistently comply with applicable laws,
regulations and standards.
5.2 Compliance Set-up
The Bank has incorporated the regulatory
requirements into the Bank’s policies,
procedures and systems. The Bank has
comprehensive compliance and AML/CFT
policies describing the compliance and AML/
CFT functions at Commercial Bank Group,
and this has been assessed and evaluated
by internal and external bodies.
5.3 Compliance Milestones
Besides the achievements of the compliance
and AML/CFT annual plan approved by the
Board Audit and Compliance Committee, the
Bank has completed the alignment to comply
with the US (CISADA) regulations, impact
assessment of US (FATCA) regulations,
implementation of World Check Data ?le for
international sanctions and blacklist checking.
5.4 Compliance Awareness
As a result of the Bank’s commitments
to the implementation of the regulatory
requirements and to keep the Bank’s staf
up to the standard, the Bank has provided
its staf with an AML compliance E-Learning
course, live training and an induction program
for new joiners, covering diferent aspects
of regulatory requirements.
5.5 Internal Audit
The Bank’s Internal Audit function is headed
by the Chief Internal Auditor (CIA), who reports
directly into the Board Audit and Compliance
Committee. There was a total of 13 staf in
the Internal Audit function as at 31 December
2012, including the CIA. The role of the Internal
Audit function is to provide independent
assurance to the Board and senior
management of the Bank as to both the
adequacy of controls and of the efectiveness
of the operation of these controls.
This role is ful?lled by way of a combination
of unit or process speci?c functional audits,
assurance audits that usually involve the
review of multiple units within the Bank based
on a particular risk, theme or end-to-end
process and credit reviews, which
independently assess the quality of the Bank’s
credit portfolios. Audit work is in accordance
with an audit plan which is approved by the
Board Audit and Compliance Committee,
which is derived from a twice yearly risk
assessment exercise covering all auditable
units, systems and processes across the
entire Bank. In addition to planned audit
assignments, the Internal Audit function
is also involved in undertaking occasional,
unscheduled investigation work. During 2012
the Internal Audit function produced a total
of 38 audit and investigation reports, which
covered a total of 177 units within the Bank’s
inventory of auditable units.
All audit work undertaken is in accordance with
the Board Audit and Compliance Committee
approved Internal Audit Charter and Standard
Operating Procedures, which are based on the
Institute of Internal Auditors standards.
Annual Report 2012 49
5.6 Risk Governance
Risk governance is an integral part of the
Bank’s efective risk-based oversight and the
Board is focused on assessing, managing, and
mitigating risk.
Risk governance at the Bank is de?ned as the
Board and management’s oversight of risk.
It is the Board which is ultimately responsible
for ensuring that all risks to the Bank are
identi?ed, evaluated and suitably managed.
To this end, it is ensured that:
• Complete risk information is transmitted
to the Board.
• Non-executive directors have the required
level of expertise.
• The Board provides a forum for vetting
strategic risk issues.
The Bank’s Board is involved in risk-decisions
through the:
• Board Risk Committee (for risk policies,
enterprise wide risk reviews and portfolio
monitoring);
• Board Executive Committee (for credit
decisions and lending strategy); and
• Board Audit and Compliance Committee
(for compliance and internal audit matters).
At management level, risk governance is
implemented by adopting and integrating the
necessary systems to identify, manage, and
report risk. The level and nature of aggregate
risk arising in rapidly evolving balance sheets
are captured by systems and reports.
Risk management units have the visibility,
stature, and independence to consolidate
institution-wide risks and elevate concerns
to a level sufcient to prompt a response from
management and the Board.
The Bank’s risk governance structure ensures
risk governance is able to respond with ?exibility
due to timelier, more complete, and enterprise-
wide risk information, enabling the Board to
make critical decisions to curtail risk earlier.
6. The Bank’s Policies
6.1 Corporate Governance Charter
The Bank recognises that an efective
corporate governance framework is the
local component in the achievement of the
Bank’s corporate objectives and maximisation
of shareholder’s value. The Bank has
established corporate governance practices
and protocols in compliance with its Articles
of Association and relevant requirements and
in line with relevant corporate governance
leading practices.
The Corporate Governance Charter captures
the detailed guidelines of the Bank’s
governance framework.
6.2 Anti-Fraud Policy
The Bank promotes an anti-fraud control
environment by adopting the following
principles:
• Commitment to the principles of integrity,
respect, accountability and to an
environment of sound governance which
includes robust internal controls;
• Commitment to a culture that safeguards
public funds and property in order to
protect shareholder interest;
• Zero tolerance approach to fraudulent and/
or unethical conduct and hold all employees
accountable for their actions; and
• Consistent handling of all cases regardless
of positions held, connections to authorities,
nationality or length of services.
6.3 Policy on Promotion
The Bank is committed to fostering ongoing
education, professional and personal
development and career advancement of
our employees.
The Bank recognises that, in the course of
meeting objectives, the duties and functions
of its employees may change in complexity
and responsibility and promotions are given
pursuant to increased responsibility levels
but subject to exceptional past performance.
The added bene?ts of a promotion serve as
an incentive for better work performance,
enhance morale and create a sense of
individual achievement and recognition.
A promotion may occur through:
1. A reclassi?cation of an employee’s
existing position as a result of the employee
performing duties at a higher degree of
responsibility and complexity than the
current classi?cation calls for; or
2. The ?lling of a higher level vacancy (in the
event of a vacancy, the Bank will ?rst look
internally for suitable candidates and no
external advertisement of the vacancy shall
run unless and until exhausting all internal
recruitment avenues).
For promotion through the ?lling of a higher
level vacancy, employees need only satisfy
the quali?cations as speci?ed in the job
description for the vacant position (and not the
qualities, skills or knowledge of the incumbent)
and are eligible for promotion:
1. Pursuant to successful completion of the
probation period speci?ed by the conditions
of employment;
2. Pursuant to exceptional semi-annual and
annual performance appraisals; and
3. Regardless of age, gender, nationality
or religion.
6.4 Penalties or Fines Imposed on the
Bank by Regulatory Authorities
Penalties imposed on the Bank in 2012 by
Qatar Central Bank amounted to QAR 471,000
(2011: Nil) in respect of breaches of real estate
ratios set by Qatar Central Bank.
6.5 Material Issues Regarding the Bank’s
Employees and Stakeholders
There are no material issues regarding the
Bank’s employees and stakeholders to be
disclosed in this report.
6.6 Corporate Social Responsibility
The Bank, as a responsible corporate citizen,
recognises its social responsibility to integrate
business values and operations to meet the
expectations and needs of its stakeholders.
Commerce + Conscience + Compassion =
Corporate Social Responsibility
The Commercial Bank of Qatar (Q.S.C.) 50
Corporate Governance
Continued
The Bank is committed to promoting
sustainable development, protecting and
conserving human life, health, natural
resources and the environment and adding
value to the communities in which it operates.
In so doing, the Bank recognises the
importance of both ?nancial and non-?nancial
commitment and contribution.
Corporate Social Responsibility (CSR) involves
assessing all the ways that the Bank’s actions
and operations may potentially impact others.
The Bank’s approach to Corporate Social
Responsibility is rooted in its core values which
shape the way it does business, which are:
How the Bank Behaves
a. Stakeholder Engagement – establishing
relationships with stakeholders and
communities and soliciting their input
and involvement on critical issues.
b. Health and Safety – conducting business
with a high regard for the health and
safety of employees, contractors and the
communities including following local and
best practice health and safety guidelines
and standards.
c. Environmental Stewardship – operating
in a safe and environmentally responsible
manner and minimising the impact of
operations on the environment, including
by reducing waste.
What the Bank Invests in
a. Community Development – sustainable
programmes to improve quality of life in
the community.
b. Education and Training – programmes and
learning opportunities to develop a skilled,
competitive workforce.
c. Corporate Citizenship – philanthropic, social
development and volunteer programs,
community service projects, humanitarian
works, arts and sports.
What the Bank In?uences and Promotes
a. Human Rights – respect and protection
of fundamental human and worker rights,
including ensuring a discrimination-free
work environment; equal opportunities;
no racism of any form; no harassment
of any form; regulated working hours and
paid holidays; fair compensation and the
principal of ‘equal pay for equal work’ for
men and women.
b. Rule of Law – respect of local laws and
promotion of the principles of justice,
fairness and equality.
c. Transparency – promotion of openness
in all business dealings.
d. High Performance – high performance
team culture and a collaborative,
supportive work environment where
employees are encouraged to reach their
full professional potential.
What the Bank Believes in
Code of Business Conduct – conducting
business honestly and with integrity,
maintaining ethical behavior in all operations,
including ?ghting all forms of corruption.
Enforcing strict principles of corporate
governance and supporting transparency
in all operations.
The Bank supports many charities and NGOs
and actively promotes creative projects and
activities useful to society. In addition to broad
support of Sports, Cultural and Charitable
activities, the Bank focuses its CSR
programme on the promotion of Qatari
youth development and related educational
activities. In so supporting, the Bank strives
to be more than a ?nancial sponsor and is
committed to engaging in a broad range of
CSR activities to establish a long-standing and
sustainable social platform, enabling positive
change within the community. The ultimate
objective of the Bank’s CSR activities is to
foster relationships that enhance community
spirit in a responsible manner by contributing
to the development of the nation and
its communities for the bene?t of Qatar’s
future generations.
6.7 Environmental Policy
The Bank is committed to protecting the
natural resources and environments of the
communities in which we serve and operate
and minimising the impact of the Bank’s
activities on the environment.
In keeping with these beliefs and
commitments, the Bank endeavours
to ensure that all management and
employees comply with the following
environmental policies:
1. Conduct business in an environmentally
responsible manner;
2. Comply with all applicable environmental
laws and regulations;
3. Make environmental concerns an
integral part of the planning and decision
making process;
4. Control environmental impacts and prevent
or minimize pollution, including operating a
paperless environment;
5. Educate management and employees to be
accountable for environmental stewardship;
6. Promote the efcient use of resources and
reducing (and where possible eliminating)
waste through recycling and pursuing
opportunities to reuse waste;
7. Ensure the proper handling and disposal
of all waste;
8. Assess the environmental condition of
property interest acquired by the Bank and
appropriately address the environmental
impacts caused by these properties;
9. Support research and development of
programmes and technologies aimed
at minimizing the environmental impacts
of company operations; and
10. Notify the Board of any pertinent
environmental issues.
Annual Report 2012 51
6.8 Health Policy
The Bank, recognising that good health and
safety management has positive bene?ts
to an organisation, is committed to providing
and maintaining a healthy, safe and secure
working environment for all employees.
The Bank is committed to:
1. Ensuring the health, safety, security and
welfare of all its employees whilst at work;
2. Ensuring that visitors to the Bank’s
premises are not exposed to risks to their
health and safety;
3. Identifying hazards, assessing risks and
managing those risks;
4. Maintaining arrangements for ensuring the
safe use, handling, storage and transport of
articles and substances; and
5. Encouraging the development and
maintenance of a positive attitude towards
health and safety throughout the Bank.
The Bank maintains comprehensive Fire,
Health and Safety policies and provides
extensive Medical Insurance through an
internationally recognized insurance provider
for the bene?t of all permanent staf.
6.9 Code of Ethics
The Bank-wide Code of Ethics serves as a
guide to the everyday professional conduct
of its employees. The Code covers all
applicable laws and regulations and the
highest standards of business ethics that the
Bank’s employees should be aware of and
comply within the conduct of their day-to-day
business activities. In addition to the Bank-
wide Code of Ethics, the standards of conduct
expected from the Board are also covered in
the Board Charter. The Code extends to the
Bank’s subsidiaries and outsourced staf and
covers the following speci?c issues:
• Compliance with laws and regulations;
• Board and employee conduct;
• Restrictions on acceptance of gifts or
commissions;
• Avoidance of con?ict of interest;
• Quality service and operational efciency;
• Protection and proper use of company
assets;
• Prohibition on insider trading;
• Media relations and publicity;
• Whistle-blowing;
• Relations between employees and the Bank;
• Use of proprietary and insider information
and stakeholder information;
• Employee information and privacy; and
• Respect for human rights and prohibition of
discrimination within the workplace.
Abdullah bin Khalifa Al Attiyah
Chairman
The Commercial Bank of Qatar (Q.S.C.) 52
Report on the Consolidated
Financial Statements
We have audited the accompanying
consolidated ?nancial statements of The
Commercial Bank of Qatar (Q.S.C.) (the “Bank”)
and its subsidiaries (the “Group”), which
comprise the consolidated statement of
?nancial position as at 31 December 2012, and
the consolidated statement of comprehensive
income, consolidated statement of changes in
equity and consolidated statement of cash
?ows for the year then ended, and a summary
of signi?cant accounting policies and
other explanatory notes.
Board of Directors’ Responsibility for
the Consolidated Financial Statements
The Board of Directors is responsible for
the preparation and fair presentation of
these consolidated ?nancial statements
in accordance with International Financial
Reporting Standards and the applicable
provisions of Qatar Central Bank regulations,
and for such internal control as board of
directors determine is necessary to enable
the preparation of consolidated ?nancial
statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion
on these consolidated ?nancial statements
based on our audit. We conducted our audit
in accordance with International Standards
on Auditing. Those standards require
that we comply with ethical requirements
and plan and perform the audit to obtain
reasonable assurance about whether
the ?nancial statements are free from
material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts
and disclosures in the consolidated ?nancial
statements. The procedures selected
depend on the auditors’ judgment, including
the assessment of the risks of material
misstatement of the consolidated ?nancial
statements, whether due to fraud or error.
In making those risk assessments, the auditors
consider internal control relevant to the
entity’s preparation and fair presentation of
the consolidated ?nancial statements in order
to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the efectiveness of the entity’s internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of accounting
estimates made by board of directors, as well
as evaluating the overall presentation of the
consolidated ?nancial statements.
We believe that the audit evidence we
have obtained is sufcient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated ?nancial
statements present fairly, in all material
respects, the ?nancial position of the
Group as of 31 December 2012, and of its
?nancial performance and its cash ?ows
for the year then ended in accordance with
International Financial Reporting Standards
and the applicable provisions of Qatar
Central Bank regulations.
Report on Other Legal and
Regulatory Requirements
We have obtained all the information and
explanations which we considered necessary
for the purpose of our audit. We further
con?rm that the ?nancial information included
in the Annual Report of the Board of Directors
is in agreement with the books and records
of the Group and that we are not aware of
any contravention by the Bank of its Articles
of Association, the applicable provisions
of Qatar Central Bank Law No.33 of 2006
and amendments thereto and of the Qatar
Commercial Companies Law No. 5 of 2002
during the ?nancial year that would materially
afect its activities or its ?nancial position.
Firas Qoussous
Ernst & Young
Qatar Auditors’ Registry No. 236
27 January 2013
Doha
Independent Auditors’ Report to the Shareholders
of The Commercial Bank of Qatar (Q.S.C.)
Annual Report 2012 53
As at 31 December QAR ’000s
Consolidated Statement of Financial Position
Notes 2012 2011
Assets
Cash and balances with central bank 8 3,448,128 2,576,494
Due from banks 9 9,731,562 9,271,920
Loans and advances to customers 10 48,594,475 41,711,783
Investment securities 11 11,162,179 11,732,639
Investment in associates 12 4,054,157 3,926,480
Property and equipment 13 1,197,069 1,070,328
Other assets 14 1,850,182 1,348,400
Total assets 80,037,752 71,638,044
Liabilities
Due to banks 15 9,855,682 6,988,697
Customer deposits 16 41,385,546 37,988,683
Debt securities 17 8,705,816 6,871,674
Other borrowings 18 3,471,515 4,182,412
Other liabilities 19 1,679,815 1,376,282
Total liabilities 65,098,374 57,407,748
Equity
Share capital 20 (a) 2,474,464 2,474,464
Legal reserve 20 (b) 8,740,540 8,740,540
General reserve 20 (c) 26,500 26,500
Risk reserve 20 (d) 924,600 805,600
Fair value reserves 20 (e) 163,225 (68,548)
Other reserves 20 (f) 673,604 556,456
Proposed dividend 20 (g) 1,484,678 1,484,678
Retained earnings 451,767 210,606
Total equity attributable to equity holders of the Bank 14,939,378 14,230,296
Total liabilities and equity 80,037,752 71,638,044
The consolidated ?nancial statements were approved by the Board of Directors on 27th January 2013 and were signed on its behalf by:
HE Abdullah bin Khalifa Al Attiyah Mr. Hussain Ibrahim Alfardan Mr. A C Stevens
Chairman Managing Director Group Chief Executive Ofcer
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
The Commercial Bank of Qatar (Q.S.C.) 54
Notes 2012 2011
Interest income 23 2,898,193 2,876,150
Interest expense 24 (1,031,939) (938,550)
Net interest income 1,866,254 1,937,600
Fee and commission income 25 689,091 752,587
Fee and commission expense 26 (170,487) (166,978)
Net fee and commission income 518,604 585,609
Foreign exchange gain 27 155,563 129,536
Income from investment securities 28 365,972 160,495
Other operating income 29 77,598 50,266
Net operating income 2,983,991 2,863,506
Staf costs 30 (499,382) (453,373)
Depreciation 13 (121,948) (113,704)
Impairment loss on investment securities 11 (d) (61,917) (68,197)
Net impairment loss on loans and advances to customers 10 (c) (139,944) (239,403)
Other expenses 31 (407,052) (308,278)
Pro?t before share of results of associates 1,753,748 1,680,551
Share of results of associates 12 258,546 203,420
Pro?t for the year 2,012,294 I,883,971
Pro?t for the year attributable to:
Equity holders of the Bank 2,012,294 1,883,971
Earnings per share
Basic/Diluted earnings per share (QAR per share) 32 8.13 7.71
For the year ended 31 December QAR ’000s
Consolidated Income Statement
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 55
Notes 2012 201 1
Pro?t for the year 2,012,294 1,883,971
Other comprehensive income for the year
Share of other comprehensive income of investment in associates 21 10,717 (2,162)
Net movement in fair value of available-for-sale investments 21 221,056 (123,034)
Other comprehensive income (loss) for the year 231,773 (125,196)
Total comprehensive income for the year 2,244,067 1,758,775
Total comprehensive income for the year attributable to:
Equity holders of the Bank 2,244,067 1,758,775
Consolidated Statement of Comprehensive Income
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
For the year ended 31 December QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 56
Retained earnings
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserves
Other
reserves
Proposed
dividend Other Total Equity
Balance as at 1 January 2011 2,268,258 7,332,158 26,500 648,000 56,648 469,706 1,587,781 110,806 12,499,857
Total comprehensive income for the year
Pro?t for the year – – – – – – – 1,883,971 1,883,971
Other comprehensive loss 21 – – – – (125,196) – – – (125,196)
Total comprehensive income for the year – – – – (125,196) – – 1,883,971 1,758,775
– – – 157,600 – (157,600) Transfer to risk reserve 20 (d) – – –
Net movement in other reserves 20 (f) – – – – – 86,750 – (86,750) –
Social and sports fund appropriation 22 – – – – – – – (55,143) (55,143)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Increase in share capital 20 (a) 206,206 – – – – – – – 206,206
Increase in legal reserve 20 (b) – 1,408,382 – – – – – – 1,408,382
Dividends paid – – – – – – (1,587,781) – (1,587,781)
Proposed dividends 20 – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders 206,206 1,408,382 – – – – (103,103) (1,484,678) 26,807
Balance as at 31 December 2011 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 1,484,678 210,606 14,230,296
1,484,678 210,606 Balance as at 1 January 2012 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 14,230,296
Total comprehensive income for the year
Pro?t for the year – – – – – – – 2,012,294 2,012,294
Other comprehensive income 21 – – – – 231,773 – – – 231,773
Total comprehensive income for the year – – 231,773 – – 2,012,294 2,244,067
Transfer to risk reserve 20 (d) – – – 119,000 – – – (119,000) –
Net movement in other reserves 20 (f) – – – – – 117,148 – (117,148) –
Social and sports fund appropriation 22 – – – – – – – (50,307) (50,307)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Dividends paid – – – – – – (1,484,678) – (1,484,678)
Proposed dividends 20 (g) – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders – – – – – – – (1,484,678) (1,484,678)
Balance as at 31 December 2012 2,474,464 8,740,540 26,500 924,600 163,225 673,604 1,484,678 451,767 14,939,378
Consolidated Statement of Changes in Equity
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 57
Retained earnings
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserves
Other
reserves
Proposed
dividend Other Total Equity
Balance as at 1 January 2011 2,268,258 7,332,158 26,500 648,000 56,648 469,706 1,587,781 110,806 12,499,857
Total comprehensive income for the year
Pro?t for the year – – – – – – – 1,883,971 1,883,971
Other comprehensive loss 21 – – – – (125,196) – – – (125,196)
Total comprehensive income for the year – – – – (125,196) – – 1,883,971 1,758,775
– – – 157,600 – (157,600) Transfer to risk reserve 20 (d) – – –
Net movement in other reserves 20 (f) – – – – – 86,750 – (86,750) –
Social and sports fund appropriation 22 – – – – – – – (55,143) (55,143)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Increase in share capital 20 (a) 206,206 – – – – – – – 206,206
Increase in legal reserve 20 (b) – 1,408,382 – – – – – – 1,408,382
Dividends paid – – – – – – (1,587,781) – (1,587,781)
Proposed dividends 20 – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders 206,206 1,408,382 – – – – (103,103) (1,484,678) 26,807
Balance as at 31 December 2011 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 1,484,678 210,606 14,230,296
1,484,678 210,606 Balance as at 1 January 2012 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 14,230,296
Total comprehensive income for the year
Pro?t for the year – – – – – – – 2,012,294 2,012,294
Other comprehensive income 21 – – – – 231,773 – – – 231,773
Total comprehensive income for the year – – 231,773 – – 2,012,294 2,244,067
Transfer to risk reserve 20 (d) – – – 119,000 – – – (119,000) –
Net movement in other reserves 20 (f) – – – – – 117,148 – (117,148) –
Social and sports fund appropriation 22 – – – – – – – (50,307) (50,307)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Dividends paid – – – – – – (1,484,678) – (1,484,678)
Proposed dividends 20 (g) – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders – – – – – – – (1,484,678) (1,484,678)
Balance as at 31 December 2012 2,474,464 8,740,540 26,500 924,600 163,225 673,604 1,484,678 451,767 14,939,378
QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 58
For the year ended 31 December QAR ’000s
Notes
2012
201 1
Cash ?ows from operating activities
Pro?t for the year 2,012,294 1,883,971
Adjustments for:
Net impairment loss on loans and advances to customers 139,944 239,403
Impairment loss on investment securities 61,917 68,197
Depreciation 13 121,948 113,704
Amortization of transaction costs 17 & 18 20,527 15,113
Gain on investment securities at fair value through pro?t or loss 28 (2,664) –
Net gain on disposal of available-for-sale securities 28 (337,161) (136,307)
Gain on disposal of property and equipment (364) (37)
Share of results of associates 12 (258,546) (203,420)
Pro?t before changes in operating assets and liabilities 1,757,895 1,980,624
Change in due from banks (2,186,297) (165,878)
Change in loans and advances to customers (7,022,636) (8,286,541)
Change in other assets (475,217) (267,873)
Change in due to banks 597,752 243,525
Change in customer deposits 3,396,863 4,708,021
Change in other liabilities 300,325 (54,106)
Contribution to social and sports activities support fund (47,099) (40,882)
(5,436,309) (3,863,734)
Net cash used in operating activities (3,678,414) (1,883,110)
Cash ?ows from investing activities
Acquisition of investment securities (7,031,632) (4,795,399)
Investment in associates – (1,150)
Dividend received from associates 141,398 116,670
Proceeds from disposal of investment securities 8,101,244 3,111,821
Acquisition of property and equipment 13 (248,690) (115,110)
Proceeds from the sale of property and equipment 365 137
Net cash from/(used in) investing activities 962,685 (1,683,031)
Cash ?ows from ?nancing activities
Net proceeds from issue of shares – 1,614,588
Proceeds from issue of debt securities 17 1,791,934 –
Repayment of debt securities 17 – (1,820,000)
Repayment of other borrowings 18 (2,366,000) –
Proceeds from other borrowings 18 1,650,219 1,816,714
Dividends paid (1,484,678) (1,587,781)
Net cash (used in)/from ?nancing activities (408,525) 23,521
Net decrease in cash and cash equivalents (3,124,254) (3,542,620)
Cash and cash equivalents as at 1 January 3,827,719 7,370,339
Cash and cash equivalents as at 31 December 34 703,465 3,827,719
Operational cash ?ows from interest and dividend:
Interest paid 1,002,400 975,121
Interest received 2,872,323 2,883,151
Dividend received 26,147 24,188
Statement of Cash Flows
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 59
As at and for the year ended 31 December 2012 QAR ’000s
Notes to the Consolidated Financial Statements
1. Reporting entity
The Commercial Bank of Qatar (Q.S.C.) (“the Bank”) is an entity domiciled in the State of Qatar and was incorporated in
1975 as a public shareholding company under Emiri Decree No.73 of 1974. The commercial registration of the Bank is 150.
The address of the Bank’s registered ofce is PO Box 3232, Doha, State of Qatar. The consolidated ?nancial statements of
the Bank for the year ended 31 December 2012 comprise the Bank and its subsidiaries (together referred to as “the Group”).
The Group is primarily engaged in conventional banking, brokerage services and credit card business and operate through
its head ofce and branches established in the State of Qatar and the Bank have 29 branches in Qatar.
The principal subsidiaries of the Group are as follows:
Name
of subsidiary
Country of
incorporation
Capital of the
subsidiary
Activity of the
subsidiary
Percentage of ownership
2012 2011
Orient1 Limited Bermuda US$ 20,000,000 Holding
company
100% 100%
Global Card Services L.L.C. Sultanate
of Oman
OMR 500,000 Credit card
business
100% 100%
CBQ Finance Limited Bermuda US$ 1,000 Debt issuance
for the Bank
100% 100%
Commercialbank Investment Services (S.P.C.) Qatar QAR 100,000,000 Brokerage
services
100% 100%
2. Basis of preparation
(a) Statement of compliance
The consolidated ?nancial 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 Qatar Central Bank
(“QCB”) regulations.
The Group presents its statement of ?nancial position broadly in the order of liquidity. An analysis regarding recovery or
settlement within twelve months after the end of reporting date (“current”) and more than twelve months of the reporting
date (“non-current”) is presented in Note 4(c)(iii).
(b) Basis of measurement
The consolidated ?nancial statements have been prepared on the historical cost basis except for the following items which
are measured at fair value:
• investment securities designated at fair value through income statement;
• derivatives;
• available-for-sale ?nancial assets; and
• the carrying values of recognised assets and liabilities 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 risks that are being hedged.
(c) Functional and presentation currency
These consolidated ?nancial statements are presented in Qatari Riyals (“QAR”), which is the Bank’s functional and
presentation currency. Except as otherwise indicated, ?nancial information presented in QAR has been rounded to the
nearest thousand. Each entity in the group determines its own functional currency and items included in the ?nancial
statements of each entity are measured using that functional currency.
The Commercial Bank of Qatar (Q.S.C.) 60
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
2. Basis of preparation (continued)
(d) Use of estimates and judgments
The preparation of the consolidated ?nancial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that afect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may difer 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 afected.
Information about signi?cant areas of estimation uncertainty and critical judgements in applying accounting policies that have
the most signi?cant efect on the amounts recognised in the consolidated ?nancial statements are described in note 5.
3. Signi?cant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
?nancial statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The ?nancial statements of subsidiaries are included in the consolidated
?nancial statements from the date that control commences until the date that control ceases.
Control is the power to govern the ?nancial and operating policies of an entity so as to obtain bene?ts from its activities and
is generally assumed when the Group holds, directly or indirectly, majority of the voting rights of the entity. In assessing
control, the Group takes into consideration potential voting rights that currently are exercisable. The accounting policies
of subsidiaries are consistent with the accounting policies adopted by the Group.
(ii) Special purpose entities
Special purpose entities (“SPEs”) are entities that are created to accomplish a narrow and well-de?ned objective such as the
securitisation of particular assets, or the execution of a speci?c borrowing or lending transaction. An SPE is consolidated
if, based on an evaluation of the substance of its relationship with the Group and the SPE’s risks and rewards, the Group
concludes that it controls the SPE. The following circumstances may indicate a relationship in which, in substance, the Group
controls and consequently consolidates an SPE:
• the activities of the SPE are being conducted on behalf of the Group according to its speci?c business needs so that
the Group obtains bene?ts from the SPE’s operation;
• the Group has the decision-making powers to obtain the majority of the bene?ts of the activities of the SPE or,
by setting up an ‘autopilot’ mechanism, the Group has delegated these decision-making powers;
• the Group has rights to obtain the majority of the bene?ts of the SPE and therefore may be exposed to risks incident
to the activities of the SPE;
• the Group retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain
bene?ts from its activities.
Annual Report 2012 61
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(a) Basis of consolidation (continued)
(iii) Transactions eliminated on consolidation
Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from
intra-group transactions, are eliminated in preparing the consolidated ?nancial statements.
(iv) Associates
Associates are entities over which the Group has signi?cant in?uence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
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 investment in associates
includes goodwill (net of any accumulated impairment loss) identi?ed on acquisition.
The Group’s share of its associates’ post-acquisition pro?ts or losses is recognised in the consolidated income statement;
its share of post-acquisition movements 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.
For preparation of the consolidated ?nancial statements, consistent accounting policies for similar transactions and other
events in similar circumstances are used.
(v) Joint ventures
Joint ventures are entities where the Group has a contractual arrangement with one or more parties to undertake activities
through entities that are subject to joint control.
The Group recognises interests in a jointly controlled entity using the equity method of accounting. The accounting policy
given in Note 3(a) (iv) therefore applies for joint ventures.
(vi) Funds management
The Group manages and administers assets held in unit trusts and other investment vehicles on behalf of investors.
The ?nancial statements of these entities are not included in these consolidated ?nancial statements except when the
Group controls the entity. Information about the Group’s funds management is set out in Note 36.
The Commercial Bank of Qatar (Q.S.C.) 62
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(b) Foreign currency
(i) 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.
The gains and losses on revaluation of foreign currency non-monetary available-for-sale investments are recognised
in the consolidated statement of changes in equity.
Foreign currency diferences 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
pro?t or loss.
(ii) Foreign operations
The results and ?nancial position of all the Group’s entities that have a functional currency diferent from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each statement of ?nancial position presented are translated at the closing rate for the
reporting date;
• income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative efect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
• all resulting exchange diferences are recognised in other comprehensive income.
(c) Financial assets and ?nancial liabilities
(i) Recognition and initial measurement
The Group initially recognises loans and advances to customers, due from / to banks, customer deposits, debt securities
and other borrowings on the date at which they are originated. All other ?nancial assets and liabilities are initially recognised
on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
A ?nancial asset or ?nancial liability is measured initially at fair value plus, for an item not at fair value through pro?t or loss,
transaction costs that are directly attributable to its acquisition or issue.
(ii) Classi?cation
Financial assets
At inception a ?nancial asset is classi?ed in one of the following categories:
• loans and receivables (LaR);
• held to maturity (HTM);
• available-for-sale (AFS); or
• at fair value through pro?t or loss (FVTPL), either as: held for trading; or FVTPL on initial designation.
Annual Report 2012 63
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(ii) Classi?cation (continued)
Financial liabilities
The Group has classi?ed and measured its ?nancial liabilities at amortised cost.
(iii) Derecognition
The Group derecognises a ?nancial asset when the contractual rights to the cash ?ows from the ?nancial asset expire,
or when it transfers the ?nancial asset in a transaction in which substantially all the risks and rewards of ownership of the
?nancial 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 ?nancial asset. Any interest in transferred ?nancial 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 ?nancial position. On derecognition of a ?nancial asset, the diference between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset transferred), and consideration received (including any new asset
obtained less any new liability assumed) is recognised in pro?t or loss.
The Group enters into transactions whereby it transfers assets recognised on its statement of ?nancial 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.
The Group derecognises a ?nancial liability when its contractual obligations are discharged, cancelled or expired.
(iv) Ofsetting
Financial assets and liabilities are ofset and the net amount presented in the statement of ?nancial position when, and only
when, the Group has a legal right to set of the recognised amounts and it intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a
group of similar transactions such as in the Group’s trading activity.
(v) Measurement principles
(i) Amortised cost measurement
The amortised cost of a ?nancial asset or liability is the amount at which the ?nancial asset or liability is measured at initial
recognition, minus principal repayments, plus or minus the cumulative amortisation using the efective interest method
of any diference between the initial amount recognised and the maturity amount, minus any reduction for impairment
loss. The calculation of efective interest rate includes all fees paid or received that are an integral part of the efective
interest rate (EIR).
The Commercial Bank of Qatar (Q.S.C.) 64
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(v) Measurement principles (continued)
(ii) Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction on the measurement date.
The Group measures the fair value of listed investments at the best bid on close for the investment. For unlisted
investments, the Group recognises any increase in the fair value, when they have reliable indicators to support such
an increase. These reliable indicators are limited to the most recent transactions for the speci?c investment or similar
investments made in the market on a commercial basis between willing and independent buyers and sellers.
The fair value of investments in mutual funds and portfolios whose units are unlisted are measured at the net asset
value, if the net asset value is a reliable measure of fair value.
Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price.
Where the Group has positions with ofsetting risks, mid-market prices are used to measure the ofsetting risk
positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values re?ect
the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the
counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such
as liquidity risk or model uncertainties; to the extent that the Group believes a third-party market participant would take
them into account in pricing a transaction.
All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The Group’s
derivative trading instruments includes forward foreign exchange contracts and interest rate swaps. 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 statement of comprehensive income.
(iii) Identi?cation and measurement of impairment
At each reporting date the Group assesses whether there is objective evidence that ?nancial assets not carried at fair
value through pro?t or loss are impaired. A ?nancial asset or a group of ?nancial assets is impaired when objective
evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss
event has an impact on the future cash ?ows of the asset(s) that can be estimated reliably.
Objective evidence that ?nancial assets (including equity securities) are impaired can include signi?cant ?nancial
difculty 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 group, or economic conditions
that correlate with defaults in the group.
Annual Report 2012 65
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(v) Measurement principles (continued)
(iii) Identi?cation and measurement of impairment (continued)
The Group considers evidence of impairment loss for loans and advances to customers and held-to-maturity
investment securities at both a speci?c asset and collective level. All individually signi?cant loans and advances to
customers and held-to-maturity investment securities are assessed for speci?c impairment. All individually signi?cant
loans and advances to customers and held-to-maturity investment securities found not to be speci?cally impaired are
then collectively assessed for any impairment that has been incurred but not yet identi?ed. Loans and advances to
customers and held-to-maturity investment securities that are not individually signi?cant 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 diference between the carrying amount
of the ?nancial asset and the present value of estimated future cash ?ows discounted at the asset’s original efective
interest rate. Impairment losses are recognised in pro?t or loss and re?ected in an allowance account against loans
and advances to customers.
For the purposes of a collective evaluation of impairment, ?nancial assets are grouped on the basis of similar credit
risk characteristics. Those characteristics are relevant to the estimation of future cash ?ows for groups of such assets
by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets
being evaluated.
Future cash ?ows in a group of ?nancial assets that are collectively evaluated for impairment are estimated on the
basis of the contractual cash ?ows of the assets in the Group and historical loss experience for assets with credit risk
characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable
data to re?ect the efects of current conditions that did not afect the period on which the historical loss experience is
based and to remove the efects of conditions in the historical period that do not currently exist.
For listed equity investments, a decline in the market value from cost by 20% or more, or a decline in the market value
from cost for a continuous period of 9 months or more, 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 pro?t or loss as a reclassi?cation adjustment. The cumulative
loss that is reclassi?ed from other comprehensive income to pro?t or loss is the diference between the acquisition
cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously
recognised in pro?t or loss. Changes in impairment provisions attributable to time value are re?ected as a component
of interest income.
In subsequent periods, the appreciation of fair value of previously impaired available-for-sale equity investment
securities is recorded in fair value reserve. If, in a subsequent period, the fair value of a debt instrument classi?ed as
available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss
was recognised in the consolidated statement of income, the impairment loss is reversed through the consolidated
statement of income.
The Commercial Bank of Qatar (Q.S.C.) 66
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(d) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid
?nancial assets with maturities of three months or less from the acquisition date that are subject to an insigni?cant 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 include amounts due from banks and amounts due to banks with an original maturity of 90 days or less.
(e) Loans and advances to customers
Loans and advances to customers are non-derivative ?nancial assets with ?xed 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.
Loans and advances to customers, cash and balances with central banks and due from banks are classi?ed as ‘loans
and receivables’.
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 efective interest method.
(f) Investment securities
Subsequent to initial recognition investment securities are accounted for depending on their classi?cation as either
‘held to maturity’, ‘fair value through pro?t or loss’, or ‘available-for-sale’.
(i) Held-to-maturity ?nancial assets
Held-to-maturity investments are non-derivative assets with ?xed or determinable payments and ?xed maturity that the
Group has the positive intent and ability to hold to maturity, and which were not designated as at fair value through pro?t or
loss or as available-for-sale. Held-to-maturity investments were carried at amortised cost using the efective interest method.
(ii) Fair value through pro?t or loss
The Group has classi?ed its investments as held for trading where such investments are managed for short term pro?t
taking or designated certain investments as fair value through pro?t or loss. Fair value changes on these investments are
recognised immediately in pro?t or loss.
(iii) Available-for-sale ?nancial assets
Available-for-sale investments are non-derivative investments that are designated as available-for-sale or are not classi?ed
as another category of ?nancial assets. 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 pro?t or loss using the efective interest method. Dividend income is recognised in pro?t 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 pro?t or loss.
Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, whereupon
the cumulative gains and losses previously recognised in other comprehensive income are transferred to pro?t or loss.
Annual Report 2012 67
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(g) Derivatives
(i) Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classi?ed as trading
assets or liabilities. Derivatives held for risk management purposes are measured at fair value on the statement of ?nancial
position. The Group designates certain derivatives held for risk management as well as certain non-derivative ?nancial
instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group
formally documents the relationship between the hedging derivative instrument(s) and hedged item(s), including the risk
management objective and strategy in undertaking the hedge, together with the method that will be used to assess the
efectiveness 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 instrument(s) is (are) expected to be highly efective in ofsetting
the changes in the fair value or cash ?ows of the respective hedged item(s) during the period for which the hedge is
designated, and whether the actual results of each hedge are within a range of 80-125 percent. The Group makes an
assessment for a cash ?ow hedge of a forecast transaction, as to whether the forecast transaction is highly probable
to occur and presents an exposure to variations in cash ?ows that could ultimately afect pro?t 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 ?rm commitment that could afect pro?t or loss, changes in the fair value of the derivative are recognised
immediately in pro?t or loss 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 efective interest method is used, is amortised to pro?t
or loss as part of the recalculated efective interest rate of the item over its remaining life.
(ii) Derivatives held for trading purposes
The Group’s derivative trading instruments includes, forward foreign exchange contracts and interest rate swaps.
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 pro?t or loss.
The Commercial Bank of Qatar (Q.S.C.) 68
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(h) Property and equipment
(i) 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.
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 diferent useful lives, they are accounted for as separate items
(major components) 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
pro?t or loss.
(ii) 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 bene?ts embodied within the part will ?ow 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 pro?t or loss as incurred.
(iii) Depreciation
The depreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value.
Depreciation is recognised in pro?t 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 re?ects the expected pattern of consumption of the future economic
bene?ts embodied in the asset and is based on cost of the asset less its estimated residual value. Land is not depreciated.
The estimated useful lives for the current and comparative years are as follows:
Buildings 20 years
Furniture and equipment 3 – 8 years
Motor Vehicles 5 years
(i) Impairment of non-?nancial assets
Assets that have an inde?nite useful life are not subject to amortisation and are tested annually for impairment.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identi?able cash ?ows
(cash-generating units). Non-?nancial assets other than goodwill that sufered impairment are reviewed for possible
reversal of the impairment at each reporting date.
Annual Report 2012 69
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(j) 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 out?ow of economic bene?ts will be required to settle the obligation.
Provisions are determined by discounting the expected future cash ?ows at a pre-tax rate that re?ects current market
assessments of the time value of money and, where appropriate, the risks speci?c to the liability.
(k) Financial guarantees
Financial guarantees are contracts that require the Group to make speci?ed payments to reimburse the holder for a loss
it incurs because a speci?ed debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantee liabilities are recognised initially at their fair value, and this initial fair value is amortised over the
life of the ?nancial guarantee. The ?nancial guarantee liability is subsequently carried at the higher of this amortised
amount and the present value of any expected payment when a payment under the guarantee has become probable.
Financial guarantees are included within other liabilities.
(l) Employee bene?ts
De?ned contribution plans
The Group provides for its contribution to the State administered retirement fund for Qatari employees in accordance with
the retirement law, and the resulting charge is included with in the personnel cost under general administration expenses
in the consolidated income statement. The Group has no further payment obligations once the contributions have been
paid. The contributions are recognised when they are due.
De?ned bene?t plan
The Group makes provision for end of service bene?ts payable to its expatriate employees on the basis of the employees’
length of service in accordance with the employment policy of the Group and the applicable provisions of Labour Law.
This provision is included in other provisions as part of other liabilities in the consolidated statement of ?nancial position.
The expected costs of these bene?ts are accrued over the period of employment.
Short-term employee bene?ts
Short-term employee bene?t 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 under short-term cash bonus or pro?t-sharing
plans 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.
(m) 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 Bank’s shareholders.
Interest income and expense
Interest income and expense for all interest-bearing ?nancial instruments, except for those classi?ed as held for trading,
are recognized within ‘interest income’ and ‘interest expense’ in the consolidated statement of comprehensive income
using the efective interest method.
Once a ?nancial asset or a group of similar ?nancial assets has been written down as a result of an impairment loss, interest
income is recognized using the rate of interest used to discount the future cash ?ows for the purpose of measuring the
impairment loss.
The Commercial Bank of Qatar (Q.S.C.) 70
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(o) Fees and commission income and expense
Fees and commission income and expense that are integral to the efective interest rate on a ?nancial asset or liability are
included in the measurement of the efective interest rate.
Other fees and commission income, including account servicing fees, investment management fees, sales commission,
placement fees 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.
(p) Income from investment securities
Gains or losses on the disposal of investment securities are recognised in pro?t or loss as the diference between fair value
of the consideration received and carrying amount of the investment securities.
Unrealised gains or losses on fair value changes from remeasurement of investment securities classi?ed as held for trading
or designated as fair value through pro?t or loss are recognised in pro?t or loss.
(q) Dividend income
Dividend income is recognised when the right to receive income is established.
(r) Earnings per share
The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the pro?t or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the pro?t or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the efects of all dilutive potential
ordinary shares.
(s) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker is the person or group that allocates resources to and assesses the
performance of the operating segments of an entity. The Group has determined the Board of Directors of the Bank as
its chief operating decision maker.
All transactions between operating segments are conducted on an arm’s length basis, with intra-segment revenue
and costs being eliminated in head ofce. Income and expenses directly associated with each segment are included
in determining operating segment performance.
(t) Fiduciary activities
The Group acts as fund manager and in other ?duciary capacities that result in the holding or placing of assets on behalf
of individuals, corporate and other institutions. These assets and income arising thereon are excluded from these
consolidated ?nancial statements, as they are not assets of the Group.
(u) Repossessed collateral
Repossessed collaterals in settlement of customers’ debts are stated under “Other assets”. According to QCB instructions,
the Group should dispose of any land and properties acquired in settlement of debts within a period not exceeding three
years from the date of acquisition although this period can be extended with the approval of QCB.
Annual Report 2012 71
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(v) Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with
comparative information.
(w) Parent bank ?nancial information
Statement of ?nancial position and income statement of the Parent bank, disclosed as supplementary information,
is prepared following the same accounting policies as mentioned above except for; investment in subsidiaries,
associates and joint ventures which are not consolidated and are carried at cost; and, any dividends received from
subsidiaries, associates and joint ventures are recognised in the income statement.
(x) New standards and interpretations
During the period, the Group has adopted the following standards efective for the annual period beginning on or after
1 January 2012.
IFRS 7 Financial Instruments (Disclosures)
The amendment requires additional quantitative and qualitative disclosures relating to transfers of ?nancial assets, when:
• Financial assets are derecognised in their entirety, but the entity has a continuing involvement in them (e.g., options
or guarantees on the transferred assets)
• Financial assets are not derecognised in their entirety
The amended disclosures are more extensive and onerous than previous disclosures. This amendment did not have any
impact on the Group.
The following amendments to standards became efective in 2012, but did not have any impact on the accounting policies,
?nancial position or performance of the Group:
Standards Content
IAS 12 Income Taxes – Tax recovery of underlying assets (Amendment)
IFRS 1 First-time adoption – Severe hyperin?ation and removal of ?xed dates for ?rst-time adopters (Amendment)
Standards and amendments issued but not adopted:
The Group is currently considering the implications of the new standards and amendments to standards which are
efective for future accounting periods and has not early adopted any of the new or amended Standards as listed below:
Standards Content Efective date
IFRS 9 Financial Instruments: Classi?cation & Measurement (Part 1) 1 January 2015
IFRS 10 Consolidated Financial Statements 1 January 2013
IFRS 11 Joint Arrangements 1 January 2013
IFRS 12 Disclosure of Interests in Other Entities 1 January 2013
IFRS 13 Fair Value Measurement 1 January 2013
IAS 1 Presentation of Items of Other Comprehensive Income (Amendment) 1 January 2013
IAS 19 Employee Bene?ts (Revised) 1 January 2013
IAS 28 Investments in Associates and Joint Ventures (Efective 1 January 2013) 1 January 2013
IAS 32 Ofsetting Financial Assets and Financial Liabilities – Amendments to IAS 32 1 January 2014
IFRS 7 Disclosures – Ofsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7 1 January 2013
The Commercial Bank of Qatar (Q.S.C.) 72
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management
(a) Introduction and overview
The Group’s business involves taking risks in a targeted manner and managing them professionally. The core functions of
the Group’s risk management are to identify all key risks for the Group, measure these risks, manage the risk positions and
determine capital allocations. The Group regularly reviews its risk management policies and systems to re?ect changes in
markets, products and best market practice.
The Group’s aim is to achieve an appropriate balance between risk and return and minimise potential adverse efects
on the Group’s ?nancial performance. The Group de?nes risk as the possibility of losses or pro?ts foregone, which may
be caused by internal or external factors.
Financial instruments
Financial instruments comprise the Group’s ?nancial assets and liabilities. Financial assets include cash and balances with
Central bank, due from banks, loans and advances, investment securities, derivative ?nancial assets and certain other
assets and ?nancial liabilities include customer deposits, borrowings under repurchase agreements and due to banks,
debt issued and other borrowed funds, derivative ?nancial liabilities and certain other liabilities. Financial instruments also
include rights and commitments included in of- balance sheet items.
Note 3(c) describes the accounting policies followed by the Group in respect of recognition and measurement of the key
?nancial instruments and their related income and expense.
Risk management
The Group derives its revenue from assuming and managing customer risk for pro?t. Through a robust governance
structure, risk and return are evaluated to produce sustainable revenue, to reduce earnings volatility and increase
shareholder value. The most important types of risk are credit risk, liquidity risk, market risk and operational risk. Credit risk
re?ects the possible inability of a customer to meet his/her repayment or delivery obligations. Market risk, which includes
foreign currency, interest rate risks and other price risks, is the risk of ?uctuation in asset and commodity values caused by
changes in market prices and yields. Liquidity risk results in the inability to accommodate liability maturities and withdrawals,
fund asset growth or otherwise meet contractual obligations at reasonable market rates. Operational risk is the potential
for loss resulting from events involving people, processes, technology, legal issues, external events or execution or
regulatory issues.
The Group’s Market Risk and Structural Risk Management policies envisage the use of interest rate derivative contracts and
foreign exchange derivative contracts as part of its asset and liability management process.
Risk and other committees
The governance structure of the Group is headed by the Board of Directors. The Board of Directors evaluates risk involving
the Group Chief Executive Ofcer and the following Board and Management Committees:
1. Board Risk Committee is responsible for all aspects of Enterprise Risk Management including but not restricted to
credit risk, market risk, and operational risk. This committee sets the policy on all risk issues and maintains oversight
of all Group risks through the Management Risk Committee.
2. Board Audit Committee is responsible for setting the policy on all Audit issues and maintains oversight of all Bank
audit issues through the Management Audit Committee. In addition, it is also be responsible for Compliance &
Anti- Money Laundering.
3. Policy, Strategy and Governance Committee is a Board committee which is responsible for all policies and strategies
of the business and compliance of corporate Governance.
Annual Report 2012 73
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(a) Introduction and overview (continued)
Risk and other committees (continued)
4. Board Executive Committee is responsible for evaluating and granting credit facilities and approval of the Group’s
investment activities within authorized limits per Qatar Central Bank and Board of Directors’ guidelines.
5. Management Credit Committee is the highest management level authority on all counterparty risk exposures product
programmes, associated expenditure programmes there under and underwriting exposures on syndications and
securities transactions.
6. Management Risk Committee is the highest management authority on all risk related issues in the Group and its
subsidiaries and afliates in which it has strategic investments. This committee provides recommendations on all risk
policy and portfolio issues to the Board Risk Committee.
7. Asset and Liability Committee (ALCO) is a management committee which is a decision making body for developing
policies relating to all asset and liability management matters.
(b) Credit risk
The Group takes on exposure to credit risk, which is the risk that counterparty will cause a ?nancial loss for the Group by
failing to discharge an obligation. Credit risk is the most important risk for the Group’s business; management therefore
carefully manages its exposure to credit risk. Credit risk is attributed to both on-statement of ?nancial position ?nancial
instruments such as loans, overdrafts, debt securities and other bills, investments, and acceptances and credit equivalent
amounts related to of-balance sheet ?nancial instruments. The Group’s approach to credit risk management preserves
the independence and integrity of risk assessment, while being integrated into the business management processes.
Policies and procedures, which are communicated throughout the organisation, guide the day-to-day management of
credit exposure and remain an integral part of the business culture. The goal of credit risk management is to evaluate and
manage credit risk in order to further enhance this strong credit culture.
(ii) Credit risk measurement
(a) Loans and advances
The Group’s aim is to maintain a sound assets portfolio by enhancing its loan mix. This is being achieved through
a strategy of reducing exposure to non-core client relationships while increasing the size of the consumer portfolio
comprising of consumer loans, vehicle loans, credit cards and residential mortgages, which have historically recorded
very low loss rates. In measuring credit risk of loan and advances to customers and to banks at a counterparty level,
the Group re?ects three components (i) the ‘probability of default’ by the client or counterparty on its contractual
obligations; (ii) current exposures to the counterparty and its likely future development, from which the Group derive
the ‘exposure at default’; and (iii) the likely recovery ratio on the defaulted obligations (the ‘loss given default’).
(i) The Group assesses the probability of default of individual counterparties using internal rating tools tailored to the
various categories of counterparty. They combine statistical analysis along with the business relationship ofcers
and credit risk ofcers assessment and are validated, where appropriate, by comparison with externally available
data. Clients of the Group are segmented based on a 10 point rating scale. The Group’s rating scale re?ects the
range of default probabilities de?ned for each rating class. This means that, in principle, exposures migrate between
classes as the assessment of their probability of default changes. The rating tools are kept under review and
upgraded as necessary.
The ratings of the major rating agency are mapped to Group’s rating grades based on the long-term average default
rates for each external grade. The Group uses the external ratings where available to benchmark internal credit risk
assessment. Observed defaults per rating category vary year on year, especially over an economic cycle.
The Commercial Bank of Qatar (Q.S.C.) 74
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Credit risk measurement (continued)
(a) Loans and advances (continued)
(ii) Exposure at default is based on the amounts the Group expects to be owed at the time of default. For example,
for a loan this is the face value. For a commitment, the Group includes any amount already drawn plus the further
amount that may have been drawn by the time of default, should it occur.
(iii) Loss given default or loss severity represents the Group’s expectation of the extent of loss on a claim should default
occur. It is expressed as percentage loss per unit of exposure and typically varies by type of counterparty, type and
seniority of claim and availability of collateral or other credit mitigation.
(b) Debt securities and other bills
For debt securities and other bills, external rating such as Standard & Poor’s and Moody’s ratings or their equivalents
are used by Group Treasury for managing of the credit risk exposures. The investments in those securities and bills
are viewed as a way to gain a better credit quality mapping and maintain a readily available source to meet the funding
requirement at the same time.
(ii) Risk limit control and mitigation policies
Portfolio diversi?cation
Portfolio diversi?cation is an overriding principle, therefore, the credit policies are structured to ensure that the
Group is not over exposed to a given client, industry sector or geographic area. To avoid excessive losses if any single
counter-party is unable to ful?l its payment obligations, large exposure limits have been established per credit policy.
Limits are also in place to manage exposures to a particular country or sector. These risks are monitored on an
ongoing basis and subject to an annual or more frequent review, when considered necessary.
Collateral
In order to proactively respond to credit deterioration the Group employs a range of policies and practices to mitigate
credit risk.
The most traditional of these is the taking of security for funds advanced, which is common practice. The Group
implements guidelines on the acceptability of speci?c classes of collateral or credit risk mitigation. The principal
collateral types for loans and advances are:
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory and accounts receivable;
• Charges over ?nancial instruments such as debt securities and equities.
Longer-term ?nance and lending to corporate entities are generally secured; revolving individual credit facilities are
generally unsecured. In addition, in order to minimise the credit loss the Group will seek additional collateral from the
counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances.
Collateral held as security for ?nancial assets other than loans and advances is determined by the nature of the
instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios of ?nancial instruments.
Annual Report 2012 75
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Credit risk measurement (continued)
(b) Debt securities and other bills (continued)
Credit-related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees
and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which
are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up
to a stipulated amount under speci?c terms and conditions – are collateralised by the underlying shipments of goods
to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially
exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than
the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining
speci?c credit standards. The Group monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term commitments.
Credit risk arising from derivative ?nancial instruments is, at any time, limited to those with positive fair values, as recorded
on the statement of ?nancial position. With gross-settled derivatives, the Group is also exposed to a settlement risk,
being the risk that the Group honours its obligation but the counterparty fails to deliver the counter-value.
(iii) Maximum exposure to credit risk before collateral held or other credit enhancements
2012 201 1
Credit risk exposures relating to assets recorded on the consolidated
statement of ?nancial position are as follows:
Balances with central bank 3,024,354 2,211,906
Due from banks 9,731,562 9,271,920
Loans and advances to customers 48,594,475 41,711,783
Investment securities – debt 10,010,277 10,525,009
Other assets 912,306 827,037
Total as at 31 December 72,272,974 64,547,655
Other credit risk exposures are as follows:
Guarantees 12,048,098 9,088,622
Letter of credit 7,541,840 5,217,592
Unutilised credit facilities 5,326,125 5,859,107
Total as at 31 December 24,916,063 20,165,321
97,189,037 84,712,976
The above table represents a worse-case scenario of credit risk exposure to the Group, without taking account of any
collateral held or other credit enhancements attached. For assets recorded on the statement of ?nancial position, the
exposures set out above are based on net carrying amounts as reported in the consolidated statement of ?nancial position.
The Commercial Bank of Qatar (Q.S.C.) 76
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure
Geographical sectors
The following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any
collateral held or other credit support), as categorized by geographical region. For this table, the Group has allocated
exposures to regions based on the country of domicile of its counterparties.
2012
Qatar Other GCC Other Middle East Rest of the world Total
Balances with
central bank 3,024,354 – – – 3,024,354
Due from banks and
?nancial institutions 3,991,495 2,562,195 273,014 2,904,858 9,731,562
Loans and advances
to customers 45,352,295 2,281,335 145,600 815,245 48,594,475
Investment
securities – debt 8,248,367 1,125,629 – 636,281 10,010,277
Other assets 460,671 169,627 341 281,667 912,306
61,077,182 6,138,786 418,955 4,638,051 72,272,974
2011
Qatar Other GCC Other Middle East Rest of the world Total
Balances with central bank 2,211,906 – – – 2,211,906
Due from banks and
?nancial institutions 6,177,703 2,536,149 18,665 539,403 9,271,920
Loans and advances
to customers 38,989,926 2,180,481 – 541,376 41,711,783
Investment securities – debt 9,629,440 509,223 – 386,346 10,525,009
Other assets 462,600 112,643 9 251,785 827,037
57,471,575 5,338,496 18,674 1,718,910 64,547,655
Annual Report 2012 77
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
2012
Qatar Other GCC Other Middle East Rest of the world Total
Guarantees 5,642,000 1,864,332 324,596 4,217,170 12,048,098
Letter of credit 3,889,389 47,995 100,475 3,503,981 7,541,840
Unutilised credit facilities 5,026,737 299,388 – – 5,326,125
14,558,126 2,211,715 425,071 7,721,151 24,916,063
2011
Qatar Other GCC Other Middle East Rest of the world Total
Guarantees 4,997,422 1,335,794 752,402 2,003,004 9,088,622
Letter of credit 1,292,280 37,020 7,031 3,881,261 5,217,592
Unutilised credit facilities 5,486,835 372,272 – – 5,859,107
11,776,537 1,745,086 759,433 5,884,265 20,165,321
The Commercial Bank of Qatar (Q.S.C.) 78
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
Industry sectors
The following table breaks down the Group’s credit exposure at carrying amounts before taking into account collateral held
or other credit enhancements, as categorized by the industry sectors of the Group’s counterparties.
Gross exposure
2012
Gross exposure
2011
Funded
Government 14,908,357 12,191,199
Government agencies 4,043,620 6,802,475
Industry 1,359,544 2,020,860
Commercial 6,810,623 5,537,182
Services 16,511,179 13,099,292
Contracting 3,778,961 2,782,738
Real estate 16,179,614 13,257,588
Personal 6,985,502 7,338,519
Others 1,695,574 1,517,802
Total funded 72,272,974 64,547,655
Un-funded
Government institutions & semi government agencies 3,135,373 868,527
Financial services 6,395,483 5,559,196
Commercial and others 15,385,207 13,737,598
Total Un-funded 24,916,063 20,165,321
Total 97,189,037 84,712,976
Total maximum exposure net of collateral is QAR 23 billion (2011: QAR 24 billion)
Annual Report 2012 79
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
Credit risk exposure
The table below presents an analysis of ?nancial assets by rating agency designation based on Standard & Poor’s ratings
or their equivalent:
2012 2011
Equivalent grades
AAA to AA- 38,779,759 38,896,269
A+ to A- 7,117,909 7,018,070
BBB+ to BBB- 46,661,602 35,500,030
BB+ to B- 3,717,461 2,471,569
Unrated/equivalent internal grading 912,306 827,038
97,189,037 84,712,976
The Commercial Bank of Qatar (Q.S.C.) 80
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(v) Credit quality
The following table sets out the credit qualities of the Group’s credit exposure at carrying amounts before taking into account collateral held or
other credit enhancements.
Loans and advances to customers Due from banks Investment securities – debt
2012 2011 2012 2011 2012 2011
Neither past due nor impaired:
A: Low risk – excellent 10,695,370 14,251,335 7,713,461 8,013,589 9,154,311 10,046,901
B: Standard/satisfactory risk 37,084,177 26,978,058 2,018,101 1,258,331 855,966 478,108
47,779,547 41,229,393 9,731,562 9,271,920 10,010,277 10,525,009
Past due but not impaired :
A: Low risk – excellent 5,238 7,281 – – – –
B: Standard/satisfactory risk 971,339 514,885 – – – –
Carrying amount 976,577 522,166 – – – –
Impaired:
C: Substandard 92,569 184,255 – – – –
D: Doubtful 73,025 66,096 – – – –
E: Bad debts 299,569 257,275 – – 202,126 260,842
465,163 507,626 – – 202,126 260,842
Less: impairment
allowance- speci?c (359,992) (321,881) – – (202,126) (260,842)
Less: impairment
allowance- Collective (266,820) (225,521) – – – –
(161,649) (39,776) – – – –
Carrying amount – net 48,594,475 41,711,783 9,731,562 9,271,920 10,010,277 10,525,009
Investment securities – debt
Held to maturity 3,324,511 5,648,715
Available for sale 6,830,628 5,137,136
Investment securities designated at
fair value through income statement 57,264 –
Less: impairment allowance (202,126) (260,842)
Carrying amount – net 10,010,277 10,525,009
Note: None of the other assets are past due or impaired as at 31 December 2012 and 31 December 2011.
Annual Report 2012 81
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(v) Credit quality (continued)
Impaired loans and advances to customers and investment in debt securities
Individually impaired loans and advances to customers and investment debt securities (other than those carried at fair value
through pro?t or loss) 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 agreement(s).
Investment debt securities carried at fair value through pro?t or loss are not assessed for impairment but are subject to the
same internal grading system, where applicable.
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.
Loans and advances to customers less than 90 days as at 31 December past due are not considered impaired, unless other
information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past
due but not impaired were as follows:
2012 2011
Up to 30 days 581,199 328,798
31 to 60 days 272,591 66,492
Above 60 days 122,787 126,876
Gross 976,577 522,166
Rescheduled loans and advances to customers
Restructuring activities include extended payment arrangements, approved external management plans, modi?cation 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. Following
restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar
accounts as non impaired. The carrying value of renegotiated loans and advances as at 31 December 2012 was QAR 4,297
million (2011: QAR 3,058 million).
(vi) 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 indices 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 is QAR 324 million (2011: QAR 189 million) for past due up to 30 days, QAR 11 million (2011: QAR 24
million) for past due from 31 to 60 days and QAR 89 million (2011: QAR 41 million) for past due above 60 days.
The Commercial Bank of Qatar (Q.S.C.) 82
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(vii) Repossessed collateral
During the year, the Group acquired ownership of land and building by taking possession of collateral held as security for
an amount of QAR 344 million (2011: Nil).
Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness.
Repossessed property is classi?ed in the consolidated statement of ?nancial position within other assets.
(viii) Write-of policy
The Group writes of a loan or an investment debt security balance, and any related allowances for impairment losses,
when Group Credit determines that the loan or security is uncollectible. QCB approval is required for such write of when
the amount to be written of exceeds Qatar Riyal hundred thousand.
This determination is made after considering information such as the occurrence of signi?cant changes in the
borrower’s/issuer’s ?nancial position such that the borrower/issuer can no longer pay the obligation, or that proceeds
from collateral will not be sufcient to pay back the entire exposure. For smaller balance standardised loans, write-of
decisions generally are based on a product-speci?c past due status. The amount written of during the year was
QAR 127 million (2011: QAR 867 million).
(c) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of e.g. customer deposits
being withdrawn, cash requirements from contractual commitments, or other cash out?ows, such as debt maturities or
margin calls for derivatives etc. Such out?ows would deplete available cash resources for client lending, trading activities and
investments. In extreme circumstances, lack of liquidity could result in reductions in the consolidated statement of ?nancial
position and sales of assets, or potentially an inability to ful?l lending commitments. The risk that the Group will be unable to
do so is inherent in all banking operations and can be afected by a range of institution-speci?c and market-wide events
including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.
(i) Management of liquidity risk
The management of liquidity risk is governed by the Group’s liquidity policy. The primary objective of liquidity risk
management; over which ALCO has oversight, is to provide a planning mechanism for unanticipated changes in the
demand or needs for liquidity created by customer behaviour or abnormal market conditions. ALCO emphasises the
maximisation and preservation of customer deposits and other funding sources. ALCO also monitors deposit rates,
levels, trends and signi?cant changes. Deposit marketing plans are regularly reviewed for consistency with the liquidity
policy requirements. ALCO has in place a contingency plan, which is periodically reviewed. The Group’s ability to raise
wholesale and/or long term funding at competitive costs is directly impacted by our credit ratings, which are as follows:
Moody’s: Long Term A1, Short Term Prime 1 and ?nancial strength C-, outlook stable.
Fitch: Long Term A, Short Term F1 and Financial strength C, outlook stable.
Standard & Poor’s: Long Term A-, Short Term A-2, outlook stable.
Annual Report 2012 83
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(ii) 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 under the heading ‘Liquidity adequacy
ratio’ (LAR). The minimum ratio limit set by QCB is 100%.
Following table sets out the LAR position of the Group during the year as follows:
2012 2011
At 31 December 102.18 1 12.55
Average for the year 106.23 1 10.07
Maximum for the year 111.91 130.38
Minimum for the year 100.1 1 104.58
(iii) Maturity analysis
The following table sets out the maturity pro?le of the Group’s assets and liabilities. The contractual/expected maturities of
assets and liabilities have been determined on the basis of the remaining period at 31 December to the contractual maturity
date and do not take account of the efective maturities as indicated by the Group’s deposit retention history and the
availability of liquid funds. Management monitors the maturity pro?le to ensure that adequate liquidity is maintained.
The Commercial Bank of Qatar (Q.S.C.) 84
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis (continued)
Carrying
amount
Demand/
within 1 month 1-3 months
3 months
– 1 year
Subtotal
1 year 1-5 years
More than
5 years No Maturity
31 December 2012
Cash and
balances with
central bank 3,448,128 1,033,721 – – 1,033,721 – – 2,414,407
Due from banks 9,731,562 6,977,586 484,800 2,087,176 9,549,562 182,000 – –
Loans and
advances to
customers 48,594,475 2,162,809 1,274,851 4,262,383 7,700,043 10,173,224 30,721,208 –
Investment
securities 11,162,179 11,421 534,502 1,481,812 2,027,735 4,245,900 3,736,642 1,151,902
Investment in
associates 4,054,157 – – – – – – 4,054,157
Property and
equipment and
others assets 3,047,251 715,124 144,270 124,741 984,135 866,047 – 1,197,069
Total 80,037,752 10,900,661 2,438,423 7,956,112 21,295,196 15,467,171 34,457,850 8,817,535
Due to banks 9,855,682 7,584,548 522,572 – 8,107,120 1,748,562 – –
Customer
deposits 41,385,546 30,264,374 7,509,315 3,062,600 40,836,289 549,257 – –
Debt securities 8,705,816 – – – – 6,549,887 2,155,929 –
Other borrowings 3,471,515 – – 1,818,345 1,818,345 1,653,170 – –
Other liabilities 1,679,815 1,045,966 301,412 175,065 1,522,443 157,372 – –
Total 65,098,374 38,894,888 8,333,299 5,056,010 52,284,197 10,658,248 2,155,929 –
Diference 14,939,378 (27,994,227) (5,894,876) 2,900,102 (30,989,001) 4,808,923 32,301,921 8,817,535
Annual Report 2012 85 85
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis (continued)
Carrying
amount
Demand/
within 1 month 1-3 months
3 months
– 1 year
Subtotal
1 year 1-5 years
More than
5 years No Maturity
31 December 2011
Cash and
balances with
central bank 2,576,494 462,572 – – 462,572 – – 2,113,922
Due from banks 9,271,920 7,296,015 1,542,745 433,160 9,271,920 – – –
Loans and
advances to
customers 41,711,783 4,991,773 564,390 1,081,623 6,637,786 7,981,931 27,092,066 –
Investment
securities 11,732,639 12,055 173,670 2,200,018 2,385,743 3,822,272 4,316,994 1,207,630
Investment in
associates 3,926,480 – – – – – – 3,926,480
Property and
equipment and
others assets 2,418,728 696,202 131,454 94,449 922,105 426,295 – 1,070,328
Total 71,638,044 13,458,617 2,412,259 3,809,250 19,680,126 12,230,498 31,409,060 8,318,360
Due to banks 6,988,697 5,703,207 134,680 – 5,837,887 1,150,810 – –
Customer
deposits 37,988,683 27,875,676 7,351,672 2,742,140 37,969,488 19,195 – –
Debt securities 6,871,674 – – – – 4,718,736 2,152,938 –
Other borrowings 4,182,412 – 2,365,698 182,000 2,547,698 1,634,714 – –
Other liabilities 1,376,282 917,341 222,130 86,919 1,226,390 149,892 – –
Total 57,407,748 34,496,224 10,074,180 3,011,059 47,581,463 7,673,347 2,152,938 –
Diference 14,230,296 (21,037,607) (7,661,921) 798,191 (27,901,337) 4,557,151 29,256,122 8,318,360
The Commercial Bank of Qatar (Q.S.C.) 86
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (?nancial liabilities and derivatives)
The table below summarises the maturity pro?le of the Group’s ?nancial liabilities at 31 December based on contractual undiscounted
repayment obligations.
Carrying
amount
Gross
undiscounted
cash ?ows
Less than
1 month 1-3 months
3 months
– 1 year
1-5 years
More than
5 years
31 December 2012
Non-derivative ?nancial liabilities
Due to banks 9,855,682 9,877,210 7,601,115 523,714 – 1,752,381 –
Customer deposits 41,385,546 41,848,180 30,602,688 7,593,259 3,096,836 555,397 –
Debt securities 8,705,816 10,716,123 – – – 8,074,159 2,641,964
Other borrowings 3,471,515 3,566,207 – – 1,867,944 1,698,263 –
Other liabilities 1,329,857 1,329,857 696,008 301,412 175,065 157,372 –
Total liabilities 64,748,416 67,337,577 38,899,811 8,418,385 5,139,845 12,237,572 2,641,964
Derivative ?nancial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
Total Up to 1 Year 1-5 years
More than
5 Years
Derivatives Held for Trading:
Forward foreign exchange contracts
Out?ow (2,067,611) (2,067,611) – –
In?ow 2,090,693 2,090,693 – –
Interest rate swaps
Out?ow (243,904) (28,853) (102,453) (112,598)
In?ow 246,749 29,686 103,365 113,698
Derivatives Held as Fair Value Hedges:
Cross currency interest rate swaps
Out?ow (1,117,638) (29,444) (1,088,194) –
In?ow 1,191,944 32,904 1,159,040 –
Total Out?ows (3,429,153) (2,125,908) (1,190,647) (112,598)
Total in?ows 3,529,386 2,153,283 1,262,405 113,698
Annual Report 2012 87 87
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (?nancial liabilities and derivatives) (continued)
Carrying
amount
Gross
undiscounted
cash ?ows
Less than
1 month
1-3 months
3 months
– 1 year
1-5 years
More than
5 years
31 December 2011
Non-derivative ?nancial liabilities
Due to banks 6,988,697 7,020,188 5,719,918 135,075 – 1,165,195 –
Customer deposits 37,988,683 38,414,487 28,188,127 7,434,075 2,772,876 19,409 –
Debt securities 6,871,674 9,166,459 – – – 5,580,235 3,586,224
Other borrowings 4,182,412 4,203,115 – 2,370,129 182,341 1,650,645 –
Other liabilities 1,110,690 1,110,690 651,749 222,130 86,919 149,892 –
Total liabilities 57,142,156 59,914,939 34,559,794 10,161,409 3,042,136 8,565,376 3,586,224
Derivative ?nancial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
Total Up to 1 Year 1-5 years
More than
5 Years
Derivatives Held for Trading:
Forward foreign exchange contracts
Out?ow (979,422) (979,422) – –
In?ow 979,199 979,199 – –
Interest rate swaps
Out?ow (272,006) (29,416) (106,227) (136,363)
In?ow 277,294 30,796 108,719 137,779
Derivatives Held as Fair Value Hedges:
Cross currency interest rate swaps
Out?ow (1,156,408) (31,776) (1,124,632) –
In?ow 1,186,746 31,880 1,154,866 –
Total Out?ows (2,407,836) (1,040,614) (1,230,859) (136,363)
Total in?ows 2,443,239 1,041,875 1,263,585 137,779
The Commercial Bank of Qatar (Q.S.C.) 88
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(v) Of-balance sheet items
Below 1 year Above 1 year Total
As at December 2012
Loan commitments 1,323,176 4,002,949 5,326,125
Guarantees and other ?nancial facilities 16,952,282 2,637,656 19,589,938
Capital commitments 393,822 – 393,822
Total 18,669,280 6,640,605 25,309,885
As at December 2011
Loan commitments 1,054,582 4,804,525 5,859,107
Guarantees and other ?nancial facilities 12,214,409 2,091,805 14,306,214
Capital commitments 479,243 – 479,243
Total 13,748,234 6,896,330 20,644,564
(d) Market risks
The Group takes on exposure to market risks, which is the risk that the fair value or future cash ?ows of a ?nancial instrument
will ?uctuate 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 speci?c 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 and by product type.
The market risks arising from trading and non-trading activities are concentrated in Group Treasury and monitored by two
teams separately. Regular reports are submitted to the Board of Directors and heads of each business unit.
Trading portfolios include those positions arising from market-making transactions where the Group acts as principal with
clients or with the market.
Non-trading portfolios primarily arise from the interest rate management of the entity’s retail and commercial banking
assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Group’s
held-to-maturity and available-for-sale investments.
(i) Management of market risks
Overall authority for market risk is vested in ALCO. Group Market Risk is responsible for the development of detailed risk
management policies (subject to review and approval by ALCO) and for the day-to-day review of their implementation.
Annual Report 2012 89
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(i) Management of market risks (continued)
The Group’s proprietary investments are managed according to the Group’s internal investment policy, which has
been approved by the Board of Directors and drafted in accordance with the Qatar Central Bank guidelines. The Group’s
trading activities are conducted by Treasury and Investments Division. These activities are subject to business line
guidelines and policies. The Group employs several techniques to measure and control activities including sensitivity
analysis, position limits and risk based limits. The maximum limit of the Group’s total proprietary investments (i.e. total of
fair value through pro?t and loss, held to maturity and available for sale investment excluding Qatar Government issued or
guaranteed investment or debt security portfolios) is restricted to 70% of the Group’s capital and reserves (Tier 1 capital).
However the individual limit for the held for trading investment portfolio is 10% of capital and reserves (Tier 1 capital) with
a maximum permissible loss to carry for local securities at any given time. Investment policy is reviewed by the Board of
Directors annually and day to day limits are independently monitored by the Market Risk Management department.
Investment proposals are approved at the Investment Committee and decisions driven by the investment strategy,
which is developed by the business line under ALCO oversight and approved by the Board.
(ii) Exposure to interest rate risk – non-trading portfolio
The principal risk to which non-trading portfolios are exposed is the risk of loss from ?uctuations in the future cash ?ows
or fair values of ?nancial 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.
The Group takes on exposure to the efects of ?uctuations in the prevailing levels of market interest rates on both its fair
value and cash ?ow risks. Interest margins may increase as a result of such changes but may reduce losses in the event
that unexpected movements arise. The Board sets limits on the level of mismatch of interest rate repricing that may be
undertaken, which is monitored daily by Group Treasury.
The Asset and Liability Management (“ALM”) process, managed through ALCO, is used to manage interest rate risk
associated with non-trading ?nancial instruments. Interest rate risk represents the most signi?cant market risk exposure
to the Group’s non-trading ?nancial instruments.
The Group’s goal is to manage interest rate sensitivity so that movements in interest rates do not adversely afect net
interest income. Interest rate risk is measured as the potential volatility to the net interest rate income caused by changes
in market interest rates. The Group typically manages the interest rate risk of its non-trading ?nancial instruments
by segmenting these assets and liabilities into two broad portfolios: non-discretionary and discretionary. The non-
discretionary portfolio consists of the Group’s customer driven loans and deposit positions and securities required
to support regulatory requirements. To manage the resulting interest rate sensitivity of the Group’s non-discretionary
portfolio, the Group uses a discretionary portfolio of securities, long dated deposits, inter-bank takings and placements,
and when warranted, derivatives. Strategically positioning the discretionary portfolio, the Group largely manages the
interest rate sensitivity in the non-discretionary portfolio.
The following table summarises the interest / pro?t rate sensitivity position at year end, by reference to the re-pricing
period of the Group’s assets, liabilities and of- balance sheet exposures.
The Commercial Bank of Qatar (Q.S.C.) 90
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
A summary of the Group’s interest rate gap position on non-trading portfolios is as follows:
Repricing in:
Carrying
amount
Less than 3
months 3-12 months 1-5 years
More than
5 years
Non-interest
sensitive
Efective
interest rate %
31 December 2012
Cash and balances with
central bank 3,448,128 1,033,721 – – – 2,414,407
Due from banks 9,731,562 7,462,386 2,087,176 182,000 – – 0.89
Loans and advances to customers 48,594,475 27,966,992 18,838,262 1,503,779 – 285,442 5.15
Investment securities 11,162,179 261,823 2,112,649 3,342,004 4,293,801 1,151,902 4.69
Investment associates 4,054,157 – – – – 4,054,157 –
Property and equipment and
other assets 3,047,251 – – – – 3,047,251 –
80,037,752 36,724,922 23,038,087 5,027,783 4,293,801 10,953,159
Due to banks (9,855,682) (8,718,807) (1,136,875) – – – 0.64
Customer deposits (41,385,546) (28,256,660) (3,062,600) (549,257) – (9,517,029) 1.52
Debt securities (8,705,816) – – (6,549,887) (2,155,929) – 5.34
Other borrowings (3,471,515) (1,653,170) (1,818,345) – – – 1.66
Other liabilities (1,679,815) – – – – (1,679,815) –
Equity (14,939,378) – – – – (14,939,378) –
(80,037,752) (38,628,637) (6,017,820) (7,099,144) (2,155,929) (26,136,222)
Interest rate sensitivity gap – (1,903,715) 17,020,267 (2,071,361) 2,137,872 (15,183,063)
Cumulative Interest rate
sensitivity gap (1,903,715) 15,116,552 13,045,191 15,183,063 –
Annual Report 2012 91 91
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
Repricing in:
Carrying
amount
Less than 3
months 3-12 months 1-5 years
More than
5 years
Non-interest
sensitive
Efective
interest rate %
31 December 2011
Cash and balances with
central bank 2,576,494 462,572 – – – 2,113,922
Due from banks 9,271,920 8,838,760 433,160 – – – 0.83
Loans and advances to customers 41,711,783 26,309,909 13,317,281 1,986,614 – 97,979 6.03
Investment securities 11,732,639 430,326 2,220,981 4,319,018 3,554,684 1,207,630 4.69
Investment associates 3,926,480 – – – – 3,926,480
Property and equipment and
other assets 2,418,728 – – – – 2,418,728
71,638,044 36,041,567 15,971,422 6,305,632 3,554,684 9,764,739
Due to Bank (6,988,697) (5,837,887) (1,150,810) – – 0.51
Customer deposits (37,988,683) (27,374,170) (2,551,460) (19,195) – (8,043,858) 1.71
Debt securities (6,871,674) – (4,718,736) (2,152,938) – 4.73
Other borrowings (4,182,412) – (2,547,698) (1,634,714) – – 0.94
Other liabilities (1,376,282) – – – – (1,376,282)
Equity (14,230,296) – – – – (14,230,296)
(71,638,044) (33,212,057) (6,249,968) (6,372,645) (2,152,938) (23,650,436)
Interest rate sensitivity gap – 2,829,510 9,721,454 (67,013) 1,401,746 (13,885,697)
Cumulative Interest rate
sensitivity gap 2,829,510 12,550,964 12,483,951 13,885,697 –
The Commercial Bank of Qatar (Q.S.C.) 92
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Sensitivity analysis
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s ?nancial assets
and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include
a 50 basis point (bp) parallel fall or rise in all yield curves worldwide and a 50 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 ?nancial position, is as follows:
50 bp parallel
increase
50 bp parallel
decrease
Sensitivity of net interest income
2012
At 31 December (61,141) 61,141
Average for the year (72,170) 72,170
2011
At 31 December (80,387) 80,387
Average for the year (70,798) 70,798
Sensitivity of reported equity to interest rate movements
2012
At 31 December 1,350 (1,350)
Average for the year 1,400 (1,400)
2011
At 31 December 1,450 (1,450)
Average for the year 1,308 (1,308)
Interest rate movements afect reported equity in the following ways:
• retained earnings arising from increases or decreases in net interest income and the fair value changes reported in pro?t or loss; and
• fair value reserves arising from increases or decreases in fair values of available-for-sale-?nancial instruments is reported directly in other
comprehensive income.
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.
Annual Report 2012 93
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios
Foreign currency transactions
The Group monitors any concentration risk in relation to any individual currency in regard to the translation of foreign
currency transactions and monetary assets and liabilities. The table shows the net foreign currency exposure by major
currencies at the end of the reporting period along with the sensitivities if there were to be a change in the currency
exchange rate.
2012 201 1
Net foreign currency exposure:
Pounds Sterling 19,221 (8,677)
Euro 528,857 (10,081)
USD (2,685,959) (2,475,774)
Other currencies 3,203,459 3,039,278
Increase/(decrease)
in pro?t or loss
Increase/(decrease)
in fair value reserve
2012 201 1
2012 201 1
5% increase/(decrease) in currency
exchange rate
Pound Sterling 961 (434) 45 35
Euro 26,443 (504) 268 238
Other currencies 160,173 151,964 16,646 12,025
Open exchange position in other currencies represents Group’s investment in associates denominated in RO and AED.
As these currencies and Qatar Riyal are pegged to the USD, there is no impact to income statement and impact to equity
is insigni?cant.
The Commercial Bank of Qatar (Q.S.C.) 94
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios
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 non-trading equity price risk exposure arises from equity securities classi?ed as held for trading and available for
sale. A 10 per cent increase in the Qatar Exchange and Bombay Stock Exchange and a 15 per cent increase in the Abu Dhabi
Securities Exchange market index at 31 December 2012 would have increased equity by QAR 43 million (2011: QAR 39 million).
An equivalent decrease would have resulted in an equivalent but opposite impact.
The Group is also exposed to equity price risk and the sensitivity analysis thereof is as follows:
2012 201 1
Increase/(decrease) in other comprehensive income:
Qatar Exchange 9,229 14,564
Bombay Stock Exchange 29,511 20,388
Abu Dhabi Securities Exchange 4,128 3,941
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 diferent from the one stated above and is subject to impairment assessment at the end of each reporting period.
(e) Operational risks
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s
involvement with ?nancial instruments, including processes, personnel, technology and infrastructure, and from external
factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour.
The Group’s objective is to manage operational risk so as to balance the avoidance of ?nancial losses and damage to the
Group’s reputation with overall cost efectiveness and to avoid Control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address Operational risk is assigned
to senior management within each business unit. This responsibility is supported by the development of overall Group
standards for the management of operational risk in the following areas:
• requirements for appropriate segregation of duties, including the independent authorisation of transactions;
• requirements for the reconciliation and monitoring of transactions;
• compliance with regulatory and other legal requirements;
• documentation of controls and procedures;
• requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures
to address the risks identi?ed;
• requirements for the reporting of operational losses and proposed remedial action;
• development of contingency plans;
• training and professional development;
• ethical and business standards; and
• risk mitigation, including insurance where this is efective.
Annual Report 2012 95
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(f) Capital management
Regulatory capital
The Group’s policy is to maintain a strong capital base so as to ensure investor, creditor and market con?dence and to
sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised
and the Group recognises the need to maintain a balance between the higher returns that might be possible with greater
gearing and the advantages and security aforded by a sound capital position.
The Group and its individually regulated operations have complied with all externally imposed capital requirements
throughout the period.
The capital adequacy ratio of the Group is calculated in accordance with the Basel Committee guidelines as adopted by
the QCB.
The Group’s regulatory capital position under Basel II and QCB regulations after deduction of Investment in Associates
at 31 December was as follows:
2012 201 1
Tier 1 capital 10,346,812 10,051,703
Tier 2 capital 1,075,982 924,683
Total regulatory capital 11,422,794 10,976,386
Tier I capital includes share capital, legal reserve, general reserve, other reserves and retained earnings including current
year pro?t and excluding proposed dividend.
Tier 2 capital includes risk reserve (up to 1.25% of the risk weighted assets), fair value reserves (45% of positive fair value
items and 100 % deduction for negative fair value items) and subordinated debt, if any.
The Commercial Bank of Qatar (Q.S.C.) 96
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(f) Capital management (continued)
Regulatory capital (continued)
Risk weighted assets and carrying amounts
Basel II Risk weighted amount Carrying amount
2012 201 1 2012 201 1
Cash and balances with central bank – – 3,448,128 2,576,494
Due from banks 4,749,160 4,168,880 9,731,562 9,271,920
Loans and advances to customers 40,373,111 37,138,297 48,594,475 41,711,783
Investment securities 1,562,099 1,765,403 11,162,179 11,732,639
Investment in associates 12,754 13,716 4,054,157 3,926,480
Other assets 3,047,251 2,418,728 3,047,251 2,418,728
Of balance sheet items 8,781,018 7,799,584 33,182,250 26,308,882
Total risk weighted assets for credit risk 58,525,393 53,304,608 – –
Risk weighted assets for market risk 3,115,549 2,536,790 – –
Risk weighted assets for operational risk 5,446,593 5,389,899 – –
67,087,535 61,231,297
2012 2011
Risk weighted assets 67,087,535 61,231,297
Regulatory capital 11,422,794 10,976,386
Risk weighted assets as a percentage of
regulatory capital (Capital ratio) 17.0% 17.9%
The minimum ratio limit determined by QCB is 10% and the Basel II capital adequacy requirement is 8%.
Annual Report 2012 97
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments
(a) Key sources of estimation uncertainty
The Group makes estimates and assumptions that afect 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 reason able under the circumstances.
(i) Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy.
The speci?c counterparty component of the total allowances for impairment applies to ?nancial assets evaluated
individually for impairment and is based upon management’s best estimate of the present value of the cash ?ows that are
expected to be received. In estimating these cash ?ows, management makes judgements about counterparty’s ?nancial
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 ?ows considered recoverable are independently approved by the Credit Risk
function. Minimum impairment on speci?c counter parties are determined based on the QCB regulations.
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 ?nancial assets, but the individual impaired items cannot yet be identi?ed.
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 de?ne 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 ?ows for speci?c
counterparty allowances and the model assumptions and parameters used in determining collective allowances.
The Group reviews its loan portfolio to assess impairment at the end of each reporting period. In determining whether
an impairment loss should be recorded in the statement of income, the Group makes judgements as to whether there is
any observable data indicating that there is a measurable decrease in the estimated future cash ?ows from a portfolio of
loans before the decrease can be identi?ed 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 ?ows. The methodology and assumptions used for estimating both the
amount and timing of future cash ?ows are reviewed regularly to reduce any diferences between loss estimates
and actual loss experience.
The Commercial Bank of Qatar (Q.S.C.) 98
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(a) Key sources of estimation uncertainty (continued)
(ii) Determining fair values
The determination of fair value for ?nancial assets and liabilities for which there is no observable market price requires
the use of valuation techniques as described in accounting policy. For ?nancial 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 afecting the speci?c instrument.
Where the fair values of ?nancial assets and ?nancial liabilities recorded on the statement of ?nancial position cannot
be derived from active markets, they are determined using a variety of valuation techniques that include the use of
mathematical models. The input to these models is 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 ?nancial instruments
The Group’s accounting policy on fair value measurements is discussed in the signi?cant accounting policies section 3.(c)v.ii.
The Group measures fair values using the following fair value hierarchy that re?ects the signi?cance 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 signi?cant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using signi?cant unobservable inputs. This category includes all instruments where
the valuation technique includes inputs not based on observable data and the unobservable inputs have a signi?cant
efect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for
similar instruments where signi?cant unobservable adjustments or assumptions are required to re?ect diferences
between the instruments.
Fair values of ?nancial assets and ?nancial liabilities that are traded in active markets are based on quoted market prices
or dealer price quotations. For all other ?nancial instruments the Group determines fair values using valuation techniques.
Valuation techniques include net present value and discounted cash ?ow models and comparison to similar instruments
for which market observable prices exist.
Annual Report 2012 99
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies (continued)
(i) Valuation of ?nancial instruments (continued)
The table below analyses ?nancial instruments measured at fair value at the end of the reporting period, by the level in the
fair value hierarchy into which the fair value measurement is categorised:
Level 1 Level 2 Carrying amount
31 December 2012
Derivative assets – 431,202 431,202
Investment securities 431,268 7,064,489 7,948,351
431,268 7,495,691 8,379,553
Derivative liabilities – 349,958 349,958
– 349,958 349,958
31 December 2011
Derivative assets – 343,799 343,799
Investment securities 393,868 5,358,253 6,229,663
393,868 5,702,052 6,573,462
Derivative liabilities – 265,592 265,592
– 265,592 265,592
All unquoted available for sale equities and investment funds are recorded at fair value except for investments with a
carrying value of QR 453 million (2011: QR 478 million), which are recorded at cost since their fair value cannot be reliably
estimated. There have been no transfers between levels 1, 2 and 3 during the year 2012 and 2011.
The Commercial Bank of Qatar (Q.S.C.) 100
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies (continued)
(ii) Financial asset and liability classi?cation
The Group’s accounting policies provide scope for assets and liabilities to be designated at inception into diferent
accounting categories in certain circumstances:
• in classifying ?nancial 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 ?nancial assets at fair value through pro?t or loss, the Group has determined that it has met one of the
criteria for this designation set out in accounting policies.
• in classifying ?nancial 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 classi?cation of ?nancial assets and liabilities are given in Note 7.
(iii) Qualifying hedge relationships
In designating ?nancial instruments in qualifying hedge relationships, the Group has determined that it expects the hedges
to be highly efective over the period of the hedging relationship.
(iv) Impairment of investments in equity and debt securities
Investments in equity and debt securities are evaluated for impairment on the basis described in the signi?cant accounting
policies section.
(v) 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.
(vi) Going concern
The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satis?ed
that the Group has the resources to continue in business for the foreseeable future. Furthermore, the management is not
aware of any material uncertainties that may cast signi?cant doubt upon the Group’s ability to continue as a going concern.
Therefore, the consolidated ?nancial statements continue to be prepared on the going concern basis.
Annual Report 2012 101
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments
For management purposes, the Group is divided into three operating segments, which are based on business lines,
together with its associated companies, as follows:
Commercial Banking:
1. Wholesale Banking provides an extensive range of conventional funded and non-funded credit facilities, demand
and time deposit services, currency exchange facilities, interest rate swaps and other derivative trading services,
loan syndication and structured ?nancing services to corporate, commercial and multinational customers.
Money market funds and proprietary investment portfolio are also managed by this operating segment.
2. Retail Banking provides personal current, savings, time and investment account services, credit card and debit
card services, consumer and vehicle loans, residential mortgage services and custodial services to retail and
individual customers.
3. Subsidiaries:
a) Orient 1 and Global Card Services L.L.C. provide credit card services in the Sultanate of Oman.
b) Commercialbank Investment Services (S.P.C.) provides brokerage services in the State of Qatar.
c) CBQ Finance Limited.
Unallocated assets, liabilities and revenues are related to certain central functions and non-core business operations.
(For example, Group head quarters, staf apartments, common property & equipment, cash functions and development
projects and related payables, net of intra-group transactions).
Associated Companies – includes the Group’s strategic investments in the National Bank of Oman in the Sultanate of Oman,
and United Arab Bank in United Arab Emirates, and Asteco Qatar L.L.C., Gekko L.L.C. and Massoun Insurance Services L.L.C.
which operate in the State of Qatar. All Associated Companies are accounted for under the equity method.
Management monitors the results of the operating segments separately to make decisions about resource allocation and
performance assessment. Transfer prices between operating segments are on an arm’s length basis.
The Commercial Bank of Qatar (Q.S.C.) 102
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(a) By operating segment
Segment assets and liabilities comprise operating assets and liabilities which are directly handled by the operating
segment, and income or expenses are attributed with the assets and liabilities’ ownership. The following table summarizes
performance of the operating segments:
Wholesale
Banking Retail Banking
Total
Commercial
Banking Subsidiaries Unallocated Total
31 December 2012
Net interest income 1,358,356 510,739 1,869,095 2,640 (5,481) 1,866,254
Net fee, commission
and other income 814,354 259,443 1,073,797 6,261 37,679 1,117,737
Segmental revenue 2,172,710 770,182 2,942,892 8,901 32,198 2,983,991
Impairment loss on
investment securities (61,917) – (61,917) – – (61,917)
Net impairment loss
on loans and advances
to customers (130,438) (9,839) (140,277) 333 – (139,944)
Segmental pro?t 1,761,677 (6,789) (1,140) 1,753,748
Share of results
of associates – – – – – 258,546
Net pro?t for the year – – – – – 2,012,294
Other information
Assets 61,018,542 12,058,948 73,077,490 288,499 2,617,606 75,983,595
Investments in associates – – – – – 4,054,157
Liabilities 52,970,660 1 1,948,655 64,919,315 22,528 156,531 65,098,374
Contingent items 23,868,360 1,047,703 24,916,063 – – 24,916,063
Intra-group transactions are eliminated from this segmental information (Assets: QAR 451 million, Liabilities: QAR 279 million)
Annual Report 2012 103
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(a) By operating segment (continued)
Wholesale
Banking Retail Banking
Total
Commercial
Banking Subsidiaries Unallocated Total
31 December 2011
Net interest income 1,524,416 415,023 1,939,439 2,059 (3,898) 1,937,600
Net fee, commission
and other income 605,399 279,582 884,981 6,310 34,615 925,906
Segmental revenue 2,129,815 694,605 2,824,420 8,369 30,717 2,863,506
Impairment loss on
investment securities (68,197) – (68,197) – – (68,197)
Net impairment loss
on loans and advances
to customers (209,586) (30,329) (239,915) 512 – (239,403)
Segmental pro?t 1,682,567 1,597 (3,613) 1,680,551
Share of results of
associates – – – – – 203,420
Net pro?t for the year – – – – – 1,883,971
Other information
Assets 56,575,141 9,243,798 65,818,939 250,857 1,641,768 67,711,564
Investments in associates – – – – – 3,926,480
Liabilities 47,087,481 10,167,407 57,254,888 64,424 88,436 57,407,748
Contingent items 18,535,026 1,630,295 20,165,321 – – 20,165,321
Intra-group transactions are eliminated from this segmental information (Assets: QAR 419 million, Liabilities: QAR 247 million)
The Commercial Bank of Qatar (Q.S.C.) 104
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement
of ?nancial position
As at 31 December 2012
Cash and balances
with central bank 3,448,123 – – – – 5 3,448,128
Due from banks 3,991,495 2,562,195 273,014 1,736,213 355,908 812,737 9,731,562
Loans and advances to customers 45,352,295 2,281,335 145,600 391,915 101 423,229 48,594,475
Investment securities 8,561,202 1,216,352 33,091 278,382 477,123 596,029 11,162,179
Investment in associates 12,753 4,041,404 – – – – 4,054,157
Property and equipment
and other assets 2,592,603 169,627 341 280,456 968 3,256 3,047,251
Total assets 63,958,471 10,270,913 452,046 2,686,966 834,100 1,835,256 80,037,752
Due to banks 2,389,733 5,256,060 1,068,976 993,159 78,125 69,629 9,855,682
Customer deposits 31,415,646 3,997,243 68,868 3,020,845 340 2,882,604 41,385,546
Debt securities – – – 8,705,816 – – 8,705,816
Other borrowings – 2,744,235 – 363,727 – 363,553 3,471,515
Other liabilities 1,318,358 172,106 626 182,838 12 5,875 1,679,815
Equity 14,939,378 – – – – – 14,939,378
Total liabilities and equity 50,063,115 12,169,644 1,138,470 13,266,385 78,477 3,321,661 80,037,752
Annual Report 2012 105 105
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement of Income
Year ended 31 December 2012
Net interest income 1,894,399 26,028 (875) (32,985) 8,649 (28,962) 1,866,254
Fee, commission
and other income 1,045,008 50,837 1,378 4,447 5,213 10,854 1,117,737
Net operating income 2,939,407 76,865 503 (28,538) 13,862 (18,108) 2,983,991
Staf cost (489,036) – – – – (10,346) (499,382)
Depreciation (121,604) – – – – (344) (121,948)
Impairment loss on investment
securities (6,994) (8,191) – (1,174) (14,871) (30,687) (61,917)
Net impairment loss on loans
and advances to customers (140,277) 333 – – – – (139,944)
Other expenses (407,401) – – – – 349 (407,052)
Pro?t before share of results
of associates 1,774,095 69,007 503 (29,712) (1,009) (59,136) 1,753,748
Share of results of associates 1,278 257,268 – – – – 258,546
Net pro?t for the year 1,775,373 326,275 503 (29,712) (1,009) (59,136) 2,012,294
The Commercial Bank of Qatar (Q.S.C.) 106
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement
of ?nancial position
As at 31 December 2011
Cash and balances
with central bank 2,576,489 – – – – 5 2,576,494
Due from banks 6,177,704 2,536,149 18,367 400,418 13,776 125,506 9,271,920
Loans and advances to customers 38,989,926 2,180,481 – 427,192 54,600 59,584 41,71 1,783
Investments securities 9,999,663 695,646 48,339 231,684 534,185 223,122 11,732,639
Investment in associates 12,753 3,913,727 – – – – 3,926,480
Property and equipment
and other assets 2,052,562 112,643 9 250,506 782 2,226 2,418,728
Total assets 59,809,097 9,438,646 66,715 1,309,800 603,343 410,443 71,638,044
Due to banks 2,773,237 2,980,599 510,767 650,064 67,800 6,230 6,988,697
Customer deposits 32,805,763 2,392,441 47,123 2,742,145 309 902 37,988,683
Debt securities – – – 6,871,674 – – 6,871,674
Other borrowings 180,989 3,274,687 – 363,635 – 363,101 4,182,412
Other liabilities 1,092,536 104,327 84 178,492 41 802 1,376,282
Equity 14,230,296 – – – – – 14,230,296
Total liabilities and equity 51,082,821 8,752,054 557,974 10,806,010 68,150 371,035 71,638,044
Annual Report 2012 107 107
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement of Income
Year ended 31 December 2011
Net interest income 1,856,418 107,205 (502) (36,272) 7,314 3,437 1,937,600
Fee, commission
and other income 891,619 12,758 1 1 1,338 5,768 14,412 925,906
Net operating income 2,748,037 119,963 (491) (34,934) 13,082 17,849 2,863,506
Staf Cost (450,971) – – – – (2,402) (453,373)
Depreciation (113,643) – – – – (61) (113,704)
Impairment loss
on investment securities (1,314) (20,410) – (23,133) (7,822) (15,518) (68,197)
Net impairment loss on loans
and advances to customers (239,915) 512 – – – – (239,403)
Other expenses (307,314) – – – – (964) (308,278)
Pro?t before share of results of
associates 1,634,880 100,065 (491) (58,067) 5,260 (1,096) 1,680,551
Share of results of associates (962) 204,382 – – – – 203,420
Net pro?t for the year 1,633,918 304,447 (491) (58,067) 5,260 (1,096) 1,883,971
The Commercial Bank of Qatar (Q.S.C.) 108
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
7. Financial assets and liabilities
(a) Accounting classi?cations and fair values
The table below sets out the carrying amounts and fair values of the Group’s ?nancial assets and ?nancial liabilities:
Fair value
through
pro?t or loss
Held-to-
maturity
Loans and
receivables
(at amortised
cost)
Available
-for-sale
Other
amortised
cost
Total
carrying
amount Fair value
31 December 2012
Cash and balances
with central bank – – 3,448,128 – – 3,448,128 3,448,128
Due from banks – – 9,731,562 – – 9,731,562 9,731,562
Derivative assets 431,202 – – – – 431,202 431,202
Loans and advances to customers – – 48,594,475 – – 48,594,475 48,594,475
Investment securities:
Measured at fair value 57,264 – – 7,891,087 – 7,948,351 7,948,351
Measured at amortised cost – 3,213,828 – – – 3,213,828 3,845,395
488,466 3,213,828 61,774,165 7,891,087 – 73,367,546 73,999,113
Derivative liabilities 349,958 – – – – 349,958 349,958
Due to banks – – – – 9,849,098 9,849,098 9,849,098
Customer deposits – – – – 41,385,546 41,385,546 41,385,546
Debt securities – – – – 8,705,816 8,705,816 9,550,448
Other borrowings – – – – 3,471,515 3,471,515 3,471,515
349,958 – – – 63,411,975 63,761,933 64,606,565
Annual Report 2012 109 109
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
7. Financial assets and liabilities (continued)
(a) Accounting classi?cations and fair values (continued)
The table below sets out the carrying amounts and fair values of the Group’s ?nancial assets and ?nancial liabilities:
Fair value
through
pro?t or loss
Held-to-
maturity
Loans and
receivables
(at amortised
cost)
Available
-for-sale
Other
amortised
cost
Total
carrying
amount Fair value
31 December 2011
Cash and balances
with central bank – – 2,211,906 – – 2,211,906 2,21 1,906
Due from banks – – 9,271,920 – – 9,271,920 9,271,920
Derivative assets 343,799 – – – – 343,799 343,799
Loans and advances to customers – – 41,613,804 – – 41,613,804 41,613,804
Investment securities:
Measured at fair value – – 6,229,663 – 6,229,663 6,229,663
Measured at amortised cost – 5,502,976 – – – 5,502,976 6,133,083
343,799 5,502,976 53,097,630 6,229,663 – 65,174,068 65,804,175
Derivative liabilities 265,592 – – – – 265,592 265,592
Due to banks – – – – 6,988,697 6,988,697 6,988,697
Customer deposits – – – – 37,988,683 37,988,683 37,988,683
Debt securities – – – – 6,871,674 6,871,674 7,422,726
Other borrowings – – – – 4,182,412 4,182,412 4,185,308
265,592 – – – 56,031,466 56,297,058 56,851,006
The Commercial Bank of Qatar (Q.S.C.) 110
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
8. Cash and balances with central bank
2012 201 1
Cash 423,774 364,588
Cash reserve with QCB* 1,990,633 1,749,334
Other balances with QCB 1,033,721 462,572
3,448,128 2,576,494
*The cash reserve with QCB is mandatory reserve not available for use in the Group’s day to day operations.
9. Due from banks
2012 201 1
Current accounts 80,230 89,744
Placements 8,866,816 8,929,827
Loans to banks 784,516 252,349
9,731,562 9,271,920
10. Loans and advances to customers
(a) By type
2012 201 1
Loans 46,996,364 40,788,068
Overdrafts 1,861,600 1,946,848
Bills discounted 278,533 112,905
Bankers acceptances 285,442 97,979
49,421,939 42,945,800
Deferred pro?t (200,652) (686,615)
Speci?c impairment of loans and advances to customers (359,992) (321,881)
Collective impairment allowance (266,820) (225,521)
Net loans and advances to customers (Note) 48,594,475 41,711,783
The aggregate amount of non-performing loans and advances to customers amounted QAR 539 million which represents
1.09% of total loans and advances to customers (2011: QAR 508 million, 1.20% of total loans and advances to customers).
Speci?c impairment of loans and advances to customers includes QAR 98 million of interest in suspense
(2011: QAR 73 million).
Note 2012 201 1
Government and related agencies 7,694,409 7,399,252
Wholesale 29,488,574 25,559,965
Retail 11,411,492 8,752,566
Net loans and advances to customers 48,594,475 41,711,783
Annual Report 2012 111 111
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(b) By sector
Loans Overdrafts Bills discounted
Bankers
acceptances Total
31 December 2012
Government and related agencies 7,302,564 391,845 – – 7,694,409
Non-banking ?nancial institutions 1,016,820 3,188 – – 1,020,008
Industry 1,308,807 97,589 – 4,481 1,410,877
Commercial 6,536,611 148,404 47,254 176,914 6,909,183
Services 4,697,202 172,192 16,150 26,250 4,911,794
Contracting 3,432,568 278,541 72,648 77,648 3,861,405
Real estate 15,868,596 111,287 136,139 – 16,116,022
Personal 6,577,536 657,527 6,342 – 7,241,405
Others 255,660 1,027 – 149 256,836
46,996,364 1,861,600 278,533 285,442 49,421,939
Less: Deferred Pro?t (200,652)
Speci?c impairment allowance (359,992)
Collective impairment allowance (266,820)
(827,464)
Net loans and advances to customers 48,594,475
The Commercial Bank of Qatar (Q.S.C.) 112
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(b) By sector (continued)
Loans Overdrafts Bills discounted
Bankers
acceptances Total
31 December 2011
Government and related agencies 6,747,899 651,353 – – 7,399,252
Non-banking ?nancial institutions 645,616 7,723 – – 653,339
Industry 2,279,857 78,593 – 23,410 2,381,860
Commercial 5,437,181 142,302 49,549 24,597 5,653,629
Services 2,569,793 107,341 9,454 10,822 2,697,410
Contracting 2,597,676 170,195 48,926 39,150 2,855,947
Real estate 13,272,787 15,824 998 – 13,289,609
Personal 6,846,331 773,517 3,978 – 7,623,826
Others 390,928 – – – 390,928
40,788,068 1,946,848 112,905 97,979 42,945,800
Less: Deferred Pro?t (686,615)
Speci?c impairment allowance (321,881)
Collective impairment allowance (225,521)
(1,234,017)
Net loans and advances to customers 41,711,783
Annual Report 2012 113
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(c) Movement in impairment loss on loans and advances to customers
2012 201 1
Balance at 1 January 547,402 979,823
Allowance made during the year 283,326 442,304
Recoveries during the year (113,785) (49,757)
Net allowance for impairment during the year * 169,541 392,547
Written of during the year (90,131) (824,968)
Balance at 31 December 626,812 547,402
* This includes net interest suspended during the year QAR 30 million (2011: QAR 153 million). The movement includes the
efect of interest suspended on loans and advances to customers as per QCB regulations.
Further analysis is as follows:
Wholesale Retail Total
Balance at 1 January 2012 376,752 170,650 547,402
Allowance made during the year 221,036 62,290 283,326
Recoveries during the year (80,166) (33,619) (113,785)
Written of during the year (83,151) (6,980) (90,131)
Balance at 31 December 2012 434,471 192,341 626,812
Balance at 1 January 2011 294,882 684,941 979,823
Allowance made during the year 255,393 186,911 442,304
Recoveries during the year (15,788) (33,969) (49,757)
Written of during the year (157,735) (667,233) (824,968)
Balance at 31 December 2011 376,752 170,650 547,402
The Commercial Bank of Qatar (Q.S.C.) 114
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities
Investment securities as at 31 December 2012 totalled QAR 11,162,179 (2011: QAR 11,732,639). The analysis of investment
securities is detailed below:
2012 201 1
Available-for-sale 7,891,087 6,229,663
Held to maturity 3,213,828 5,502,976
Investment securities designated at fair value through income statement 57,264 –
Total 11,162,179 11,732,639
The carrying value of investments securities pledged under Repurchase agreements (REPO) is QAR 1,968 million
(2011:QAR 1,281 million)
(a) Available-for-sale
2012 201 1
Quoted Unquoted Quoted Unquoted
Equities 427,876 386,284 391,010 430,180
State of Qatar debt securities 2,926,400 2,020,060 547,448 3,102,658
Debt and other securities* 1,584,123 208,602 982,811 389,116
Investment funds – 337,742 – 386,440
Total 4,938,399 2,952,688 1,921,269 4,308,394
* Fixed rate securities and ?oating rate securities amounted to QAR 1,523 million and QAR 270 million respectively
(2011: QAR 1,081 million and QAR 290 million respectively).
Annual Report 2012 115
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities (continued)
(b) Held to maturity
2012 201 1
Quoted Unquoted
Quoted Unquoted
By issuer
State of Qatar debt securities 740,698 2,358,377 1,539,084 3,843,019
Other debt securities – 114,753 – 120,873
Total * 740,698 2,473,130 1,539,084 3,963,892
By interest rate
Fixed rate securities 740,698 2,358,377 1,539,084 3,843,019
Floating rate securities – 114,753 – 120,873
Total 740,698 2,473,130 1,539,084 3,963,892
* The fair value of held to maturity investments amounted to QAR 3,845 million at 31 December 2012 (2011: QAR 6,133 million).
(c) Investment securities designated at fair value through income statement
2012 2011
Debt securities 57,264 –
Balance at 31 December 57,264 –
The Commercial Bank of Qatar (Q.S.C.) 116
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities (continued)
(d) Movement in impairment loss on investment securities
2012 2011
Balance at 1 January 260,842 283,303
Allowance for impairment during the year 1,344 21,509
Recoveries during the year (23,660) (2,314)
Write-of during the year (36,400) (41,656)
Balance at 31 December * 202,126 260,842
* Further breakup as follows:
2012 2011
Available-for-sale – debt securities 91,443 115,103
Held to maturity 110,683 145,739
202,126 260,842
The Group has also taken impairment loss for investments in Equities and funds during the year totalling QAR 60.6 million
(2011: QAR 46.7 million).
Annual Report 2012 117
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
12. Investments in associates
2012 2011
Balance at 1 January 3,926,480 3,839,542
Investments acquired during the year – 1,940
Share of results 258,546 203,420
Cash dividend (141,398) (116,670)
Other movements 10,529 (1,752)
Balance at 31 December 4,054,157 3,926,480
Amount Ownership %
2012 2011 Country Company’s Activities 2012 2011
Name of the Company
National Bank of Oman
SAOG (‘NBO’) 1,604,243 1,538,990 Oman Banking 34.9 34.9
United Arab Bank PJSC (‘UAB’) 2,435,883 2,374,737 UAE Banking 40 40
Asteco LLC 1,906 2,256 Qatar Facilities management 30 30
Gekko LLC – – Qatar
Electronic payment
infrastructure 50 50
Massoun Insurance Services LLC 12,125 10,497 Qatar Insurance brokerage 50 50
The summarised ?nancial position and results of associates as at the end of reporting period are as follows:
2012 2011
Total assets 38,900,140 31,838,134
Total liabilities 33,757,868 27,137,761
Operating income 1,698,430 1,455,615
Net pro?t 788,827 648,586
Share of results 258,546 203,420
Shares of National Bank of Oman SAOG are listed on the Muscat Securities Market, having a market value of QAR 1,042 million
as at 31 December 2012 (31 December 2011: QAR 1,141 million).
Shares of United Arab Bank PJSC are listed on the Abu Dhabi Securities Market, having a market value of QAR 1,216 million as
at 31 December 2012 (31 December 2011: QAR 1,438 million).
The Commercial Bank of Qatar (Q.S.C.) 118
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
13. Property and equipment:
Land and
buildings
Leasehold
improvements
Furniture and
equipment
Motor
Vehicles
Capital Work
in progress Total
Cost
Balance at 1 January 2011 788,823 70,112 490,361 6,915 216,487 1,572,698
Acquisitions / transfers 21,873 227 121,183 354 (28,527) 115,110
Disposals – – – (551) – (551)
Foreign currency translation – – (2) – – (2)
Balance at 31 December 2011 810,696 70,339 611,542 6,718 187,960 1,687,255
Balance at 1 January 2012 810,696 70,339 611,542 6,718 187,960 1,687,255
Acquisitions / transfers 149,518 18,863 64,620 981 14,708 248,690
Disposals (1,540) (1,460) – (1,495) – (4,495)
Balance at 31 December 2012 958,674 87,742 676,162 6,204 202,668 1,931,450
Accumulated depreciation
Balance at 1 January 2011 138,398 52,101 307,573 5,604 – 503,676
Charged during the year 27,274 6,589 79,085 756 – 113,704
Disposals – – – (451) – (451)
Foreign currency translation – – (2) – – (2)
Balance at 31 December 2011 165,672 58,690 386,656 5,909 – 616,927
Balance at 1 January 2012 165,672 58,690 386,656 5,909 – 616,927
Depreciation for the year 28,906 7,970 84,513 559 – 121,948
Disposals (1,540) (1,460) – (1,494) – (4,494)
Balance at 31 December 2012 193,038 65,200 471,169 4,974 – 734,381
Net carrying amounts
Balance at 31 December 2011 645,024 11,649 224,886 809 187,960 1,070,328
Balance at 31 December 2012 765,636 22,542 204,993 1,230 202,668 1,197,069
Annual Report 2012 119
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
14. Other assets
2012 2011
Interest receivable and Accrued income 321,698 295,828
Prepaid expenses 32,068 19,080
Accounts receivable 128,715 150,788
Repossessed collateral* 856,093 412,206
Positive fair value of derivatives (Note 35) 431,202 343,799
Clearing cheques 30,691 36,622
Others 49,715 90,077
1,850,182 1,348,400
* This represents the value of the properties acquired in settlement of debts and subsequent additions, which have been
stated at their carrying value net of any allowance for impairment. The estimated market values of these properties at the
end of the reporting period are not materially diferent from the carrying values.
15. Due to banks
2012 2011
Balances due to central banks 16,380 700,000
Current accounts 583,485 281,700
Placements with banks 7,507,255 4,856,187
Repurchase agreements with banks 1,748,562 1,150,810
9,855,682 6,988,697
16. Customer deposits
(a) By type
2012 2011
Current and call deposits 14,845,171 11,350,636
Saving deposits 3,692,906 3,630,898
Time deposits 22,847,469 23,007,149
41,385,546 37,988,683
(b) By sector
2012 2011
Government 3,250,755 5,791,316
Government and semi government agencies 6,509,328 8,778,012
Individuals 11,756,110 10,071,423
Corporate 14,385,014 9,962,814
Non-banking ?nancial institutions 5,484,339 3,385,118
41,385,546 37,988,683
The Commercial Bank of Qatar (Q.S.C.) 120
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
17. Debt securities
EMTN Programme – Senior unsecured notes: On 11 April 2012, the Commercial Bank of Qatar through CBQ Finance
Limited, a wholly-owned subsidiary, completed an issuance of US$ 500 million (or QAR 1,820 million) ?ve year senior
unsecured ?xed rate notes under its US$ 5 billion European Medium Term Note (“EMTN”) Programme that it established
in 2011. The notes carry a ?xed coupon of 3.375% per annum with interest payable semi-annually in arrears and are listed
on the London Stock Exchange. The estimated fair value of the EMTN notes as at 31 December 2012 was QAR 1.89 billion.
Senior and Subordinated Notes: On 18 November 2009, the Commercial Bank of Qatar through CBQ Finance Limited,
a wholly-owned subsidiary, completed the issuance of the following notes:
• Senior Notes: US$ 1,000 million or QAR 3,640 million ?ve-year Senior Notes paying a ?xed coupon of 5.00%
per annum. Interest is payable semi-annually in arrears and the principal is payable in full at maturity of ?ve years.
The estimated fair value of the Senior Notes as at 31 December 2012 was QAR 3.85 billion (2011: QAR 3.79 billion).
• Subordinated Notes: US$ 600 million or QAR 2,184 million ten-year Subordinated Notes paying a ?xed coupon
of 7.50% per annum. Interest is payable semi-annually in arrears and the principal is payable in full at maturity
of ten years. The estimated fair value of the Subordinated Notes as at 31 December 2012 was QAR 2.68 billion
(2011: QAR 2.52 billion).
These notes have been irrevocably guaranteed by the Commercial Bank of Qatar and are listed and traded on the London
Stock Exchange.
CHF denominated Fixed Rate Bond: On 7 December 2010, the Commercial Bank of Qatar through CBQ Finance Limited,
a wholly-owned subsidiary, completed the issuance of a CHF 275 million ?ve year bond paying a ?xed coupon of 3.0% per
annum. Interest and 0.01% agency commission is payable annually in arrears and the principal is payable in full at maturity
of ?ve years. This bond has been irrevocably guaranteed by the Commercial Bank of Qatar and is listed and traded on the
‘SIX’ Swiss Exchange AG, Zurich.
The Group entered into cross currency interest rate swaps to convert its CHF 275 million borrowing into a USD denominated
borrowing and pay a ?oating rate of USD 3 month LIBOR plus applicable margins on the USD notional amount and receive a
coupon of 3% per annum on the CHF denominated notional amount.
2012 2011
EMTN Programme – Senior notes 1,796,024 –
Senior Notes 3,623,332 3,615,093
Subordinated Notes 2,155,929 2,152,938
CHF Fixed Rate Bonds 1,130,531 1,103,643
Total 8,705,816 6,871,674
Annual Report 2012 121
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
17. Debt securities (continued)
Movements in debt securities are analysed as follows:
2012 2011
Balance at beginning of the year 6,871,674 8,629,875
Additions 1,791,934 –
Repayments – (1,820,000)
Fair value adjustment 26,565 48,697
Amortisation of discount and transaction cost 15,643 13,101
Balance at 31 December 8,705,816 6,871,674
The table below shows the maturity pro?le of debt securities:
2012 2011
Up to 1 year – –
Between 1 and 3 years 4,753,863 3,615,093
Over 3 years 3,951,953 3,256,581
Balance at 31 December 8,705,816 6,871,674
18. Other borrowings
2012 2011
Syndicated loan (a) – 2,365,698
Bilateral loan (b) 1,818,345 1,816,714
Club loan (c) 1,653,170 –
Total 3,471,515 4,182,412
Notes:
(a) A Syndicated loan with a value of US$ 650 million (or QAR 2,366 million) matured and was repaid on 28 February 2012.
(b) Bilateral loans: The Bank has entered into certain bi-lateral loan agreements amounting to US$ 500 Million or QAR 1,820
million in 2011 to obtain ?nancing facilities; all loans are at ?oating rate on general commercial terms, except one loan
agreement amounting to US$ 100 million or QAR 364 million, wherein the lender has the right to claim settlement in
equivalent QAR at the prevailing exchange rate on maturity.
(c) The Bank established a Club term loan facility on 6 February 2012 for US$ 455 million (or QAR 1,656 million) with a group
of international banks.
The Commercial Bank of Qatar (Q.S.C.) 122
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
18. Other borrowings (continued)
Movements in other borrowings are analysed as follows:
2012 2011
Balance at beginning of the year 4,182,412 2,363,686
Additions to borrowings 1,650,219 1,816,714
Repayments (2,366,000) –
Amortisation of discount and transaction cost 4,884 2,012
Balance at 31 December 3,471,515 4,182,412
The table below shows the maturity pro?le of other borrowings:
2012 2011
Up to 1 year 1,818,345 2,547,698
Between 1 and 3 years 1,653,170 1,634,714
Over 3 years – –
Balance at 31 December 3,471,515 4,182,412
Annual Report 2012 123
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
19. Other liabilities
2012 2011
Interest payable 163,502 133,963
Accrued expense payable 50,719 65,488
Other provisions (Note i) 143,694 137,504
Negative fair value of derivatives (Note 35) 349,958 265,592
Unearned income 80,304 66,631
Cash margins 138,119 120,733
Accounts payable 286,304 266,465
Directors’ remuneration 40,500 36,000
Social responsibility fund 225 3,282
Social & Sports Activities Support Fund (‘Daam’) (Note 22) 50,307 47,099
Dividend payable 11,957 9,988
Managers’ cheque and payment order 22,060 16,704
Unclaimed balances 7,896 10,977
Due for trade acceptances 285,442 97,979
Others 48,828 97,877
Total 1,679,815 1,376,282
The Commercial Bank of Qatar (Q.S.C.) 124
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
19. Other liabilities (continued)
(i) Other provisions –
Provident
fund (a)
Pension
fund (b) Total 2012 Total 201 1
Balance at 1 January 136,565 939 137,504 130,167
Provisions made during the year 6,965 7,914 14,879 19,128
Earnings of the fund 4,114 – 4,114 3,684
Provident fund – staf contribution 6,651 4,207 10,858 9,654
Transferred to state retirement fund authority – (11,469) (11,469) (7,091)
Payments during the year (12,192) – (12,192) (18,038)
Balance at 31 December 142,103 1,591 143,694 137,504
(a) The provident fund includes the Group’s obligations for end of service bene?ts to expatriate staf per Qatar labour law
and the employment contracts.
(b) Pension fund contributions in respect of the national staf are paid to the State administered retirement fund at the end
of each month. The Group has no further payment obligations once the contributions have been paid. The contributions
are recognized when they are due.
Annual Report 2012 125
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
20. Equity
(a) Share capital
The issued, subscribed and paid up capital of the Bank is QAR 2,474,463,720 (2011: QAR 2,474,463,720) divided into
247,446,372 (2011: 247,446,372) ordinary shares of QAR 10 each.
Ordinary shares
In thousands of shares 2012 201 1
On issue at the beginning of the reporting period 247,446 226,826
New shares issued – 20,620
On issue at 31 December 247,446 247,446
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 shareholders’ Annual/Extra-ordinary General meeting of the Bank.
On 17 January 2011 the Bank received the ?nal tranche of the private placement proceeds from Qatar Holding LLC amounting
to QAR 1.61 billion being the value of 20,620,530 new ordinary shares, with an issue price of QAR 78.30 per share including
a premium of QAR 68.30 per share. Further to the approval at the Extraordinary General Assembly of the Bank, held on
21 February 2011, the new ordinary shares were issued on 22 February 2011 and the nominal value of QAR 10 per ordinary
share was applied to paid up share capital.
(b) Legal reserve
In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net pro?t 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 speci?ed in the Qatar Commercial Companies’ Law No. 5 of 2002 and is subject to
the approval of QCB.
The legal reserve includes share premium received on issuance of new shares in accordance with Qatar Commercial
Companies Law (5) of 2002.
(c) General reserve
As per the Bank’s Articles of Association, the general reserve may only be used in accordance with a resolution from the
General Assembly upon the Board of Directors recommendation and after obtaining Qatar Central Bank approval.
(d) Risk reserve
In accordance with QCB regulations, a risk reserve should be created to cover contingencies on both the public and private
sector ?nancing assets, with a minimum requirement of 2% of the total private sector exposure granted by the Group inside
and outside Qatar after the exclusion of the speci?c provisions and interest in suspense. The ?nance provided to/or secured
by the Ministry of Finance or ?nance against cash guarantees is excluded from the gross direct ?nance. From distributable
pro?t of the year, total amount of transfer made to the risk reserve was QAR 119.0 million (2011: QAR 157.6 million).
The Commercial Bank of Qatar (Q.S.C.) 126
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
20. Equity (continued)
(e) Fair value reserves
The fair value reserve arises from the revaluation of the available-for-sale investments, change of post acquisition fair value
reserve of its associates and exchange gain or loss on consolidation of subsidiaries.
(f) Other reserves
This represents the Group’s share of pro?t from investment in associates and joint ventures, net of cash dividend received,
as required by QCB regulations as follows:
2012 201 1
Balance as at 1 January 556,456 469,706
Share of result of associates 258,546 203,420
Dividend from associates transferred to retained earnings (141,398) (116,670)
Net movement 117,148 86,750
Balance as at 31 December 673,604 556,456
(g) Proposed dividend
The Board of Directors has proposed a cash dividend of 60% (or QAR 6 per share) for the year 2012. This is subject to
approval at the Annual General Assembly.
(h) Dividends paid
During the year, the shareholders received a dividend of QAR 6 per share totalling QAR 1.48 billion in respect of the year
ended 31 December 2011 (2011: QAR 7 per share totalling QAR 1.59 billion in respect of the year ended 31 December 2010).
Annual Report 2012 127
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
21. Other comprehensive income
2012 201 1
Available-for-sale investments:
Positive change in fair value 362,267 62,207
Negative change in fair value (4,966) (142,874)
Net change in fair value 357,301 (80,667)
Net amount transferred to pro?t or loss (136,245) (42,367)
Share of other comprehensive income of associates 10,717 (2,162)
Total other comprehensive income 231,773 (125,196)
22. Contribution to Social and Sports Activities Support Fund (‘Daam’)
Pursuant to Law No. 13 of 2008, the Bank made an appropriation of QAR 50 million from retained earnings for its contribution
to the Social and Sports Activities Support Fund (‘Daam’) of Qatar. This amount represents 2.5% of the net pro?t for the year
ended 31 December 2012.
23. Interest income
2012 201 1
Amounts deposited with central banks 7,288 9,938
Amounts deposited with banks 56,586 41,654
Debt securities 521,665 508,922
Loans and advances to customers 2,312,654 2,315,636
2,898,193 2,876,150
24. Interest expense
2012 201 1
Amount deposited by banks 49,952 27,043
Customer deposits 476,811 493,502
Other borrowings 68,602 25,696
Debt securities 436,574 392,309
1,031,939 938,550
The Commercial Bank of Qatar (Q.S.C.) 128
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
25. Fee and commission income
2012 201 1
Loans and ?nancing advisory service 280,596 358,418
Credit and debit card fees 241,954 232,752
Indirect credit facilities 120,324 117,752
Banking and other operations 26,401 26,052
Investment activities for customers 19,816 17,613
689,091 752,587
26. Fee and commission expense
2012 201 1
Brokerage services 994 642
Credit and debit card fees 155,043 149,127
Others 14,450 17,209
170,487 166,978
27. Foreign exchange gain
2012 201 1
Dealing in foreign currencies 137,430 126,802
Revaluation of assets and liabilities 18,133 2,734
155,563 129,536
28 Income from investment securities
2012 201 1
Net gain on disposal of available-for-sale securities 337,161 136,307
Gain on investment securities at fair value through pro?t or loss 2,664 –
Dividend income 26,147 24,188
365,972 160,495
Annual Report 2012 129
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
29. Other operating income
2012 201 1
Rental income 30,522 33,614
Gain on sale of property and equipment and other income 47,076 15,911
Management fees from associates – 741
77,598 50,266
30. Staf costs
2012 201 1
Staf costs 465,134 428,037
Staf provident fund and pension fund cost (Note 19 (i)) 14,879 19,128
Training 19,369 6,208
499,382 453,373
31. Other Expenses
2012 201 1
Marketing and advertisement 61,615 44,207
Professional fees 74,055 51,610
Communication, utilities and insurance 39,183 40,806
Board of Directors’ remuneration and meeting attendance fees 42,720 38,230
Occupancy, IT Consumables and maintenance 91,272 77,261
Printing and stationery 8,703 7,173
Travel and entertainment costs 3,324 2,875
Outsourcing service costs 64,762 26,301
Others 21,418 19,815
407,052 308,278
The Commercial Bank of Qatar (Q.S.C.) 130
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
32. Earning per share
Earnings per share of the Bank is calculated by dividing pro?t for the year attributable to the equity holders of the Bank by
the weighted average number of ordinary shares in issue during the year:
2012 201 1
Pro?t for the year attributable to the equity holders of the Bank 2,012,294 1,883,971
Weighted average number of outstanding shares in thousands 247,446 244,509
Earning per share (QAR) 8.13 7.71
The weighted average number of shares in thousands have been calculated as follows:
2012 201 1
Qualifying shares at the beginning of the year 247,446 226,826
Efect of share issued to Qatar Holding (QH) – 17,683
Weighted average number of shares in thousands at 31 December 247,446 244,509
33. Contingent liabilities and other commitments
(a) Contingent liabilities
2012 201 1
Unused facilities 5,326,125 5,859,107
Guarantees 12,048,098 9,088,622
Letters of credit 7,541,840 5,217,592
Total 24,916,063 20,165,321
(b) Other commitments
2012 201 1
Forward foreign exchange contracts and derivatives at notional value 8,266,187 6,143,561
Capital commitments 393,822 479,243
Total 8,660,009 6,622,804
Annual Report 2012 131
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
33. Contingent liabilities and other commitments (continued)
(b) Other commitments (continued)
Unused facilities
Commitments to extend credit represent contractual commitments to make loans and revolving credits. The total
contractual amounts do not necessarily represent future cash requirements, since commitments may expire without
being drawn upon.
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 speci?c
event. Guarantees and standby letters of credit carry the same credit risk as loans.
Lease commitments
The Group leases a number of branches and ofce premises under operating leases. Lease rentals are payable as follows:
2012 201 1
Less than one year 7,108 5,602
Between one and ?ve years 23,311 33,610
More than ?ve years 1,498 5,924
31,917 45,136
34. Cash and cash equivalents
2012 201 1
Cash and balances with Central Bank * 1,457,495 827,160
Due from banks up to 90 days 7,353,090 8,838,446
Due to banks up to 90 days (8,107,120) (5,837,887)
703,465 3,827,719
*Cash and balances with Central bank do not include the mandatory cash reserve.
The Commercial Bank of Qatar (Q.S.C.) 132
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
35. Derivatives
Notional/expected amount by term to maturity
Positive
fair value
Negative
fair value
Notional
amount
within
3 months
3 – 12
months
1-5
years
More than 5
years
At 31 December 2012:
Derivatives held for trading:
Forward foreign exchange
contracts and interest rate swaps 329,028 349,958 7,236,881 4,174,795 39,809 2,064,757 957,520
Derivatives held for
fair value hedges:
Cross currency Interest rate swaps 102,174 – 1,029,306 – – 1,029,306 –
Total 431,202 349,958 8,266,187 4,174,795 39,809 3,094,063 957,520
At 31 December 2011:
Derivatives held for trading:
Forward foreign exchange
contracts and interest rate swaps 268,189 265,592 5,114,255 1,977,434 61,246 2,048,204 1,027,371
Derivatives held for
fair value hedges:
Cross currency interest rate swaps 75,610 – 1,029,306 – – 1,029,306 –
Total 343,799 265,592 6,143,561 1,977,434 61,246 3,077,510 1,027,371
The bank maintains strict control limits on net open derivative positions, i.e. the diference between purchase and sale contracts, by both amount and
term. At any one time the amount subject to credit risk is limited to the current fair value of instruments that are favourable to the bank (i.e. assets)
which in relation to derivatives is only a small fraction of the contract or notional values used to express the volume of instruments outstanding.
This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements.
Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where the bank requires margin deposits
from counter-parties.
36. Investment custodian
As at the end of the reporting period, the Group holds QAR 191 million (2011: QAR 175 million) worth of international investment securities on
behalf of its customers. Out of this amount, investment securities with a value of QAR 152 million equivalent to USD 42 million (2011: QAR 133 million
equivalent to USD 36.5 million) are held with an international custody and settlement house. The remaining investment securities are held with
the ?nancial institutions through whom the securities were purchased. These ?nancial institutions are industry leaders in their respective ?elds.
The Group has established maximum limits for such holding with each ?nancial institution according to its risk management policy.
Annual Report 2012 133 133
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
37. Related parties disclosure
The Group carries out various transactions with subsidiaries and associate companies and with members of the Board of Directors, the executive
management or companies in which they have signi?cant interest or any other parties of important in?uence in the Group’s ?nancial or operations
decisions. The balances at the year end with these accounts were as follows:
2012 201 1
Board members
Loans, advances and ?nancing activities (a) 2,604,579 2,516,789
Deposits 331,283 183,640
Contingent liabilities, guarantees and other commitments 29,507 23,356
Interest income earned from facilities granted to board members 27,739 35,233
Other fee income earned from transactions with board members 387 3,252
Interest paid on deposits accounts of board members 10,788 15,671
Remuneration, meeting attendance fees and salaries paid to board members 46,080 41,454
Associated companies
NBO’s deposit with the Group 329,478 675
Bank’s deposit with NBO 91,533 237,053
NBO’s contingent liabilities to the Group:
Letter of Guarantee 10,575 11,192
Unutilised credit facilities 254,800 254,800
Interest rate swap (notional amount) – 14,182
Interest rate swap (fair value) – 488
UAB’s deposit with the Group 101,075 183,369
Bank’s deposit with UAB 364,987 182,737
UAB’s contingent liabilities to the Group:
Letter of Guarantee 27,850 29,281
Letter of Credit 5,470 620
Asteco’s deposit with the Group 5,439 6,148
GEKKO’s deposit with the Group 126 580
Massoun’s deposit with the Group 19,317 19,855
Interest income earned from Associates 1,918 550
Interest income incurred to Associates 368 836
Senior management compensation/Transaction
Fixed remuneration 43,415 35,975
Discretionary remuneration 21,980 12,864
Fringe bene?ts 4,884 4,772
Loans and advances (b) 24,004 26,267
(a) A signi?cant portion of the loans, advances and ?nancing activities’ balance at 31 December with the members of the Board and the companies in
which they have signi?cant in?uence are secured against tangible collateral or personal guarantees. Moreover, the loans, advances and ?nancing
activities are performing satisfactorily with all obligations honored as arranged. The pricing of any such transactions are primarily based on the
banker customer relationship at the prevailing market rates.
(b) No impairment losses have been recorded against balances outstanding during the period with key management personnel, and no speci?c
allowance has been made for impairment losses on balances with key management personnel at the period end.
The Commercial Bank of Qatar (Q.S.C.) 134
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
38. Comparatives
Certain amounts in the prior year ?nancial statements and supporting note disclosures have been reclassi?ed to conform
to the current year’s ?nancial statements format and minimum disclosures as prescribed by the Qatar Central Bank (QCB).
However, such reclassi?cations were not material and did not have an impact on the previously reported net pro?t,
other comprehensive income or the total consolidated equity for the comparative year.
During 2012, the QCB required all banks to bring acceptances onto the statement of ?nancial position. The Group concluded
that it was appropriate to afect the change for the prior year. As a result, the comparatives in the statement of ?nancial
position have been restated to include customer acceptances. The Group has revised the statement of ?nancial position
for the year ended 31 December 2011.
The table below details the efect of the adjustments to the consolidated statement of ?nancial position:
As previously
reported
Efect of
adjustments
After
adjustments
Gross loans and advances to customers 42,847,821 97,979 42,945,800
Other liabilities 1,278,303 97,979 1,376,282
Total assets 71,540,065 97,979 71,638,044
Total liabilities 57,309,769 97,979 57,407,748
As at and for the year ended 31 December 2012 QAR ’000s
135
Financial statements of the parent bank
(a) Statement of Financial Position – Parent Bank
As at 31 December 2012 201 1
Assets
Cash and balances with central bank 3,448,123 2,576,489
Due from banks 9,731,437 9,271,621
Loans and advances to customers 48,587,855 41,709,638
Investment securities 11,334,983 11,905,443
Investment in associates 3,403,682 3,403,682
Property and equipment 1,195,396 1,070,021
Other assets 1,848,721 1,346,857
Total assets 79,550,197 71,283,751
Liabilities
Due to banks 9,849,098 6,987,863
Customer deposits 41,574,595 38,179,363
Debt securities 8,705,816 6,871,674
Other borrowings 3,471,515 4,182,412
Other liabilities 1,672,784 1,368,574
Total liabilities 65,273,808 57,589,886
Equity
Share capital 2,474,464 2,474,464
Legal reserve 8,740,365 8,740,365
General reserve 26,500 26,500
Risk reserve 924,600 805,600
Fair value reserves 157,665 (63,403)
Proposed dividend 1,484,678 1,484,678
Retained earnings 468,117 225,661
Total equity 14,276,389 13,693,865
Total liabilities and equity 79,550,197 71,283,751
Supplementary Information
Annual Report 2012
As at and for the year ended 31 December 2012 QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 136
Financial statements of the parent bank (continued)
(b) Income Statement – Parent Bank
For the year ended 31 December 2012 201 1
Interest income 2,897,119 2,875,771
Interest expense (1,033,505) (940,230)
Net interest income 1,863,614 1,935,541
Fee and commission income 684,060 750,573
Fee and commission expense (169,365) (166,366)
Net fee and commission income 514,695 584,207
Foreign exchange gain 155,484 129,468
Income from investment securities 365,972 160,495
Other operating income 75,325 45,426
Net operating income 2,975,090 2,855,137
Staf costs (489,036) (449,057)
Depreciation (121,604) (113,643)
Impairment loss on investment securities (61,917) (68,197)
Net impairment loss on loans and advances to customers (140,277) (239,915)
Other expenses (407,401) (305,371)
Pro?t before dividend income from associates 1,754,855 1,678,954
Dividend income from associates 141,398 1 16,670
Pro?t for the year 1,896,253 1,795,624
Supplementary Information
Continued
The Commercial Bank of Qatar (Q.S.C.)
PO Box 3232
Doha, State of Qatar
www.cbq.qa
Commercial Bank was founded in 1975, as
Qatar’s ?rst private sector bank. Today, we ofer
a complete range of banking services, including:
current and savings accounts, loans, credit cards,
insurance, brokerage and investment services.
We are committed to delivering excellent service
and innovation that makes banking easy and
gives you greater ?exibility over the way you
manage your money.
doc_172022017.pdf
From the very beginning, Commercial Bank has played a part in serving the people, businesses and community of Qatar.
Annual Report
2012
Annual Report 2012 1
His Highness
Sheikh Tamim bin Hamad Al Thani
Heir Apparent
His Highness
Sheikh Hamad bin Khalifa Al Thani
Emir of the State of Qatar
From the very beginning, Commercial Bank has played
a part in serving the people, businesses and community
of Qatar. Our origins are those of a pioneer, being the ?rst
private sector bank in the country and one that has focused
constantly on bringing innovations to the market.
This year our Annual Report takes its theme from the
24-hour world in which we now operate. It shows glimpses
of life in Qatar through diferent times of the day – from
dawn to dusk and through the night. It shows our customers,
employees and managers as they go about their lives and
re?ects the contribution that Commercial Bank makes to
the communities in which we operate.
This year’s report also marks an evolution of our
brand, one that expresses our ongoing belief that
everything is possible. It re?ects our aim to help
our customers succeed in their ambitions and to make
the most of the opportunities our economy ofers.
In future, our iconic four-crescent symbol and name
will be given a dynamic prominence, and the new design
will project a modern image relevant to the next generation
of digitally empowered customers.
Annual Report 2012 3
Contents
Business at a Glance 5
Financial Highlights 6
Chairman’s Report 10
Board of Directors 12
Managing Director’s Report 14
Management Review of Operations 18
Annual Corporate Governance Report 41
Independent Auditors’ Report 52
Consolidated Statement of Financial Position (“Balance Sheet”) 53
Consolidated Income Statement 54
Consolidated Statement of Comprehensive Income 55
Consolidated Statement of Changes in Equity 56
Consolidated Statement of Cash Flows 58
Notes to the Consolidated Financial Statements 59
6.00am
Fish Market on the Doha Corniche
Doha, once a small ?shing and pearl
diving village, now boasts an impressive
city skyline and a per capita GDP that
ranks amongst the highest in the world.
Since its foundation in 1975 the Bank has
played a role in the everyday lives of the
people of Qatar.
Annual Report 2012 5
Business at a Glance
About Commercial Bank
Headquartered in Doha, Commercial Bank
ofers a full range of corporate, retail and
investment banking services. We also own
and operate exclusive Diners Club franchises
in Qatar and Oman. Our country-wide network
includes 29 branches and 165 ATMs.
The Bank has been pro?table every year
since it was founded in 1975. Our successful
strategy has diversi?ed our income streams
and expanded our GCC footprint, through
strategic partnerships with the National Bank
of Oman in Oman and United Arab Bank
in the United Arab Emirates. Our continual
investment in technology and people,
together with our strong capital base,
provides a solid foundation for further growth.
Commercial Bank has a robust ?nancial
position, with total assets of QAR 80.0 billion
at 31 December 2012, and a capital adequacy
ratio of 17% – well above the minimum
required by the Qatar Central Bank. The Bank
enjoys strong credit ratings of A from Fitch, A1
from Moody’s and A- from Standard & Poors.
The Bank is listed on the Qatar Exchange
and was the ?rst Qatari bank to list its Global
Depository Receipts, as well as bonds, on the
London Stock Exchange.
Commercial Bank continues to play
an important role in Qatar’s economic
development and is dedicated to supporting
Qatar’s community and social infrastructure,
through our Corporate Social Responsibility
programmes and sponsorship of prestigious
sporting events, which help to raise Qatar’s
international pro?le.
Our business segments
Wholesale Banking Provides a range
of conventional commercial and investment
banking services and products to large,
medium and small enterprises, including
corporate lending, trade ?nance,
syndicated loans, deposits, letter of
credit and guarantees.
Retail Banking Provides a full suite of
conventional retail banking services and
products to retail customers in Qatar,
including current and deposit accounts,
wealth management, mortgage lending,
personal and vehicle loans and credit card
and other card services.
Associates and subsidiaries
National Bank of Oman (S.A.O.G.) Operates
through 66 branches in Oman, one in Egypt
and one in the United Arab Emirates.
United Arab Bank (P.J.S.C.) Operates through
15 branches in the United Arab Emirates.
Asteco Qatar W.L.L. A joint venture property
management company.
Massoun Insurance Services L.L.C. A joint
venture that provides tailored corporate
and personal insurance products to the
Bank’s customers.
Gekko L.L.C. A joint venture company
that provides contactless payment
infrastructure and customer database
management solutions.
Orient 1 Limited A fully owned subsidiary that
owns and manages an exclusive Diners Club
franchise in Qatar and Oman.
Global Card Services L.L.C. A limited liability
company that issues Diners Club Credit Cards
and acquires merchant rights in Oman.
Commercial Bank Investment Services (S.P.C.)
A fully owned subsidiary that provides direct
access to the Qatar Exchange, online trading
and brokerage services.
History
• 1975 Commercial Bank founded as Qatar’s
?rst private sector bank
• 1997 First licensed broker on the Doha
Securities Market
• 2005 Acquires stake in National Bank
of Oman
• 2006 First Qatari bank to issue bonds
totalling USD 500 million on the LSE
• 2007 Acquires stake in United Arab Bank
• 2008 First Qatari bank to list GDRs
on the LSE
• 2009 Launches Regulation S/144A Lower
Tier II and Senior Global Bond Ofering
totaling USD 1.6 billion
• 2010 First Qatari bank to list bond issue
on the SIX Swiss Exchange
• 2011 Incorporates Commercial Bank
Investment Services
• 2012 Launches Regulation S USD 500
million Senior unsecured bonds
Total assets
QAR80.0bn
up 12%
Capital strength
17.0%
Total Regulatory Capital Ratio
The Commercial Bank of Qatar (Q.S.C.) 6
Key highlights
• Record net pro?t for the year up 7%
to QAR 2.012 billion compared with
QAR 1,884 billion achieved in 2011
• Net operating income up 4% to
QAR 2.98 billion, increased from
QAR 2.86 billion in 2011
• Non-interest income up 21% to
QAR 1.12 billion compared with
QAR 926 million for the same period
in 2011 due to higher gains from the
Bank’s investment portfolio and an
increase in foreign exchange income
• Net provisions for loans and advances
were QAR 140 million, down 42% from
QAR 239 million provided in the same
period for 2011
• Total assets up 12% to QAR 80.0 billion
• Loans and advances to customers up
17% to QAR 48.6 billion, with growth
in lending in both the Corporate and
Retail businesses
• Customers’ deposits up 9% to
QAR 41.4 billion
• Contribution of Commercial Bank’s
associates to the Bank’s net pro?t
increased by 27% to QAR 259 million
compared with QAR 203 million
for 2011
Financial Highlights
Net pro?t
QAR2.012bn
up 7%
Customers’ deposits
QAR41.4bn
up 9%
Earnings per share
QAR8.13
up from QAR 7.71
Customer loans and advances
QAR48.6bn
up 17%
Annual Report 2012 7
Financial highlights
QAR million, except per share amounts
and as stated otherwise 2012 2011 2010 2009 2008
Net operating income 2,984 2,864 2,562 2,778 2,769
Net pro?t 2,012 1,884 1,635 1,524 1,702
Total assets 80,038 71,638 62,520 57,317 61,485
Lending to customers 48,594 41,712 33,567 31,929 33,898
Basic/diluted earnings per share in QAR 8.13 7.71 7.24 7.08 8.76
Dividends declared per ordinary share
including bonus shares in QAR 6.00 6.00 7.00 6.00 7.00
Closing market price per ordinary share
in QAR (at year end) 70.90 84.00 92.00 61.50 88.40
Book value per ordinary share in QAR 60.37 57.51 55.11 55.47 48.39
Long-term debt (at year end) 12,177 11,054 10,994 9,924 6,096
Shareholders’ equity (at year end) 14,939 14,230 12,500 12,010 9,978
Return on average shareholders’ equity 13.80% 14.10% 13.34% 13.86% 21.01%
Return on average assets 2.65% 2.81% 2.73% 2.56% 3.19%
Capital adequacy ratio 17.00% 17.91% 18.49% 18.86% 15.66%
Full-time employees (at year end) 1,114 1,115 1,207 1,239 1,241
Forward-looking statements
This document contains certain forward-
looking statements with respect to certain
plans and current goals and expectations
of Commercial Bank and its associated
companies relating to their future ?nancial
condition and performance. These forward-
looking statements do not relate only to
historical or current facts. By their nature
forward-looking statements involve risk
and uncertainty because they relate to future
events and circumstances including a number
of factors which are beyond Commercial
Bank’s control. As a result, Commercial Bank’s
actual future results may difer materially
from the plans, goals and expectations set
forth in Commercial Bank’s forward-looking
statements.
Any forward-looking statements made by or
on behalf of Commercial Bank speak only as
of the date they are made. Commercial Bank
does not undertake to update forward-
looking statements to re?ect any changes in
Commercial Bank’s expectations with regard
thereto or any changes in events, conditions
or circumstances on which any such statement
is based. The information, statements
and opinions contained in this presentation
do not constitute a public ofer under any
applicable legislation or an ofer to sell or
solicitation of an ofer to buy any securities
or ?nancial instruments or any advice
or recommendation with respect to such
securities or other ?nancial instruments.
62,520
71,638
80,038
10 11 12
Total Assets
Million (QAR)
2,562
2,864
2,984
10 11 12
Net Operating Income
Million (QAR )
33,567
41,712
48,594
10 11 12
Lending to Customers
Million (QAR )
1,635
1,884
2,012
10 11 12
Net Pro?t
Million (QAR )
12,500
14,230
14,939
10 11 12
Shareholders’ Equity
Million (QAR )
7:30am
The American School, Doha
School starts early in Qatar, with the
drop-of before work starts. There are
more than 100,000 young people at
private schools in Qatar and the Bank
provides education loans to many of
these students’ families. The American
School is also one of the Bank’s
corporate clients.
Commercial Bank has successfully grown
its lending and diversi?ed revenue streams
to deliver a record pro?t for the full year.
Qatar’s economy is expected to be driven by the
Government’s spending programme in 2013 and
Commercial Bank is well positioned to support
the future economic growth of Qatar and to
deliver ongoing value to its shareholders.
Abdullah bin Khalifa Al Attiyah
Chairman
Annual Report 2012 11
Chairman’s Report
I am pleased to present The Commercial
Bank of Qatar’s Annual Report for the year
ended 31 December 2012 on behalf of the
Board of Directors.
2012 has been another difcult year for
the world economy. Many of the emerging
markets that have driven global activity
have seen their growth slow, while demand
in established economies has remained
subdued. In Europe, Government ?nances
are under substantial pressure and many
Eurozone economies are struggling with
austerity, recession and high unemployment.
The US economic recovery remains fragile
and fragmented as bi-partisan agreement
to reduce debt has yet to be reached.
Overall, the global economic outlook has
deteriorated and growth forecasts for the
majority of the world’s economies were
reduced in the second half of 2012.
Against this backdrop, Qatar’s economy has
continued to grow. Real GDP growth for 2012
is expected to be 6.3%, which is strong growth
by current global standards. The economic
growth in 2012 was supported by Government
investment in infrastructure, healthcare,
education and housing alongside increased
contribution from other sectors of the
economy. Credit demand in 2012 has
been dominated by the Public Sector with
continuing low levels of demand from the
Private Sector. The banking sector has
continued to strengthen and is well capitalised
under the strong guidance and oversight of
the Government and the Qatar Central Bank.
Commercial Bank has again reported
excellent ?nancial results in 2012. The net
pro?t of QAR 2,012 million is a record annual
result and an increase of 7% over the
net pro?t of QAR 1,884 million achieved
in 2011. This strong performance in 2012
is a demonstration of the Bank’s agility
in developing the strength of its product
ofering, broadening its client relationships,
successfully growing its lending as well as the
ongoing diversi?cation of the Bank’s revenue
streams, speci?cally capturing opportunities
in the investment portfolio. The Bank remains
well capitalised, with a diversi?ed funding base
and continued growth in its customer
deposits during 2012.
Our banking associates, United Arab Bank
(UAB) and National Bank of Oman (NBO) have
both had excellent years increasing revenue
and pro?tability and growing their lending.
UAB delivered another record net pro?t
of AED 410 million, up 24%, while NBO
increased its net pro?t by 19% to OMR 41
million. Both banks are strongly positioned
to deliver further growth in their domestic
markets and we continue to focus on
strengthening our regional alliance.
The Board of Directors is recommending
a cash dividend payout of 74% of net
pro?t, which equates to QAR 6 per share,
for approval at the Annual General
Assembly. The level of dividend recognises
our shareholders’ ongoing loyalty and the
Bank’s strong ?nancial performance in 2012.
Although global economic forecasts
for the year ahead suggest that conditions
will continue to be challenging, Qatar’s
economy remains relatively well insulated
and is expected to be driven mainly by the
Government’s spending programme in 2013.
While the public sector dominated credit
growth in 2012, we expect a broader based
demand to develop in the year ahead.
Commercial Bank continues to play an integral
role in the growth and development of Qatar
and is committed to playing a central role
as the economy expands and diversi?es.
The Government has identi?ed small and
medium enterprises as a vital component
in Qatar’s economic future, and we are helping
to support and nurture these businesses
through our Enterprise Business which we
launched at the start of the year.
The Bank is well positioned to support the
growth in investment in infrastructure that
will arise from Qatar’s successful bid for the
2022 World Cup. The Bank is committed to its
role in Qatar’s social and cultural development.
Our programme of corporate social
responsibility aims to develop local talent,
aid society by supporting socio-economic
initiatives and promote the bene?ts of sport,
culture and the arts.
On behalf of the Board of Directors, I would
like to express our sincere appreciation
for the continuing visionary leadership
of His Highness the Emir and His Highness
the Heir Apparent, and for the guidance
and support received from His Highness the
Prime Minister, His Excellency the Minister
of Economy and Finance and His Excellency
the Governor of Qatar Central Bank.
Commercial Bank is committed to delivering
the highest standards of service and value to
both our customers and to our shareholders,
and in successfully delivering that ambition,
we owe thanks to the loyalty, dedication and
hard work of all our employees.
Abdullah bin Khalifa Al Attiyah
Chairman
The Commercial Bank of Qatar (Q.S.C.) 12
Board of Directors
Standing from left:
Sh. Ahmed Bin Nasser Bin Faleh Al Thani - Director
Mr. Khalifa Abdullah Al Subaey - Director
Mr. Omar Hussain Alfardan - Director
Mr. Jassim Mohammad Jabor Al Mosallam - Director
Mr. Andrew Stevens - Group Chief Executive Ofcer
Mr. Abdullah Mohd Ibrahim Al Mannai - Director
Sh. Jabor Bin Ali Bin Jabor Al Thani - Director
Seated from left:
Sh. Abdullah Bin Ali Bin Jabor Al Thani - Vice Chairman
H.E. Abdullah Bin Khalifa Al Attiyah - Chairman
Mr. Hussain Ibrahim Alfardan - Managing Director
10.30am
Qatar Foundation
Qatar Foundation is home to eight
world- class universities, and central
to Qatar’s development as a modern
knowledge-based economy.
Commercial Bank has direct links
with the Foundation through MEEZA,
a Qatar Foundation joint venture,
which provides cloud services to the
Bank’s corporate customers, especially
small and medium enterprises (SMEs).
many SMEs have already bene?ted from
this added-value service.
Commercial Bank has successfully achieved
strong earnings in a challenging operating
environment. The Bank has protected its core
business in 2012 whilst delivering alternative
sources of income. Our asset quality remains
strong and we remain both well capitalised
and funded to target growth sectors of the
economy in the year ahead.
Hussain Ibrahim Alfardan
Managing Director
Annual Report 2012 15
Managing Director’s Report
Commercial Bank has delivered another
record performance in 2012, achieving
strong earnings in a challenging operating
environment. Our business strategy has
seen the Bank protect its core business in
2012, grow its domestic corporate and retail
businesses and deliver alternative sources
of income. There have also been continued
strong performances by our alliance banks.
The Bank’s net pro?t of QAR 2,012 million
for the year ended 31 December 2012 was
7% higher than the pro?t for 2011.
Commercial Bank’s net operating income
was 4% higher in 2012, at QAR 2,984 million.
Intense competitive pricing pressure and
the regulatory cap on retail product pricing
reduced lending yields, which were partially
ofset by a reduction in funding costs, leading
to 4% decline in net interest income as
contraction in net interest margins outweighed
the bene?ts of higher lending volumes.
Non-interest income rose by 21% to
QAR 1,118 million, due to higher gains from
our investment portfolio and an increase
in foreign exchange income, partially ofset by
lower levels of net fee and commission income.
Our asset quality remains strong even as we
grew total assets by 12% to QAR 80.0 billion
at 31 December 2012. Lending to customers
rose by QAR 6.9 billion to QAR 48.6 billion, with
growth generated in both the Wholesale and
Retail businesses, while the non-performing
loan ratio reduced to 1.09%, compared
with 1.20% at the end of 2011. To support the
growth in lending, customers’ deposits grew
by 9% to QAR 41.4 billion.
Commercial Bank remains both well
capitalised and funded to target growth
sectors in the year ahead. The capital
adequacy ratio was 17.0% at 31 December
2012 compared with 17.9% at the end of 2011
which is well above the Qatar Central Bank’s
required minimum level of 10%. During 2012,
we continued to diversify our sources of
funding. In February, the Bank repaid a
syndicated loan facility of USD 650 million
and arranged a new USD 455 million medium
term loan with a club of international banks.
In April, we issued USD 500 million of ?ve-year
unsecured ?xed rate notes in the international
capital markets, under our Euro Medium Term
Note Programme.
Commercial Bank’s banking associates, United
Arab Bank and National Bank of Oman, have
once again delivered outstanding results,
including a record net pro?t from United Arab
Bank in the UAE; our alliance banks contributed
QAR 259 million to the net pro?t for 2012,
up 27% on 2011. The three banks bene?t
signi?cantly from a close working relationship
to deliver new product oferings and
synergies across both operational efciency
and service delivery. I would like to thank the
Board of Directors, executive management
and staf at both banks for their contribution
and the excellent performance as we continue
to develop the regional alliance.
Commercial Bank provides a high-quality
service ofering to its customers through the
channels that meet their speci?c needs. We
continued to expand our branch network with
the opening of new local community branches
in Al Mesilla and Al Kharaitiyat which brought
the total number of branches in Qatar to
twenty nine; we intend to open more branches
in 2013. We are also investing in our online
and mobile banking platforms, ensuring our
customers have access to diverse, convenient
and cost-efective ways of banking.
I would like to express my sincere appreciation
for the visionary and inspirational leadership
of His Highness the Emir, Sheikh Hamad bin
Khalifa Al Thani, and His Highness the Heir
Apparent, Sheikh Tamim bin Hamad Al Thani,
for promoting the Qatar economy during
continued difcult times in global ?nancial
markets. I would also like to thank
His Highness the Prime Minister, His
Excellency the Minister of Economy
and Finance, and His Excellency the Governor
of the Qatar Central Bank for their guidance
and support of the banking sector throughout
the year.
I would also like to thank Commercial Bank’s
management and staf for their tireless
contribution to our continued success,
and acknowledge my appreciation for the
continued support and encouragement
of the Chairman, the Board of Directors and
our shareholders.
Qatar’s economy is expected to continue
to grow strongly in 2013 with an increasing
contribution from the non-hydrocarbon
sector. The Government’s capital spending
on infrastructure and the broader public
spending programme will help to ensure
that growth seen in 2012 across a variety of
sectors will continue in 2013. I look forward to
2013 with con?dence that Commercial Bank
is well positioned to play a central role in the
ongoing development of the Qatar economy
and build on its strengths to target growth
sectors in the year ahead.
Hussain Ibrahim Alfardan
Managing Director
1:00pm
Katara
Katara – with its beautiful theatres,
concert halls and exhibition galleries –
is host to a multicultural programme
of international, regional and local
festivals, workshops, performances and
exhibitions. In 2012, Commercial Bank
signed a strategic partnership with
Katara, representing a long-term
commitment to encouraging and
supporting the development of culture
and the arts in Qatar.
Commercial Bank has maintained the progress
seen in the ?rst half of the year to deliver a record
full year pro?t. This performance demonstrates
the Bank’s agility in broadening its client
relationships as well as the diversi?cation of
its income streams to capture new opportunities
for growth. In 2013, we will build on the success
of 2012 by capturing market growth, developing
core income across our Wholesale and Retail
businesses and broadening the strength of
our international presence.
Andrew C. Stevens
Group Chief Executive Ofcer
Annual Report 2012 19
Commercial Bank has delivered strong results
in 2012 in an operating environment in which
we have seen a slowdown in growth across
the world and ongoing ?nancial problems
in established markets. In Qatar the economy
has continued to grow in line with market
expectations whilst the banking sector has
been extremely competitive. The Bank has
worked hard to maintain its market share in
a lower margin environment in which pricing
pressure has remained and has successfully
grown its lending book, diversi?ed its revenue
and funding streams and maintained strong
asset quality.
The Bank achieved a record full year net pro?t
of QAR 2,012 million in 2012, an increase of
7%, compared with the net pro?t of QAR 1,884
million achieved in 2011. Commercial Bank’s
record performance demonstrates the Bank’s
agility in broadening its client relationships
as well as the ongoing diversi?cation of its
income streams to capture new opportunities
for growth.
Credit demand has been dominated by the
Public Sector which was up by 46% since the
beginning of the year, with continuing slower
demand from the Private Sector which grew
by 14%. Our loan book was 17% higher at
QAR 48.6 billion with increased lending in
both our Corporate and Retail businesses. We
have also continued to grow our deposit base
which increased by 9% for the full year, whilst
further diversifying our funding sources in the
?rst half of the year though the arrangement
of a USD 455 million term loan with a club
of international banks and the issuance of
USD 500 million ?ve-year unsecured ?xed rate
notes in the international debt capital markets.
Our afliated banks in the UAE and Oman have
delivered outstanding ?nancial performances
throughout 2012 with strong growth in lending
and operating income and a 27% year-on-
year improvement in pro?tability.
On 24 December 2012, we announced
that the Bank had commenced negotiations
with Anadolu Endustri Holding A.S. for the
acquisition of a majority stake in Alternatifbank
A.S. in Turkey. This proposed acquisition is
consistent with our strategy. For many years
we have communicated that our strategy
includes looking for opportunities to expand
internationally outside Qatar. Our focus is to
become a pan-GCC player but opportunities
within the GCC have been limited in recent
years and we have spoken about the potential
to broaden our presence beyond the GCC,
if we found a relevant opportunity, and that
opportunity ful?lled a number of criteria.
We believe that the proposed acquisition
of a majority stake in a commercial bank
of an appropriate size, operating in a stable
economy with good growth prospects, in
a country that is strategically and culturally
aligned presents a natural next step in the
execution of our international expansion.
The negotiations for the acquisition of 70.8%
majority of the shares in Alternatifbank are
ongoing and are planned to be completed
during March 2013.
Although global economic forecasts for
the year ahead suggest that conditions will
continue to be challenging, Qatar’s economy
remains relatively well insulated and will be
driven mainly by the Government’s spending
programme and the services sector.
In 2013, we will build on the success of 2012
by capturing lending growth in our domestic
market, and internationally in conjunction
with our alliance partners. We will develop
our core income across our Wholesale and
Retail businesses without compromising risk
management or asset quality and will seek
to broaden the strength of our international
presence in order to deliver solid returns to
our shareholders.
Management Review
of Operations
The Commercial Bank of Qatar (Q.S.C.) 20
Ensuring our customers have a positive
experience of the Bank is vital to our success,
whether they access our services in branch,
by telephone or online. Our brand and
reputation depend on those experiences.
‘Everything is possible’ is a mindset that is
embedded across all our businesses and is
manifested in our everyday behaviour and
actions; we aim to challenge ourselves
constantly to bring this promise to life and
to live up to it in all that we do.
Financial Results
Commercial Bank delivered a record
?nancial performance in 2012 with net pro?t
of QAR 2,012 million, up by 7% compared
with QAR 1,884 million reported in 2011,
re?ecting strong growth in a challenging
operating environment.
Net Operating Income
Net operating income increased by 4%
to QAR 2,984 million for the year ended
31 December 2012 up from QAR 2,864 million
achieved in 2011.
Net interest income was QAR 1,866 million for
the year ended 31 December 2012, 4% lower
than in 2011, re?ecting growth in lending to
customers ofset by a reduction in the net
interest margin to 2.95% in 2012 from 3.46%
in 2011. The decline in net interest margin
resulted from lower average yields on lending
due to intensely competitive pricing pressure
and the full year impact of regulatory changes,
which capped pricing for retail products
in 2011, partially ofset by a reduction in the
average cost of funds as a result of proactive
management of the Bank’s funding mix. The
Bank’s focus on low cost funding as the core
tool in the management of its funding base
led to a 31% increase in low cost funds in 2012.
Non-interest income was up 21% to
QAR 1,118 million for 2012 compared with
QAR 926 million in 2011. The increase in non-
interest income was due to higher gains on
the disposal of available-for-sale securities
from the Bank’s investment portfolio and
an increase in foreign exchange income,
partially ofset by lower levels of net fee
and commission income. 2012 has seen
lower levels of loan-related fee income, in
part ofset by higher trade ?nance and other
ancillary fee income.
Operating Expenses
Total operating expenses were up 17% to
QAR 1,028 million for 2012 compared with
QAR 875 million in 2011.
Staf costs were up by 10% to QAR 499
million re?ecting annual salary increments
for staf and investment in staf training and
development. General and Administrative
expenses, and depreciation were also
up re?ecting continued investment in the
development of the Bank’s infrastructure,
service delivery capability and distribution
network.
The cost to income ratio increased to 31.7%
in 2012 compared with 28.5% in 2011.
The Bank’s strategic outsourcing programme
has enabled the Bank to improve its
technology ofering and service delivery
to customers, to enhance controls and
achieve cost synergies whilst allowing it to
expand its scale of operation and channel
delivery across businesses.
Provisions for Impairment Losses
The Bank’s net provisions for impairment
losses reduced to QAR 202 million in 2012
compared with QAR 307 million in 2011, and
comprised provisions of QAR 140 million for
loans and advances and QAR 62 million for
?nancial investments.
In 2012, net impairment provisions on loans
and advances to customers comprised
QAR 130 million against the corporate lending
portfolio, net of a recovery of QAR 29 million
from a legacy Islamic banking customer,
and QAR 10 million against the retail book
compared with QAR 25 million in 2011.
Asset quality remains strong with an
improvement in the non-performing loan ratio
to 1.09% at 31 December 2012 from 1.20%
at the end of 2011 due to lower levels of non-
performing loans and a growing loan book.
The Bank also sets aside a risk reserve against
its lending as part of shareholders’ equity.
At 31 December 2012, the risk reserve was
QAR 925 million, representing 2% of total
lending, meeting the minimum level set by
the Qatar Central Bank for the end of 2012; the
new regulation requires all banks to maintain
a risk reserve of 2.5% by the end of 2013.
Operating Expenses
QAR million 2012 2011
Staf costs 499 453
General and administrative
expenses 407 308
Depreciation 122 114
Total operating expenses 1,028 875
Provisions for Impairment Losses
QAR million 2012 2011
Net provision/(recovery) for
impairment on loans and advances 140 239
Impairment losses on
?nancial investments 62 68
Total provisions for
impairment losses 202 307
Management Review
of Operations Continued
Net interest income
Investment & dividend income
Net fee income
FX income
Other income
Net Operating Income
Financial Results
QAR million 2012 2011
Net interest income 1,866 1,938
Non-interest income 1,118 926
Net operating income 2,984 2,864
Operating expenses -1,028 -875
Provisions for impairment losses -202 -308
Share of results of associates 258 203
Net pro?t for the year 2,012 1,884
2.00pm
Commercial Bank, D-Ring Branch
The ?agship D-Ring Branch is within
easy access to the Airport and
strategically placed for the up-market
Al Hilal residential area. The branch
provides customers with a range
of services from Sadara Privileged
Banking to Investment and Brokerage.
The branch also ofers extended
opening hours, part of the Bank’s
strategy to make its services more
accessible throughout the day and
ensure that they ?t around our
customers’ working lives.
The Commercial Bank of Qatar (Q.S.C.) 22
Management Review
of Operations Continued
Impairment provisions on the Bank’s
investment portfolio decreased to
QAR 62 million for the year ended 31
December 2012 compared with QAR 68
million in 2011, re?ecting a general
improvement in the valuations of certain
classes of investments.
Total Assets and Funding
The Bank’s total assets increased by 12%
to QAR 80.0 billion at 31 December 2012
compared with QAR 71.6 billion at the end
of 2011. The increase in total assets was due
to growth of QAR 6.9 billion in lending to
customers and higher balances held with
the Qatar Central Bank and other ?nancial
institutions which were up QAR 1.3 billion,
partially ofset by a reduction of QAR 0.6
billion in Financial Investments.
Loans and advances to customers were
up 17% to QAR 48.6 billion at 31 December
2012, compared with QAR 41.7 billion at the
end of 2011. The growth in lending in 2012 was
generated by both the Corporate and Retail
businesses, and was mainly through credit
growth in the Private Sector in Services,
Contracting, Commercial and Real Estate
relating mainly to mortgage lending within the
Retail book.
Financial Investments reduced to QAR 11.2
billion at 31 December 2012, 5% lower than
at the end of December 2011. The decrease
since the end of 2011 re?ects, mainly, the
maturity and sales of Government Bonds
and Qatar Central Bank Treasury Bills ofset
by investment in new issues of Treasury Bills.
Customers’ deposits have grown by 9%
to QAR 41.4 billion at 31 December 2012,
compared with QAR 38.0 billion in 2011,
supporting growth in lending. The increase
in deposits has come mainly from higher
demand and call balances.
During 2012, the Bank has arranged a USD 455
million term loan with a club of international
banks and issued, in April, USD 500 million
of ?ve-year unsecured ?xed rate notes in the
international capital markets, under its Euro
Medium Term Note Programme. The Bank
has also repaid a syndicated loan facility
of USD 650 million which matured in
February 2012.
Capital
The Bank’s capital position remains strong
with a capital adequacy ratio of 17.0% as at
31 December 2012 compared with 17.9% at
the end of 2011, well above the Qatar Central
Bank’s required minimum level of 10%.
The Tier 1 ratio reduced to 15.4% from 16.4%
in 2011; the reduction in both ratios re?ects,
primarily, an increase in Risk Weighted Assets
pertaining to the growth in the business
during the year.
The Board of Directors has recommended
a cash dividend payout for 2012 of 74% of
net pro?t, which equates to QAR 6 per share,
for approval at the Annual General Assembly.
Associates and Subsidiaries
Commercial Bank’s associated companies
contributed QAR 259 million to the Bank’s
?nancial performance in the year ended
31 December 2012, which represented 13%
of the Bank’s total net pro?t, compared with
QAR 203 million in 2011. Commercial Bank’s
two banking associates, National Bank
of Oman and United Arab Bank, have
delivered outstanding ?nancial performance
throughout 2012 with strong growth in lending
and operating income, and a 27% year-on-
year improvement in pro?tability.
National Bank of Oman
National Bank of Oman (NBO) achieved strong
results in 2012, with net pro?t after tax growing
19% to OMR 40.7 million, compared with OMR
34.2 million for the same period in 2011.
Operating income grew by OMR 6.4 million
to OMR 98.6 million, from OMR 92.2 million in
2011 due, mainly, to an increase in net interest
income which was up 16% to OMR 67.2 million.
Interest income was up 15% and the cost
of funds improved to 1.98% compared
with 2.13% in 2011. Net interest spread
was higher at 3.09% for the year ended
31 December 2012.
Operating expenses increased by 7% to
OMR 46.7 million in 2012, mainly due to higher
staf costs and marketing expenses. NBO’s
net impairment losses for 2012 were OMR 5.3
million, 48% lower than 2011 predominantly
due to a reduction of OMR 3.3 million in credit
losses and lower investment provisions which
were down OMR 0.8 million in 2012.
Loans
Investments
Investments in associates
Liquid assets
Other assets
Total Assets
Government
Government and semi-Government agencies
Industry
Commercial
Services
Contracting
Real Estate
Consumption
Other
Loans and advances
Annual Report 2012 23
During 2012, NBO grew its customer lending
by 14% to OMR 1.9 billion and Customers’
deposits increased by 18% to OMR 1.9 billion
compared with the end of 2011.
The Board has proposed a cash dividend
of OMR 0.0175 per share, subject to
approval by the Oman Central Bank and
the General Assembly.
The launch of Islamic banking in Oman
opens up new opportunities for banks and
NBO was the ?rst conventional bank to
commence Islamic banking operations
launching its Sharia compliant Islamic window
under the brand name ‘Muzn’. Muzn seeks
to ofer a rich mix of Islamic products and
services which cater to institutional, corporate
and retail clientele.
The outlook for Oman’s economy
looks positive in 2013 with an increase
in government spending and focus on
infrastructure projects expected to boost
economic growth. The Wholesale and
Investment Banking franchise will continue
to support domestic project ?nancing
and related activity while mortgages, small
businesses, cards and low cost deposits
will remain the focus of Retail Banking.
United Arab Bank
United Arab Bank (UAB) delivered a record
net pro?t of AED 410 million for the year
ended 31 December 2012 which represents
an increase of 24% over the 2011 results
of AED 330 million. UAB has continued
to capitalise on the solid foundations that
were laid in previous years. It has traditionally
enjoyed one of the highest interest margins
in the UAE along with one of the lowest levels
of non-performing loans. This has allowed
UAB to focus on implementing its strategy for
increasing market share.
The total operating income for the year ended
31 December 2012 increased by 32% to AED
765 million, from AED 581 million for 2011.
Growth in the number of customers has led
to an increase in UAB’s loans and advances
of 35% to AED 10.9 billion as at 31 December
2012, with Customers’ deposits at AED 10.1
billion, testament to the trust placed in UAB
by its retail, commercial and institutional
customers.
UAB has remained committed to ensuring
the appropriate quality and mix of its assets
with its non-performing loan ratio at 1.6% at
31 December 2012, the same level as in 2011.
Liquidity is efectively managed with the
Advances to Stable Resources Ratio at 86%,
well below the cap of 100%. The Capital
Adequacy Ratio is robust at 19% and remains
well above the minimum required by the UAE
Central Bank of 12%.
UAB has proposed a cash dividend of 25%
of its paid-up capital for 2012, subject to
approval by the UAE Central Bank and the
General Assembly.
UAB’s branch expansion plans continue
with the opening of branches across the UAE,
particularly in Abu Dhabi, providing UAB’s
customers with a more extensive network.
In parallel, further investment has been
made in the call centre and internet banking
infrastructure to ensure efcient alternative
banking channels for its customers.
A new core banking system went live in early
2012, with UAB winning recognition for the
implementation project. Several back ofce
processes were also outsourced to a globally
recognised third party service provider,
which has resulted in operational activities
being performed to the highest standards
of control and efciency. There has also been
a signi?cant uplift in UAB’s risk management
practices to support the evolving breadth
and complexity of its businesses. UAB is well
positioned for 2013 to build on the strong
momentum achieved in 2012.
Associates
QAR million 2012 2011
National Bank of Oman 123 102
United Arab Bank 134 102
257 204
Asteco Qatar W.L.L. (0) –
Gekko L.L.C. – (2)
Massoun Insurance Services L.L.C. 2 1
Share of results of associates 259 203
Due to banks and ?nancial institutions
Customers’ deposits
Other borrowed funds
Other liabilities
Shareholders’ funds
Funding mix
Share capital
Legal reserve
Other reserves
Risk Reserve
Proposed dividend
Retained earnings
Shareholders’ equity
2.30pm
Customer service training,
Commercial Bank Academy
The new Academy is a dedicated
Commercial Bank training facility.
The Bank runs a comprehensive range
of training programmes for all staf,
from high school leavers to future
leaders. Last year, 470 employees
went through the Academy. The Future
Leaders programme is speci?cally
designed to fast track the careers
of the next generation of Qatari leaders.
During 2012, selected employees took
part in intensive courses at the Academy,
developed in conjunction with the
Judge Business School at the University
of Cambridge.
Annual Report 2012 25
Asteco Qatar W.L.L.
Asteco Qatar is a Qatari incorporated joint
venture company between Commercial
Bank, United Development Company, Qatar
Insurance Company and Asteco Property
Management in the UAE. The company
provides real estate brokerage and
sales, facilities and management services,
commercial and residential lettings, property
valuations and property consultancy services.
Massoun Insurance Services L.L.C.
Massoun Insurance Services is a Qatari
incorporated joint venture company between
Commercial Bank and Qatar Insurance
Company. The company was incorporated
in 2010 and provides a range of insurance
products which have been tailored to meet
the speci?c needs of the Bank’s retail and
corporate customers.
Gekko L.L.C.
Gekko is a Qatari incorporated joint venture
company between Commercial Bank and
United Development Company. The company
provides contactless payment infrastructure
and customer database management
solutions with its ?rst implementation based at
The Pearl Qatar.
Orient 1 Limited
Orient 1 is a fully owned subsidiary of the Bank
incorporated in Bermuda and is engaged in
supporting the credit card operations of the
Diners Club franchise in the Sultanate of Oman.
Global Card Services L.L.C.
Global Card Services is a limited liability
company registered in the Sultanate of Oman.
The principal activities of the Company are to
issue Diners Club credit cards in the Sultanate
of Oman and to acquire merchant rights and
other related services.
Commercial Bank Investment Services
Commercial Bank Investment Services (CBIS)
was launched in early 2011 as a fully owned
subsidiary of Commercial Bank. CBIS provides
direct access to the Qatar Exchange and
ofers seamless online trading capabilities for
individuals, institutions, corporate and foreign
counterparties. In addition to its electronic
trading platform, CBIS also provides access
to three fully equipped brokerage lounges.
CBIS has increased its share of the brokerage
services market in 2012 to 2.90%.
Business Unit Review
Commercial Bank’s two principal business
units are Wholesale Banking and Retail
Banking. Wholesale Banking brings together
all of the Bank’s oferings to small, medium
and large corporates, both locally and
internationally, while Retail Banking provides
personal banking and wealth management
services to high net worth individuals, afuent
segment and consumers. The Bank’s net
operating income for the year ended 31
December 2012, by business unit, was:
Wholesale Banking
Commercial Bank ofers a comprehensive
range of ?nancial services to domestic and
international companies investing, trading
or implementing projects in Qatar. These
services include banking, treasury, investment
banking, cash management, trade,
transaction banking, corporate ?nance and
advisory services.
Business Performance
Wholesale Banking’s business continued to
grow during 2012 despite the slower demand
in the Private Sector. Net operating income
was up by 2% to QAR 2,173 million for the
year ended 31 December 2012. Net interest
income was QAR 166 million lower re?ecting,
primarily, the competitive pricing pressures
which have seen a reduction in yields on
Corporate lending, whilst other income was
up QAR 209 million compared with 2011.
Loans and advances to customers increased
by 12% to QAR 37.3 billion at 31 December
2012 due to, mainly, to growth in lending to
Services, Contracting, Commercial and Real
Estate industries within the private sector.
Customers’ deposits increased 6% to
QAR 29.6 billion re?ecting the Bank’s strong
corporate customer relationships. Asset
quality improved with Wholesale non-
performing loans increasing by only
QAR 9 million in 2012 and the provision
for impairment losses reducing to QAR 130
million from QAR 209 million in 2011.
Domestic Banking
Domestic Banking provides comprehensive,
cross-product banking solutions to
local corporates based in Qatar. In 2012,
Domestic Banking continued to focus on the
development and deepening of corporate
Business unit review
QAR million 2012 2011
Wholesale Banking 2,173 2,130
Retail Banking 770 695
Subsidiaries 9 8
Other 32 31
Net Operating Income 2,984 2,864
The Commercial Bank of Qatar (Q.S.C.) 26
Management Review
of Operations Continued
relationships through leveraging its existing
customer base more efectively along with
developing new relationships.
Stafed with dedicated relationship managers
who are driven to respond with solutions,
Domestic Banking originates and builds
strong customer links, which are nurtured
in an atmosphere of trust and by cultivating
a deep understanding of the local market
in the context of individual customer needs.
Commercial Bank ?rmly believes in the true
spirit of partnership. This belief, together
with the Bank’s long-standing roots and
reputation in Qatar, gives the team an edge
in its thorough understanding of the ?nancial,
economic and cultural challenges facing
today’s corporate customers. Domestic
Banking is able to anticipate and respond
quickly to speci?c requirements with tailored
and reliable solutions meeting individual
customer needs.
Commercial Bank’s specialist product
expertise in treasury, trade ?nance and retail,
allows the team to provide customer-focused
solutions relevant in various ?nancial systems,
at diferent levels of maturity, and in diferent
stages of development.
It is these capabilities, even when faced with
the challenging market witnessed in 2012,
which fuelled a number of transactions in the
real estate, contracting and services industries
that showcased the collective abilities of the
Domestic Banking team and its strength in
maintaining the customer relationships that
the Bank values most.
Commercial Bank exhibited at the
Qatar Motor Show on 25 – 28 January
2012, promoting its vehicle loans to
over 120,000 visitors.
Annual Report 2012 27
In 2012, Commercial Bank was one of the key
sponsors of the annual International Chamber
of Commerce (ICC) conference and hosted
a training seminar for its Corporate Banking
customers and staf. The seminar, conducted
by industry experts from ICC Trade Finance,
highlighted Commercial Bank’s extensive
experience in transaction banking and
trade, provided insight into real-life practices
and issues, and helped participants gain
a thorough understanding of the recent
changes to Uniform Customs and Practice
for Documentary Credits 600, the global
standard practices for letters of credit.
Government, Public Sector and
International Banking
Government, Public Sector and International
Banking are strategically important business
units for the Bank. As a major Qatari bank,
Commercial Bank continues to maintain
close relationships with government
and public sector institutions in Qatar.
International Banking division manages
banking relationships and business dealings
with Multinational Companies operating
in Qatar as well as global Financial Institutions
and cross-border international corporate
clients. The business unit, together with
the Bank’s Treasury, plays an important role
in diversifying the Bank’s funding sources,
arranging bilateral and syndicated loans
for the Bank, as well as expanding treasury
and corporate deposit relationships with
multinational companies, regional sovereign
wealth funds, asset managers, and other
non-banking ?nancial institutions.
Commercial Bank’s cross-border business
strategy remains conservative and its
primary focus is on business with banks
and corporates in the GCC region. The Bank
also actively participates in trade ?nance
transactions for ?nancial institutions
in countries with large and growing trade
and investment links with Qatar and the
GCC. The Bank works closely with its Alliance
Banks partners to exploit quality lending
opportunities throughout the GCC and to
implement a coordinated group ?nancial
institutions strategy, in line with their shared
business objectives.
Commercial Bank has a strong presence
in Qatar’s infrastructure and contract ?nance
sector, and is a major issuer of guarantees
for large projects in Qatar. Qatar’s successful
bid to host the 2022 Football World Cup
has fast-tracked more than USD 160
billion of infrastructure projects in sports,
transportation, tourism, airlines, energy,
utilities and other sectors over the next ?ve
years. Concurrent high government spending
on the education, health, infrastructure and
real estate sectors continues to stimulate the
Qatar economy, and will boost private sector
and contract ?nance activity. With a large
client list of foreign companies operating
in Qatar, and specialist sector expertise, the
Multinational Companies business unit is well
positioned to bene?t from the expected surge
in contract ?nance. The unit works closely
with various embassies and trade promotion
agencies in Qatar, and has presented to
visiting business delegations from countries
such as Korea, Malaysia and Finland.
Commercial Bank is a major trade bank for
many Public Sector companies. The Financial
Institutions Group has expanded its global
network of correspondent bank relationships
and continued to grow its trade ?nance book.
The International Funds Transfer division
maintained its record of superior service
quality and consistently high performance.
Once again, Commercial Bank was among
the region’s select small number of institutions
to receive the Commerzbank ‘STP Award 2011’
for excellence in payments and the Citibank
Performance Excellence Awards for high
efciency. The Financial Institutions Group
also arranged the Bank’s two-year club
loan facility for USD 455 million with a group
of international banks. The Trade Finance
and Transaction Banking unit continued
to upgrade its product and service ofering
during the year by establishing four new
in-branch trade and cash service centres
within the Bank’s corporate branch network.
Commercial Bank expanded its strategic
collaboration with Hana Bank, Korea, by
establishing a Korean Business Desk, through
which both banks now ofer a wide range of
conventional and innovative corporate and
investment services to Korean companies
operating in the GCC region, and to Qatari
Commercial Bank is the title sponsor
of the Qatar Masters. Televised globally,
it is one of the key events in the Qatar
sporting calendar. The sponsorship
represents the Bank’s commitment to
supporting the Qatar government’s vision
of making Qatar a destination for world-
class sporting events.
The Commercial Bank of Qatar (Q.S.C.) 28
Management Review
of Operations Continued
companies looking to do business in
Korea. The Korea Business Desk will enable
Commercial Bank and Hana Bank to work
together as the preferred partner bank
in their respective countries, combining
business synergies, resources and
market knowledge.
With activity reviving in the syndicated loan
markets, Commercial Bank was associated
with several successful ?nancings, all of
which were signi?cantly oversubscribed.
In particular, the Bank was:
• Mandated Lead Arranger on a QAR 3.7
billion 10-year dual tranche syndicated
facility for Bawabat Al Shamal Real Estate
Company, to ?nance the development of
the Doha Festival City project. Commercial
Bank led the banking group and execution
of one of the biggest private sector
transactions closed in 2012;
• Mandated Lead Arranger and Book
runner for the USD 200 million short- term
oil import ?nancing facility for Bangladesh
Petroleum Corporation, guaranteed by
Bangladesh Bank;
• Mandated Lead Arranger for the USD 138
million and EUR 135 million dual tranche
term loan facility for Ulker Biskuvi Sanayi,
which produces Turkey’s best known brands
of snack foods;
• Mandated Lead Arranger and Conventional
Facility Agent for USD 55 million
conventional facility for Turkiye Petrol
Ra?nerileri in Turkey engaged in re?ning
and distributing petroleum products;
• Mandated Lead Arranger in the USD 190
million short-term loan facility for Bank of
Ceylon, the largest bank in Sri Lanka and
fully government owned;
• Lead Arranger in the USD 400 million SBLC
backed term loan ?nancing for Videocon
Hydrocarbon Holdings Limited, supporting
their activities in the oil and gas ?eld sectors;
• Arranger role in the USD 150 million term
loan facility for NMC Healthcare PLC, a
leading hospital chain operator in the UAE.
Commercial Bank actively supports initiatives
that are relevant to the Qatar and GCC banking
sector, and closely interacts with key global
trade and development institutions such
as the ICC Banking Commission, SWIFT,
Institute of International Finance, International
Finance Corporation, IMF, Arab Trade
Finance Program, ISDA and other
development institutions.
Commercial Bank sponsored or participated
in major banking industry events and
conferences. These included being:
• Gold sponsor of the ICC Banking
Commission meeting in Qatar which was
attended by approximately 400 banking
leaders and executives from 50 countries,
and had a theme of “Reframing the Future
of Trade Finance”;
• Gold sponsor of the Qatar Projects 2012
Conference, which had a theme of “The
journey to 2022”, including the projects that
are expected to be awarded in Qatar in the
run-up to the 2022 World Cup;
• Gold sponsor of the Qatar Capital Markets
conference, which focused on lessons learnt
from ?nancial conditions in regional and
international markets, and the necessity
to develop bond markets in ?scal surplus
countries;
• Platinum sponsor for INTERCEM Doha,
the world’s leading cement industry event,
which attracted over 500 delegates from
45 countries;
• Diamond sponsor of the 14th Forum of the
Arab Business Community, which focused
on the challenges and opportunities in the
Arab world;
• Platinum sponsor of Cityscape Qatar,
the leading real estate exhibition, which
attracted over 2,000 participants and
had more than 100 exhibitors from around
the world.
The Bank also took part in the IMF, IIF,
SIBOS and Asian Development Bank
annual meetings.
For the Government, Public Sector and
International Banking group, the outlook for
business growth in the coming years remains
positive. The management team has been
signi?cantly strengthened, with the addition of
senior and experienced international bankers.
In 2013, the Bank will support Qatar’s vision
and infrastructure projects, grow its business
with the Qatar Government and public sector
institutions, grow its share of trade ?nance
business, strengthen its business and
presence in target markets (international
?nancial centres and growth regions), and
align its business growth to its cross-border
strategy, preferred sectors, client needs and
product platforms.
Enterprise Banking
Enterprise Banking provides a comprehensive
range of products and value-added services
to support small and medium enterprises
(SMEs), thereby nurturing Qatar’s
entrepreneurial business community and
encouraging growth in this sector. Our focus
on this core sector demonstrates the Bank’s
commitment to the Qatar Government’s
Vision 2030, which identi?es SMEs as the
key constituent of the country’s economic
future. Through Enterprise Banking, we
also partner with Qatar Development Bank’s
‘Al Dhameen’ programme, which extends
investment and working capital facilities to
economically-viable SMEs and makes credit
more accessible.
The Bank now provides dedicated relationship
managers for SME customers in ?ve branch
locations at Umm Lekhba, Al Rayyan, D Ring,
Bin Omran and Hamad Al Kabeer. The highly
specialised team advises existing and
potential entrepreneurs on:
• Working capital ?nance and term lending;
• Trade Finance facilities;
• Deposits, remittances, insurance and
treasury solutions;
• Retail solutions for employees;
• Business Technology Solutions;
• Access to Advisory and Mentoring services.
3.30pm
Construction site, Doha
The Qatar skyline changes by the day
with the rise of new developments.
Gross domestic investment is expected
to reach QAR 820 billion over the period
2011 – 2016. Commercial Bank plays a
key role in lending to private real estate
investors, developers and contractors.
The Commercial Bank of Qatar (Q.S.C.) 30
During the year, Enterprise Banking rolled out
a programme designed to provide tailored
lending to SMEs. The credit programme
speci?cally caters to the Enterprise market’s
characteristics, providing a smoother ?ow
and faster turnaround times while taking
into consideration SMEs’ risk pro?le and
factors such as the lack of detailed ?nancial
information. This initiative provides enhanced
customer service and supports the Bank’s
objective of providing quick, easy and
comprehensive solutions to SMEs.
Commercial Bank’s SME services also
include a range of business technology
solutions, provided through the Bank’s
exclusive partnership with MEEZA, a Qatar
Foundation Joint Venture. The suite of product
solutions include cloud technology for email,
webhosting, SharePoint services as well as
HR and payroll solutions and relieves small
business customers of administrative
problems and the need for, and investment in,
technology and operational resources. These
solutions were formally launched in January
2012, and as the ?rst of their kind in the region,
were well received by customers, allowing
them to increase their efciency and focus on
growing their business. The Bank’s insurance
joint venture, Massoun Insurance Services has
developed a new product ‘SME Shield’ which
provides wider protection and competitive
insurance rates for SME Customers.
The Bank also supports SMEs by providing
education and training to help them to grow.
In May 2012, the Bank partnered with the
College of North Atlantic, Qatar (CNA-Q) to
host a workshop on ‘Strategic Growth’ for
Enterprise customers. The workshop was
conducted by an industry expert from CNA-Q
and was attended by numerous business
owners and key decision-makers. It addressed
opportunities and challenges for SMEs, laying
the foundation for future workshops and
seminars. The workshop was followed in
December 2012 by a second workshop
on ‘Capitalising on Strengths’. Commercial
Bank was the Silver sponsor of the ?rst Qatar
International Trade Exhibition for Partners
and Franchise which brought together SMEs
from the Middle East and around the world
to showcase their products and services
to young Qatari entrepreneurs for potential
partnerships, dealerships or franchises in
Qatar and the Middle East.
Treasury
The Treasury department manages the
Bank’s funding and liquidity requirements.
It also provides a full suite of foreign exchange
and interest rate products and services for
its customers, which help them to hedge
their market risks. Commercial Bank’s
Treasury ranks at number two in the Qatari
market for treasury activities and is regarded
by correspondent banks as a market maker in
US Dollar/Qatari Riyal spot, forwards and swap
dealings. Customer transactions are done
on a matched basis, resulting in no trading or
market risk for the Bank.
During the year, the Treasury division
identi?ed and executed new opportunities for
investment in QCB Treasury Bills, secondary
trading on T-Bills and high yield placements.
There has been an overall improvement in
market activity and consequently the Bank
witnessed an increase in foreign exchange
?ows in 2012.
Treasury has been instrumental in reducing
the Bank’s cost of funds during 2012
and continued to focus on balance sheet
optimisation and liquidity management,
and maintaining key liquidity ratios well
above the minimum prescribed by the Qatar
Central Bank.
Retail Banking
Retail Banking ofers a comprehensive
suite of products to its customers, including
deposits and loans, credit cards, insurance
and wealth management solutions. Customer
centricity is the cornerstone of its approach,
and it tailors its products and services to meet
or exceed customers’ needs.
Business Performance
Retail Banking continued to grow in
2012, delivering a strong core business
performance, with lending to customers
up 32% to QAR 11.3 billion and deposits
up 17%, QAR 1.7 billion, to QAR 11.8 billion.
Management Review
of Operations Continued
Commercial Bank’s exclusive agreement
with MEEZA, signed on 12 January 2012,
will provide the Bank’s business
customers with access to cloud-based
HR and IT solutions.
Annual Report 2012 31
Net operating income increased by QAR 75
million to QAR 770 million with net interest
income 23% higher than 2011 despite the
regulatory restriction on banking fees and
interest rates.
The strong increase in revenues is a testament
to Retail Banking’s focus on sustained and
pro?table growth, as it continued to leverage
corporate synergies and the expanded
branch network. There has also been an
improvement in the asset quality of the loan
book with a lower provision for impairment
losses of QAR 10 million in 2012 compared
with QAR 30 million in 2011.
Commercial Bank employees participated
in the Qatar Central Bank marathon,
held on the Doha Corniche, to celebrate
Qatar’s ?rst National Sports Day on
14 February 2012.
Strategic Initiatives in 2012
Retail Banking continued to develop new
products and services, releasing a wide
range of asset, liability and insurance products
during the year. It focused its retail asset
growth on secured mortgage lending, semi-
secured vehicle ?nancing and expanding
the credit card base. This asset growth
was centred on customer pro?tability and
leveraging organic growth opportunities.
In line with the Bank’s strategy of changing
the funding pro?le, Retail Banking introduced
deposit products ofering attractive medium
and longer-term interest rates. New products
included ‘Term Saver’, a customer deposit
account ofering higher interest rates
which helps the bank to maintain long-term
relationships with Retail and Private Banking
customers. Retail Banking also launched
a ‘60-Day Notice’ deposit product.
5.00pm
Phone in hand
Smartphone penetration in Qatar
is amongst the highest in the world.
Commercial Bank was ?rst to launch
a Mobile Banking app, and continues
to invest in its SMS, Mobile and Internet
Banking platforms. The Bank has
recently upgraded its website which
is now a key channel for acquisition of
new customers and a portal to all of the
Bank’s services. Ongoing investment
in the website will allow customers to
complete a wider range of transactions
at their convenience, 24 hours a day.
Annual Report 2012 33
Aligned to its premium brand, the Bank
launched best-in-class and by ‘invitation only’
Diners Club Black and World MasterCard card
products, targeting Private Banking clients.
The Bank also re-launched Accolades, a
reinvigorated cards loyalty programme, which
enhances customer loyalty by ofering an
unrivalled selection of rewards for credit card
customers. The Accolades programme allows
customers to redeem vouchers with more
than 100 valuable partners and brands.
Commercial Bank has a leading position in the
vehicle ?nance market. Initiatives to enhance
the Bank’s ofering during the year included
a Vehicle Finance event in collaboration with
authorised car dealers. The event ofered
customers special discounted rates for vehicle
loans and insurance, and was extended due
to high demand. The Bank also gave exclusive
ofers on vehicle loans for customers who
visited its stand during The Qatar Motor Show.
Retail Banking continues to make progress
against its strategic agenda, transforming
the way it does business by streamlining
operational processes and seamlessly
integrating electronic delivery channels.
The Bank’s robust mobile banking platform
is now compatible with iPad, Android and
all smartphones, in addition to the iPhone,
BlackBerry and mobile web. The platform was
further enhanced to enable customers to pay
Qtel bills, buy airtime and make bill enquiries,
and to allow customers to pay Kahramaa bills.
Commercial Bank also signed an agreement
with a local exchange house which enables
Payroll card holders to enjoy easy access
to remittance services through the Bank’s
country-wide ATM network. This ful?ls an
important need for expatriate customers
and re?ects the growth of remittances.
Commercial Bank understands that young
adults of Qatar are its future. In the latter
part of 2012, the Bank launched a new Retail
Banking segment, Pioneer Banking, ofering
more tailored solutions to serve customers
in the age group of 18 – 35 living in Qatar.
The Bank recognises that this particular age
group consists of digital natives who seek
dependable, quick and convenient technology
solutions from their bank. Therefore, more
focus was placed on building a stronger digital
brand proposition during the past year to ofer
this audience a more proactive connection
on the Bank’s social networking channels,
in addition to ‘on the go’ banking services
through the Bank’s streamlined mobile
banking platform.
Retail Banking continues to identify new
revenue streams, in particular in wealth
management and bancassurance. During
the year, Private Banking partnered with
Commercial Bank Investment Services to ofer
personalised wealth management solutions
which included initiating a six-month free
brokerage service, aimed at boosting stock
market activity and acquiring brokerage
accounts. The Bank is designing wealth
management and investment products that
can be integrated with its Private Banking and
Sadara Privileged Banking propositions.
The Sadara ofering was also enhanced to
provide customers with independent wealth
management. The Sadara Investment
Relationship Managers ofer services ranging
from a review of customers’ ?nancial situations
to advice on speci?c investments. In addition,
the Bank launched the Sadara Privileged
Remote Relationship Management Unit,
providing a premium relationship banking
service by telephone and email for customers
who are constantly on the move.
As part of its strategy to expand distribution,
the Bank opened branches at Al Mesilla and
Al Kharaitiyat during the year, taking the
network to 29 branches. This expansion
strategy aligns the Bank’s branch network
with Qatar’s geographical developments, to
support the growing population and ensure
the highest standards of service are always
within convenient reach for customers.
In this way, Commercial Bank can be a partner
for each community, aiding its ?nancial
development and working closely with all
segments of society.
The branches are a key touchpoint for
customers, so Commercial Bank has taken
a series of steps to leverage its investment in
the network. This has included an awareness
campaign in leading English and Arabic
newspapers, as well on the Bank’s website,
A series of open door customer events
were held between 13-27 March 2012
to showcase Commercial Bank’s ?agship
branches. The D-Ring branch boasts
a brokerage lounge where customers
can keep an eye on equity markets from
around the world, via newsfeeds and
stock tickers.
The Commercial Bank of Qatar (Q.S.C.) 34
under the title ‘Open the doors to a Unique
Banking Experience’. The campaign promoted
Commercial Bank’s state-of-the-art branches
and highlighted the range of services,
products and channels available to
customers. The Bank also ran a number
of events for high net worth and afuent
customers at its ?agship branches, giving
them a private tour of the branch and an
overview of the Bank’s premium services.
Retail Banking continued to undertake
initiatives to further enhance its service.
This included rolling out a system allowing
scanning and electronic submission of
applications and supporting documents,
to speed up account opening and processing.
The branch network is supplemented by 165
ATMS that are strategically located to meet
customers’ needs. To ensure all customers
?nd it easy to do business with the Bank,
a number of ATMs have been installed
for people with special needs, such as
visual impairments or physical disabilities.
These ATMs ofer voice-enabled services
and are designed to be accessible for
wheelchair users.
Risk Management
The provision of ?nancial services to
customers carries signi?cant risks.
Accordingly, identifying, assessing and
mitigating risk is a key priority for Commercial
Bank. The Bank has a comprehensive risk
governance framework in place, covering
accountability, oversight, measurement and
reporting of risk, encapsulated through the
Board-approved Risk Charter which also
outlines the Bank’s enterprise-wide risk
management activities and details high-level
organisation, authorities and processes
relating to all aspects of risk management.
During 2012, Commercial Bank continued to
deploy clear risk management objectives, and
a well-established strategy to deliver them,
through core risk management processes.
Responsibility for risk management resides
at all levels within Commercial Bank from the
Board and the Executive Committee down
to each business manager and risk ofcer.
Our risk management practices are well
embedded and are cascaded down from
the Board of Directors, sub-committees of
the Board, to Management Committees and
Executive Management.
Commercial Bank’s Board is involved in
risk decisions through the:
• Board Risk Committee (for risk policies,
enterprise-wide risk reviews and portfolio
monitoring);
• Board Executive Committee (for credit
decisions and lending strategy); and
• Board Audit and Compliance Committee
(for compliance and internal audit matters).
Commercial Bank’s risk governance structure
ensures that risk governance is able to
respond with ?exibility due to timely, complete
and enterprise-wide risk information, enabling
the Board to make critical decisions to
minimise risk.
At management level, risk governance is
implemented by adopting and integrating the
necessary systems to identify, manage and
report risk. The level and nature of aggregate
risk arising in the business are captured by
systems and reports.
Commercial Bank has actual or potential
exposures to four principal categories of risk:
Credit, Market, Liquidity and Operational.
Credit risk is the risk of a potential loss when
a customer or market counterparty fails to
ful?l its contractual obligation to the Bank.
The risk arises mainly from wholesale and
retail loans and advances, due from banks
and non-trading investments. The Bank’s
credit risk management framework includes
policies and procedures to monitor and
manage this risk, and a comprehensive
structure of delegated authorities.
Market risk is the risk of potential loss in
value or earnings arising from changes in
market factors such as interest rates, foreign
exchange rates, equity prices, commodity
prices and credit spreads. This risk is
managed by the Bank’s Asset and Liability
Committee (ALCO), which provides speci?c
guidelines for market risk management.
Liquidity risk comprises two key risks:
liquidity risk and structural risk. Liquidity risk
is the risk that the Bank is unable to meet
its obligations as they fall due. Structural
risk concerns the management of non-
contractual risk, which primarily arises from
the impact on the Bank’s balance sheet of
changes in interest rates on income or foreign
exchange rates on capital ratios. The Board
of Directors has delegated responsibility
for liquidity management to ALCO, which
establishes parameters and determines
strategic levels for these two risks.
Operational risk is inherent in the Bank’s
business activities and arises from events
associated with its processes, people and
systems, and from external factors other than
credit, market and liquidity risk. Reputational
risk is addressed through various operational
risk management tools and is managed
through a well-de?ned operational risk
management cycle that comprises four major
stages: risk identi?cation, risk assessment,
controls and monitoring and reporting.
During 2012, the Bank strengthened its risk
management processes further by improving
its market risk management, monitoring and
reporting capabilities, extending its internal
credit risk rating application to all business
segments, fully integrating risk-based
decisions and automating the operational risk
incident reporting process.
Commercial Bank complies with the provisions
of the applicable Basel II Framework, as
advised by the Qatar Central Bank. The Bank
is also working closely with the Qatar Central
Bank, alongside other banks, on the
consultation process for implementing
Basel III in Qatar.
The governance framework, policies and
administrative procedures and practices
relating to the Bank’s risk management
align with global best practice, the
recommendations of the Basel Committee
and the guidelines of the Qatar Central Bank.
Annual Report 2012 35
Corporate Social Responsibility
Commercial Bank’s Corporate
Communications Department is responsible
for promoting and maintaining efective
communication between the Bank and its
existing and potential customers, key
stakeholders and employees. This includes
adopting integrated marketing campaigns
that target all consumer segments within each
business division.
In 2012, the Bank enhanced its brand equity
by focusing largely on customer marketing
communications, as well as industry
conferences, seminars, public events
and cultural projects. Corporate Social
Responsibility (CSR) is part of the Bank’s ethos,
and Commercial Bank has therefore invested
heavily in various community, sports,
education, social, humanitarian and health
initiatives in Qatar.
Committed to supporting the
community in Qatar
Commercial Bank’s corporate citizenship
agenda is to support and encourage the
Qatari community where we operate
in a positive way. The Bank aims to be an
outstanding corporate citizen by supporting
socio-economic initiatives that bene?t society
as a whole, and initiated numerous campaigns
and charity events in 2012.
Community outreach was a priority and the
Bank focused on engaging with all segments
of Qatari society. The Bank sponsored
events such as a spelling bee competition
for children, blood donation camps, Al Sadd
Stadium’s Disability Legacy programme and
various other sports, cultural, educational
and CSR initiatives. In early 2012, the Bank
supported four notable charities, which
contribute signi?cantly to Qatar’s social
infrastructure and ofer funds and services to
people in need. Driven by its commitment to
create a more humanitarian society, the Bank
presented donations to The Qatar Society for
Rehabilitation of Special Needs, Qatar National
Cancer Society, Qatar Foundation for the Care
of Orphans ‘Dhreima’ and Qatar Foundation
for Elderly People Care.
Commercial Bank also supported the
promotion of Qatari arts and culture
programmes during the year and became
a strategic partner of the Katara Cultural
Village which has been designed to reinforce
Qatar’s ?ourishing cultural environment.
The collaboration symbolises the Bank’s
commitment to supporting cultural activities
in Qatar and making the country a regional
arts and cultural hub.
Bringing sports and business together
Commercial Bank believes that sport plays
an integral role in today’s society. It promotes
a better quality of life through healthier
choices and encourages other values
such as competition, endurance and good
sportsmanship.
In 2012, Commercial Bank proudly celebrated
Qatar’s First National Sports Day with two
days of fun-packed activities for its employees
and their families. Employees also took part in
Qatar Central Bank’s Marathon which was held
at the Doha Corniche.
Commercial Bank also co-sponsored
‘Sailing Arabia – The Tour 2012’, the regional
sailing event across the Arabian Peninsula,
through its sponsorship of the ‘Team
Commercialbank’ boat. The event was a great
initiative aimed at reinvigorating the region’s
rich maritime heritage.
Title sponsorship of the Commercial Bank
Qatar Masters and the Grand Prix of Qatar
MotoGP re?ects the Bank’s promotion of
excellence in sports and its keen interest in
enhancing Qatar’s international sporting
reputation. The events, which are viewed
by a global audience of millions, demonstrate
the Bank’s commitment to the Qatari
Government’s vision of placing Qatar
on the map as a venue for world-class
sporting events.
In the latter part of 2012, Commercial Bank
signed an agreement with Aspire Zone
Foundation to be the principal sponsor of
its ‘Step into Health’ programme. ‘Step into
Health’ is designed to engage the people of
Qatar in a self-managed lifelong programme
which promotes a moderate amount of daily
healthy activity.
Employee Development
Commercial Bank is committed to developing
local talent in Qatar and building the region’s
professional skills and human and intellectual
capital. As part of this, the Bank is dedicated
to creating a robust talent and knowledge
pool within Qatar’s youth community who will
proudly represent their country at a national
and international level in the future.
In April 2012, Commercial Bank was a Diamond
sponsor at the annual Qatar Career Fair,
a knowledge-based community forum
with signi?cant investment in developing
local talent. The Bank’s involvement was
an overwhelming success, with the Bank
subsequently receiving a large number of
job applications for a variety of positions.
Through a partnership with the College
of North Atlantic - Qatar (CNA-Q), The Bank
has a Banking Associate Programme which
provides Qatari National school graduates
with the banking and work-based skills to
develop into senior bankers of the future.
Thirty-one students participated in this
highly successful programme before
being appointed into roles within the Bank’s
branch network.
In 2012, the Bank launched Induction
Programmes for new joiners. The ?rst
programme was delivered to Qatari Banking
Associate students who are sponsored
through banking training at CNA-Q. The
second programme was run for recent
Qatari and expatriate joiners to the bank.
The Commercial Bank of Qatar (Q.S.C.) 36
Investing in the future of our employees
Most recently, Commercial Bank launched
several proprietary educational and
professional career advancement
programmes for the Bank’s talented
employees and high potential candidates.
These include the Future Leaders
Programme, Graduate Development
Programme, Accelerated Leadership
Programme and Career Management
Programme. These programmes are
designed to empower employees and enable
them to excel in their ?elds. Coaching and
mentoring are an integral part of all of the
Bank’s talent programmes, to optimise fully
and accelerate the learning experience and
allow talented employees to bene?t from
the broader experience of the coach and
mentor population. Training programmes
are run at the Commercial Bank Academy,
which was inaugurated by the Bank’s
Managing Director in September 2012.
This purpose designed learning centre ofers
training facilities of the highest order, in line
with the Bank’s ongoing partnership with
world-class learning providers.
Through the launch of our Accelerated
Leadership and Future Leaders programmes
in conjunction with some of the world’s leading
universities and business schools, including
Judge Business School (Cambridge), London
Business School, HEC (Paris), The Centre for
Creative Leadership (Brussels) and INSEAD
(Paris), we have been able to accelerate the
career progression of our most talented
potential leaders. The success of the
signi?cant investment that the Bank has made
is evidenced through the recent promotions
of a number of talented Qatari staf into senior
leadership roles in the Bank.
Commercial Bank is proud to be launching the
Youth Leadership Acceleration Programme,
in partnership with HEC (Paris) in Qatar. The
programme is designed to encourage youth
participants to grow into leaders who will
contribute to the future of Qatar in line with
the country’s Vision 2030 plans and is set to
be launched in the ?rst quarter of 2013.
Supporting women in business
Commercial Bank strongly encourages the
development of women in Qatar. All of the
Bank’s development programmes have
a high percentage of female participants
and are designed to empower women,
in particular, with the skills and con?dence
required to succeed. The Bank is inspired by
its female workforce and their commitment
to excellence.
The Bank sponsored the third Qatar
International Businesswomen Forum in
October 2012, showing its commitment to
playing a part in encouraging the economic
empowerment of women. The Qatar
International Businesswomen Forum
emphasised the role of women in the
development of economies of scale
throughout the Arab world. The event
was used as a platform to highlight the
achievements of Qatari businesswomen
and female entrepreneurs from the region,
as well as the achievements of successful
businesswomen from around the world.
Preserving Qatari Values and Traditions
Commercial Bank believes in putting the
nation ?rst and encouraging national pride
by observing Qatar’s traditional values, whilst
looking towards the future with ambition.
The Bank recognises that the people of Qatar
are its greatest asset and is committed to
promoting cultural practices that preserve
Qatar’s heritage for generations to come.
The Bank celebrated the 2012 National Day
with the citizens and residents of Qatar by
launching a non-pro?t-making public activity,
recognising the human endeavours involved
in building this great nation. The ‘Doing
Good For Qatar’ campaign was designed to
encourage the Qatari community to spread
the joy of giving to others by volunteering
time, efort or money, to any causes or ideas
that show gratitude and also bene?t the
country. The campaign celebrated the
Qatari values of giving back to society by
encouraging all individuals to make public
The Future Leaders programme launched
in June 2012, is run in partnership with
Cambridge University. The programme
will fast track the careers of the
Bank’s top performing and highest
potential employees.
Annual Report 2012 37
pledges for any cause or purpose that is
close to their hearts, thus inculcating good
citizenship and strong societal values within
the community. To encourage and reward
participation in the campaign, Commercial
Bank rewarded several pledge-takers
selected in a random draw at the campaign’s
conclusion.
Commercial Bank proudly continued its
annual tradition of celebrating Qatari values
by hosting a Garangao festival for Qatar’s
younger generation on the 14th day of the
Holy Month of Ramadan. To engage all levels
of the community, families were welcomed at
Commercial Bank branches to enjoy various
fun-?lled Garangao festivities. In keeping
with Qatari customs and traditions, children
of all ages were given Garangao bags ?lled
with an assortment of traditional treats
and mementos.
In association with the Ministry of Social
Afairs, Department of Developing Productive
Families, the Bank again hosted a ‘traditions
tent’ at the 2012 Commercial Bank Qatar
Masters, featuring traditional Qatari hospitality
and displaying elements from the country’s
rich heritage. Visitors enjoyed viewing a
traditional arts and crafts display, including
falconry and henna painting, available
throughout the four-day golf tournament,
showcasing the Bank’s commitment to
promoting Qatar to an international audience.
Acknowledgement
Commercial Bank’s record performance
has demonstrated its agility in broadening its
business as well as the ongoing diversi?cation
of its income streams to capture new
opportunities and deliver improvement in
the Bank’s performance. This has only been
possible through the dedication and hard
work of our valued employees and the
leadership team. We are also extremely
grateful for the ongoing support and guidance
provided by the Chairman, Vice Chairman,
Managing Director and Members of the
Board. Under their leadership, we have
continued to achieve growth and have
sustained our reputation of being one of
Qatar’s most preferred and trusted banks.
In conclusion, we would like to thank His
Excellency Sheikh Abdullah bin Saud Al Thani.
Under his wise leadership, we have raised
the Bank’s credibility and brand equity in the
region. The Qatar Central Bank has shown
prudence with clear and consistent leadership,
expertise and direction, enabling the Qatar
?nancial market to achieve high growth,
despite the worldwide economic problems.
‘Everything is possible’ is a mindset engraved
in our core. Commercial Bank’s legacy mirrors
the nation’s, and this holds true for its vision
forward as well. The Bank has a vital interest
in its people’s progress, in line with Qatar’s
national vision 2030. We are proud to be
inspired by Qatar and its people, and look
forward to the future with ambition and
con?dence.
Andrew C Stevens
Group Chief Executive Ofcer
Responsibility statement
To the best of our knowledge, ?nancial
statements prepared in accordance
with International Financial Reporting
Standards give a true and fair view of the
assets, liabilities, ?nancial position and
pro?t of The Commercial Bank of Qatar
(Q.S.C.). We con?rm that the management
review, together with the notes to the
?nancial statements, includes a fair review
of development and performance of the
business and the position of the Group
together with a description of the principal
risks and opportunities associated with
the expected development of the Group.
26 February 2013
For and on behalf of the Board
of Directors:
Mr. Hussain Ibrahim Alfardan
Managing Director
Mr. A. C. Stevens
Group Chief Executive Ofcer
7:30pm
Souq Waqif, Doha
The Souq comes alive in early evening
with merchants selling everything from
pots and pans to herbs and spices. Since
its origins as Qatar’s ?rst commercial
bank, supporting trade and commerce
has always been at the heart of
Commercial Bank’s operations. Today,
the Bank has over 6,500 Point of Sale
terminals installed at merchant outlets
across Qatar and is the largest provider
of Merchant services in the market.
12:05am
The Pearl, Qatar
Home to local and international
residents, The Pearl ofers a unique
waterside living environment with
upmarket shops and restaurants.
Fitting in with today’s modern and busy
lifestyles, Commercial Bank is continuing
to invest in its Internet Banking service,
enabling customers to do everything
from check their balance to pay urgent
bills, all from the comfort of their own
home at a time that suits them.
Annual Report 2012 41
Annual Corporate Governance
Report 2012
1. Introduction
The Bank is committed to strong corporate
governance practices that allocate rights
and responsibilities among the Bank’s
shareholders, the Board and executive
management to provide for the efective
oversight and management of the Bank in a
manner that enhances shareholder value.
The Bank is required to comply with the
Corporate Governance Guidelines for Banks
and Financial Institutions issued by Qatar
Central Bank (the QCB Guidelines) and the
Corporate Governance Code for Joint Stock
Companies listed on markets regulated by the
Qatar Financial Markets Authority (the QFMA
Code). In addition, the Bank seeks to adopt
international best practices for Corporate
Governance, including but not limited to those
developed by the Organisation for Economic
Cooperation and Development (OECD), the
Bank for International Settlements (BIS) and
the International Institute of Finance (IIF).
The shares of the Bank, represented by Global
Depository Receipts, are listed on the London
Stock Exchange. Debt securities issued
or guaranteed by the Bank are listed on the
London Stock Exchange and on the SIX Swiss
Exchange. The Bank complies with the listing
rules of those exchanges as well as those of
the Qatar Exchange.
In view of the increasing focus on corporate
governance and risk management, the
Bank has taken active measures to further
enhance and raise its corporate governance
standards during 2012. Through the
combined eforts of the Board of Directors,
executive management and employees, the
Bank has adopted governance charters and
documents which are in line with applicable
regulatory requirements and leading
corporate governance practices. These
standards are reviewed by the Board annually
to ensure that the Bank maintains best
practices in corporate governance. The Board
Charter, Board Committees Charter and
Corporate Governance Charter are available
on the Bank’s website www.cbq.qa and are
also available in print to any shareholder upon
request.
2. The Board of Directors
2.1 Role of the Board and Executive
Management
The Board oversees the conduct of the
Bank’s business and is primarily responsible
for providing efective governance over the
Bank’s key afairs, including the appointment
of executive management, approval
of business strategies, evaluation of
performance and assessment of major
risks facing the Bank.
In discharging its obligations, the Board
exercises judgment in the best interests of
the Bank and relies on the Bank’s executive
management to implement approved
business strategies, resolve day-to-day
operational issues, keep the Board informed,
and maintain and promote high ethical
standards. The Board delegates authority in
management matters to the Bank’s executive
management subject to clear instructions in
relation to such delegation of authority and
the circumstances in which executive
management shall be required to obtain
Board approval prior to taking a decision
on behalf of the Bank.
The Board has established clear rules in
relation to the dealings of the Board and
employees in securities issued by the Bank.
2.2 Board Composition and Directors’
Quali?cations
The size of the Board is in accordance with the
Bank’s Articles of Association, which currently
provide for nine Directors. The organisation
of the Board shall (i) be determined from
time to time according to the requirements
of the Bank, and (ii) be subject to the Directors’
independence provisions set out below. The
Board is required to consist of a balance of
Non-Executive and Independent Directors.
The position of Chairman of the Board and
Managing Director of the Bank may not be
held by the same individual.
The Board is collectively required to possess
professional knowledge, business expertise,
industry knowledge and ?nancial awareness
sufcient to enable the Board to carry out
its responsibilities, and Directors shall have
experience and technical skills in the best
interests of the Bank.
2.3 Secretary of the Board of Directors
The Secretary of the Board is entrusted to
record, coordinate and register all meetings
of the Board along with maintaining custody
of records, reports and other materials sent
to and received by the Board. The Secretary’s
functions also include distribution of
information and coordination among
members of the Board and between the
Board and its stakeholders. The Secretary
is also entrusted to ensure the timely access
of members of the Board to all minutes of
meetings, information, documents and
records relating to the Bank.
2.4 Electing Directors
During 2012, the Bank has established
a Nomination Committee which is
tasked to uphold the transparency in the
nomination process for Board membership.
This Committee is responsible for
recommending Board Members’
appointments and nomination for election
in the General Assembly.
Nominations and appointments are made
in accordance to formal, rigorous and
transparent procedures as per QFMA
Corporate Governance Code and in line with
the Bank’s Articles of Association and relevant
governance charters. To be elected to the
Board, a nominee Director must receive a
majority of votes cast in the election. Members
The Commercial Bank of Qatar (Q.S.C.) 42
Corporate Governance
Continued
of the Board shall be elected for a period of
three years, and a director may be re-elected
more than once.
A Director’s membership to the Board
shall terminate in the event that, amongst
other things, the Director is convicted of
an ofence of dishonour or breach of trust
or is declared bankrupt.
Vacancies on the Board are ?lled in
accordance with the Bank’s Articles
of Association.
2.5 Directors’ Responsibilities
The responsibilities of the Chairman of the
Board are as de?ned in the Bank’s Articles of
Association, the Commercial Companies Law
and Directors’ Job Descriptions.
Directors shall be given appropriate and
timely information to enable them to maintain
full and efective control over strategic,
?nancial, operational, compliance and
governance issues of the Bank.
Directors shall act in accordance with the
Bank’s Articles of Association, the Commercial
Companies Law, the Board Charter, Board
Committees Charter and Corporate
Governance Charter.
Other than resolutions passed at each Annual
General Assembly absolving the Board of
Directors from responsibility, and provisions
in the Articles of Association requiring
that disputes against directors can only be
brought in accordance with a resolution by the
General Assembly, there are no provisions in
efect protecting the Board of Directors and
executive management from accountability.
2.6 Directors’ Independence
At least one third of the Board shall comprise
Independent Directors and a majority of the
Board shall comprise Non-Executive Directors.
Directors must notify the Board as soon as
reasonably practicable in the event of any
change in circumstances which may afect
the evaluation of their independence. Non-
Executive Directors must be able to dedicate
suitable time and attention to the Board, and
their directorship must not con?ict with any
other interests of such Directors.
2.7 Board Meetings
The Board shall hold meetings at least once
every two months pursuant to either (i) written
notice from the Chairman of the Board or his
Deputy at least one week prior to the meeting,
or (ii) the request of another member of the
Board of Directors.
Notice of meetings issued by the Chairman
of the Board shall include the meeting agenda.
Directors may request that a matter be
included on the meeting agenda.
Directors are expected to make every efort
to attend, in person, all scheduled Board
meetings and meetings of the committees
of the Board on which they serve. A Board
meeting shall only be validly called if a majority
of Directors are in attendance (whether in
person or by proxy) and provided that at least
four Directors are present in person.
Voting in Board meetings shall be in
accordance with the Bank’s Articles of
Association. Matters considered, and
decisions taken, by the Board shall be
recorded by means of minutes kept by
the secretary of the Board.
As per the Board Charter, the Board meets
a minimum of six times (once every two
months at a minimum). The Board met a
total of seven times in 2012 to conduct its
duties and responsibilities.
2.8 Board Committees
Board committee members are appointed
by the Board. Each Board committee has its
own written terms of reference, duties and
authorities as determined by the Board and
de?ned in the Board Committees Charter
and applicable job descriptions.
The standing Board committees are as
follows:
Board Risk Committee
The Committee comprises three Board
Members, and the current Members are Sh.
Abdullah bin Ali bin Jabor Al Thani (Chairman),
Sh. Ahmed bin Nasser bin Faleh Al Thani and
Mr. Omar Hussain Al Fardan:
The Terms of Reference provide that the
Committee is responsible for (i) all aspects of
enterprise risk management including but not
restricted to credit risk, market risk, liquidity
risk and operational risk, (ii) setting forth
risk policies, criteria and control mechanisms
for all activities involving any types of risk, and
(iii) overseeing all Bank risks through the
Management Risk Committee (MRC).
The Committee is required to meet at least
four times a year. The Board Risk Committee
met a total of four times in 2012.
Policy, Strategy and Governance Committee
The Committee comprises four Board
Members, and the current Members are H.E.
Abdullah bin Khalifa Al Attiyah (Chairman), Sh.
Abdullah bin Ali bin Jabor Al Thani, Mr. Hussain
Ibrahim Al Fardan and Mr. Omar Hussain Al
Fardan together with Mr. Andrew C. Stevens
(Group Chief Executive Ofcer):
The Terms of Reference provide that the
Committee (i) reviews and develops the long
term strategy, brand, vision and mission of
the Bank, (ii) reviews and develops the annual
business plan and budget in line with the
long term strategy and changes in economic,
market, and regulatory environments,
(iii) monitor and evaluate the Bank’s
performance periodically against the strategy,
business plan and budget, (iv) review and
pre-approve the Bank’s proposed policies
prior to ?nal approval being sought from the
Board of Directors unless the Board delegates
its “?nal approval authority” to the Committee
and (v) on a periodic basis, reviews and
assesses any changes to international
and local corporate governance practices
and applicable regulations that could
impact Commercial Bank’s activities and
recommends any required changes in
practices and documentation to the Board
of Directors for review and approval.
The Committee is required to meet at least
four times a year, and at least once in each
?nancial quarter of the year. The Policy,
Strategy and Governance Committee met
a total of 10 times in 2012.
Annual Report 2012 43
Board Executive Committee
The Committee comprises four Board
Members, and the current Members are
H.E. Abdullah bin Khalifa Al Attiyah (Chairman),
Sh. Abdullah bin Ali bin Jabor Al Thani,
Mr. Hussain Ibrahim Al Fardan and Mr. Omar
Hussain Al Fardan:
The Terms of Reference provide that the
Committee (i) acts as a consultative body to
the Board, which handles matters that require
the Board’s review, but may arise between
Board meetings. In addition, this Committee
deliberates matters, speci?cally credit
matters, in detail which are not discussed
at length in the meetings of the Board, and
assists the Board in detailed reviews and
analysis which could be done prior to a Board
meeting and (ii) is also delegated certain
approval authorities by the Board including
the granting of major credit facilities and
undertaking major investments within the
approved limits as per the Bank’s approved
delegation of authority matrixes.
The Committee is required to meet at least
once a month (12 times a year). The Board
Executive Committee has met a total of 19
times in 2012.
Board Audit and Compliance Committee
The Committee comprises three Board
Members, and the current Members are
Mr. Khalifa Abdullah Al Subaey (Chairman), Sh.
Jabor bin Ali bin Jabor Al Thani and Sh. Ahmed
bin Nasser bin Faleh Al Thani as well as Mr.
Abdulla Mohammed Ibrahim Al Mannai
(alternate member):
The Terms of Reference provide that the
Committee is responsible for (i) overseeing
the quality and integrity of the accounting,
auditing, internal control and ?nancial
reporting practices of the Bank, (ii) setting
forth compliance and Anti-Money Laundering
& Combating Financing Terrorism (AML/CFT)
requirements, and de?ning criteria and
control mechanisms for all activities
involving Bank-wide related risks and
(iii) recommending the appointment of the
External Auditors to the Board and in turn the
Board will review and recommend the same
for approval in the Annual General Meeting.
The Board Audit and Compliance Committee
is required to meet four times a year or more
frequently if needed. The Board Audit and
Compliance Committee met a total of six times
in 2012.
Board Remuneration Committee
The Committee comprises three Board
Members, and the current Members are Sh.
Jabor bin Ali bin Jabor Al Thani (Chairman), Mr.
Abdulla Mohammed Ibrahim Al Mannai and
Mr. Hussain Ibrahim Al Fardan as well as Mr.
Jassim Mohammed Jabor Al Mosallam
(alternate member):
The Terms of Reference provide that the
Committee is responsible for (i) setting the
Bank’s remuneration framework for the Board
Members, management and employees, as
outlined in the Directors’ remuneration policy
and Human Resources policy on management
and employee compensation and bene?ts,
respectively. Remuneration shall take into
account the responsibilities and scope of
the functions of the Board Members and the
management as well as the performance of
the Bank. Compensation includes ?xed and
performance related components that are
based on the long-term performance of
the Bank. The Committee is also responsible
for (ii) presenting the Bank’s remuneration
framework to the Board, with the Directors’
Remuneration Policy being subject to further
approval by the shareholders in the General
Assembly.
The Board Remuneration Committee is
required to meet twice a year. The Board
Remuneration Committee met once in 2012.
Board Nomination Committee
The Committee comprises two Board
Members, and the current Members are
Sh. Jabor bin Ali bin Jabor Al Thani (Chairman)
and Mr. Jassim Mohammed Jabor Al Mosallam
as well as Mr. Abdulla Mohammed Ibrahim
Al Mannai (alternate member):
The Terms of Reference provide that the
Committee (i) oversee the establishment
of a nomination process for Board Members,
(ii) follow “Fit and Proper Guidelines for
Nomination of Board Members” annexed
to the QFMA Corporate Governance Code,
(iii) review candidate pro?les of all new Board
Members applying for election to the Board
considering current Board composition, (iv)
recommend appointment of new members
to the Board for recommendation to the
General Assembly, (v) review members for
re-election and provide opinion to the Board
for communication to the General Assembly
and (vi) facilitate the performance of an annual
self-assessment exercise for the full Board.
The Board Nomination Committee is required
to meet twice a year. The Board Nomination
Committee has not yet met since it was
formed in October 2012.
2.9 Directors’ Remuneration
Remuneration of Directors is in accordance with
QCB Circular No. 75/2011 and in compliance with
the QCCL (Law 5 of 2002), QFMA Corporate
Governance Code and the Bank’s Articles
of Association. This remuneration framework
shall be presented to the shareholders in the
General Assembly for approval and shall be
made public. In conformity with the Bank’s
Remuneration Policy for the Board,
remuneration shall take into account the
responsibilities and scope of the functions
of the Board Members as well as the
performance of the Bank. Remuneration may
take the form of (i) ?xed salaries, (ii) directors’
fees, (iii) in-kind bene?ts or (iv) a percentage
of the Bank’s pro?ts. Directors may receive
multiple forms of remuneration provided that
remuneration by way of a percentage of the
Bank’s pro?ts shall not, after deduction of
expenses, depreciation and reserves and
distribution of dividends of not less than
5% of the Bank’s capital, exceed 10% of the
net pro?t of the Bank. The amount of such
remuneration shall be approved annually by
the General Assembly, taking into account the
level of pro?tability of the Bank.
Total remuneration earned by the Board
in 2012 (including ?xed remuneration and
meeting attendance fees) was QAR 46.08
million. (2011: QAR 41.45 million).
2.10 Independent Advisors
The Board and its committees may retain
counsel or consultants with respect to any
issue relating to the Bank’s afairs. Costs and
expenses incurred pursuant to appointment
of independent advisors or consultants shall
be borne by the Bank.
The Commercial Bank of Qatar (Q.S.C.) 44
Corporate Governance
Continued
For 2012, total costs incurred by the Bank with
respect to retaining counsel and consultants
amounted to QAR 20.3 million.
2.11 Independent and Non-Executive Members of the Board of Directors
As at 31 December 2012, the Board of Directors of the Bank comprised the following members:
Director Position First Appointment Expiry of Current
Appointment
Status
H.E. Abdullah bin
Khalifa Al Attiyah Chairman 1975 2014
Non-Executive,
Independent
Sh. Abdullah bin
Ali bin Jabor Al Thani
Vice
Chairman 1990 2014
Non-Executive,
Non-Independent
Mr. Hussain Ibrahim
Al Fardan
Managing
Director 1975 2014
Non-Executive,
Non-Independent
Mr. Omar Hussain
Al Fardan Member 2002 2014
Non-Executive,
Non-Independent
Mr. Jassim Mohammed
Jabor Al Mosallam Member 1975 2014
Non-Executive,
Independent
Mr. Khalifa Abdullah
Al Subaey Member 1987 2014
Non-Executive,
Independent
Sh. Jabor bin Ali bin
Jabor Al Thani Member 2002 2014
Non-Executive,
Independent
Mr. Abdulla Mohammed
Ibrahim Al Mannai Member 1987 2014
Non-Executive,
Independent
Sh. Ahmed bin Nasser
bin Faleh Al Thani Member 2009 2014
Non-Executive,
Independent
The status of Board Members as Non-
Executive, Independent or Non-Independent
is determined in accordance with the QCB
Guidelines.
Details of the education, experience and
principal membership in other banks, ?nancial
institutions or companies, of Board Members
is set out below:
Sh. Abdullah bin Ali bin Jabor Al Thani
Vice Chairman
Chairman of the Board Risk Committee and
a Member of the Board Executive Committee
and the Policy, Strategy and Governance
Committee.
Director of National Bank of Oman and United
Arab Bank. Owner of Vista Trading Company.
Partner in Dar Al Manar, Domopan Qatar, Banz
Group Qatar and Al Aqili Furnishings.
Mr. Hussain Ibrahim Al Fardan
Managing Director
Member of the Board Executive Committee,
the Policy, Strategy and Governance
Committee and the Remuneration Committee.
Started his career as a banker in Standard
Chartered Bank. Chairman of Alfardan Group
and United Development Company. Director
of Qatar Insurance Company. Chairman of
QIC International LLC. Founding member and
Director of Investcorp Bahrain. Vice Chairman
of Gulf Publishing and Printing Company and
Qatar Businessmen’s Association.
Mr. Omar Hussain Al Fardan
Board Member
Member of the Board Executive Committee,
the Policy, Strategy and Governance
Committee and the Board Risk Committee.
President and Director of companies
comprising Alfardan Group. Director of United
Development Company. Vice Chairman of
United Arab Bank. Chairman of National Bank
of Oman. President of Resorts Development
Company. Chairman of Qatar District Cooling
Company. Vice Chairman of Middle East
Dredging Company. Director of Qatar Red
Crescent Society.
Mr. Jassim Mohammed Jabor Al Mosallam
Board Member
Member of the Nomination Committee
and Alternate Member of the Remuneration
Committee.
Owner of Al Mosallam Trading Company.
Director of Qatar German Medical Devices
Company and Qatar Clay Bricks Company.
H.E. Abdullah bin Khalifa Al Attiyah
Chairman
Chairman of the Board Executive Committee
and the Policy, Strategy and Governance
Committee.
State Minister. Vice Chairman of Qatar
Insurance Company and United Development
Company and Chairman of Gulf Publishing and
Printing Company. Owner of Contraco
Contracting Company.
Annual Report 2012 45
Mr. Khalifa Abdullah Al Subaey
Board Member, representing Qatar
Insurance Company
Chairman of the Audit and Compliance
Committee.
Started his career in the Finance Department
of Qatar Petroleum. President and CEO of
Qatar Insurance Company, Managing Director
of QIC International LLC, Q-Re Insurance
Company and Damaan Islamic Insurance
Company (BEEMA). Director of United
Development Company.
Sh. Jabor bin Ali bin Jabor Al Thani
Board Member
Chairman of the Remuneration Committee
and the Nomination Committee and a Member
of the Audit and Compliance Committee.
Director of Gulf Publishing and Printing
Company and Qatar Clay Bricks Company.
Owner of Al Maha Contracting Co.
Mr. Abdulla Mohammed Ibrahim Al Mannai
Board Member
Member of the Remuneration Committee
and Alternate Member of the Nomination
Committee and the Audit and Compliance
Committee.
Owner of AMPEX, Qatar Marble and Islamic
Mozaic Company. Member of the Qatar
Businessmen’s Association.
Sh. Ahmed bin Nasser bin Faleh Al Thani
Board Member, representing Naser Bin
Faleh Group
Member of the Board Risk Committee and
the Audit and Compliance Committee.
Director of United Development Company.
Partner in Waset Trading Company and
Ali Bin Nasser Al Thani and Brothers.
3. Executive Management
Executive Management (de?ned as the group
of persons with operational responsibility
for the Bank appointed by the Board)
is responsible for the overall day-to-day
management of the Bank
As at 31 December 2012, Executive Management of the Bank comprised the following:
Director Position
Mr. Andrew C. Stevens Group Chief Executive Ofcer (GCEO)
Mr. Abdulla Al Raisi Deputy Chief Executive Ofcer
Mr. Nicholas Coleman EGM & Group Chief Financial Ofcer
Mr. Sandeep Chouhan EGM & Group Chief Operating Ofcer
Mr. Abduljalil Borhani EGM, Strategic Clients
Mr. Stephen Mullins EGM, Corporate Banking
Mr. Jerold Williamson EGM & Chief Risk Ofcer
Mr. James Kneller EGM & Head of Organizational Efectiveness
Mr. Alex Carre de Malberg EGM & Global Head, Comcap
Mr. Dean Proctor EGM, Retail & Consumer Banking
Mr. Fahad Badar EGM, Government & International Banking
Mr. Sarmad Lone Senior EGM & Head of Wholesale Banking
Mr. Jeremy Davies EGM & Chief Marketing Ofcer
Mr. Khoda Fartash EGM & Group Chief Legal Ofcer
Mr. Gary Williams Senior AGM & Chief Internal Auditor
Mr. Mohamad Mansour AGM & Head of Compliance & AML/CFT Unit
3.1 Education, Experience
and Afliations
Andrew C. Stevens
Group CEO, Commercial Bank of Qatar
Mr. Stevens began his banking career in
1980 with Standard Chartered Bank in Dublin,
Ireland; he was later posted to Hong Kong,
Bahrain, and their regional headquarters for
Africa, Middle East and South Asia, and then
seconded to lead the African business of
Standard Chartered Bank in Uganda.
Since joining Commercial Bank of Qatar in
1989, Mr. Stevens has been heavily involved
leading wholesale changes at the bank. In
1994, he was appointed as the Bank’s ?rst
AGM of Retail Banking; was appointed as
Director of Orient 1 in 1998, a 100% owned
subsidiary, set up to manage credit card
businesses across the Middle East.
In April of 2001, he was appointed General
Manager of Commercial Bank of Qatar and in
2005, Chief Executive Ofcer. Mr. Stevens
spearheaded the eforts that led to the
acquisition of a 35% stake in the National Bank
of Oman (NBO) in 2005, followed by the
acquisition of 40% in United Arab Bank (UAB),
Sharjah, UAE, in 2008.
Mr. Stevens holds a B.Com (Hons) in Banking
and Finance from Birmingham University, UK.
He presently serves as a director on the
boards of both NBO and UAB. He is also a
director of Qatar Insurance International LLC
and serves on the Visa’s International Senior
Client Council.
Mr. Abdulla Al Raisi
Graduated from Portland State University in
1982 with a B.Sc. in Political Science & Social
Science. Joined Commercial Bank in 1998;
Deputy Chief Executive Ofcer since March
2007. Previously with QAFCO. Over 26 years
experience, including extensive banking
experience, in Arab Gulf States Folklore Center
and Doha Bank respectively. Chairman of
Commercial Bank Investment Services.
The Commercial Bank of Qatar (Q.S.C.) 46
Corporate Governance
Continued
Mr. Fahad Badar
Joined Commercial Bank in 2000 and
currently serves as EGM Government &
International Banking. Over 11 years of
experience in various areas of the retail,
corporate banking and operations divisions,
where he has built strong relationships and
an excellent reputation amongst key industry
stakeholders, from customers to peers.
He has a BA in Banking & Finance from
the University of Wales and an MBA from
Durham University.
Mr. Sarmad Lone
Joined Commercial Bank in 2012 as
Senior EGM & Head of Wholesale Banking
responsible for the Domestic Corporate,
International, Multi-National, Government,
Public Sector, Investment Banking (Comcap)
and Enterprise/SME businesses. He has
previously worked for more than 20 years
with Morgan Stanley and Citibank in MENA and
Asia. His last assignment with Morgan Stanley
was Head of Investment Banking Middle East
and North Africa. Before that, he held various
senior management positions in Corporate
and Investment Banking Group at Citibank.
He was designated as a Senior Credit Ofcer
(SCO) at Citibank.
Mr. Jeremy Davies
Joined Commercial Bank in 2012 as EGM &
Chief Marketing Ofcer. Began marketing
career at multinational advertising agency
J Walter Thompson in 1990, after graduating
in Law from Exeter University. Completed MBA
at the Judge Business School, Cambridge, and
became the founder and Managing Director
of JWT’s brand & digital consultancy. Joined
the cable group NTL in 2001 as Marketing
Director. Appointed Brand & Communications
Director at Abbey National/Santander in
2003. In 2008, joined the E.ON Group as
UK Brand and Communications Director, with
responsibility for all UK marketing activities, as
well as internal communications, PR and public
afairs; appointed as Marketing Director of
E.ON’s new Energy Solutions Business in 2011,
driving customer satisfaction improvements
across E.ON’s core markets across Europe.
Mr. Nicholas Coleman
Graduated from London Guildhall University
with a BA (Hons) in Economics. Joined
Commercial Bank as EGM & Group Chief
Financial Ofcer in 2008. Over 22 years
experience as a seasoned banker with
The Bank of New York in London, National
Westminster Bank in London and Morgan
Stanley in London. Previously with Arthur
Young in Kuwait. Fellow of the Institute of
Chartered Accountants in England and Wales.
Director of United Arab Bank, Orient 1 Limited,
Commercial Bank Investment Services, Gekko
LLC and CBQ Finance Limited.
Mr. Sandeep Chouhan
Graduated from the National Institute of
Technology, India. Joined Commercial Bank
as Group Chief Operating Ofcer in June
2008. Previously with Barclays Bank in
London. Over 20 years global experience in
banking operations and technology, including
?ve years with Morgan Stanley and eight
years with Citigroup across EMEA, Asia and
USA. Chartered Professional of the British
Computer Society. Director of Orient 1 Limited.
Mr. Abdul Jalil Borhani
Graduated from Northern Arizona University
in Business Administration in 1992. Joined
Commercial Bank in 1993, beginning his career
in corporate banking as relationship ofcer;
promoted to EGM, Corporate Banking Ofcer in
January 2009. Currently EGM, Strategic Clients.
Mr. Stephen Mullins
Joined Commercial Bank in 2009 as Group
Chief Credit Ofcer and promoted to EGM
Corporate Banking in September 2010. Over
35 years of banking experience including 24
years with National Westminster Bank Group,
two years with ICICI Bank and eight years as
Regional Head of Credit with Nedbank in their
regional ofce in Hong Kong. Associate of the
Institute of Bankers.
Mr. Jerold Williamson
Graduated from Loughborough University
in the UK in 1981 in Banking and Finance.
Joined Commercial Bank in 2011 as Chief Risk
Ofcer. Previously with Midland Bank/HSBC,
and Lloyds TSB Bank, with over 30 years
experience in international, corporate, and
retail banking, encompassing business, credit,
internal audit and risk roles. Director of CBQ
Finance Limited.
Mr. James Kneller
Joined Commercial Bank as EGM & Head
of Organisational Efectiveness in 2011. Prior
to joining, he led a management and business
coaching consultancy based in London
and before this, spent four years with
Banco Santander as HR Director during the
integration of their UK acquired businesses.
He spent ?ve years working within the Saudi
Arabian based ALJ Group as both an HR
Director and Business Head and has also
held senior HR positions with Dixons, Granada
Group and Sainsburys.
Mr. Alex Carre de Malberg.
Graduated from HEC (MBA), University of
Massachusetts (MsChE) and ENSIC (Chemical
Engineer). Joined Commercial Bank in 2011 as
EGM & Global Head, Comcap, the investment
banking, research and asset management
division and parent of Commercial Bank
Investment Services, the brokerage arm of
Commercial Bank. Over 19 years of investment
banking experience, of which the last ?ve
years were in the Gulf previously as co-head
of Rothschild Middle East and head of
investment banking at Abu Dhabi Investment
Company. Started his investment banking
career in New York with Lazard Freres, then
Hong Kong and Singapore with Peregrine and
one of its spin-ofs, until he joined Rothschild in
Paris in 1998. Director of Commercial Bank
Investment Services.
Mr. Dean M. Proctor
Joined Commercial Bank in 2012 as EGM
Retail & Consumer Banking. Previously
CEO of Arbuthnot Latham & Co. Ltd, a private
bank in the UK, for three years. Concurrently
an Executive Director and Board Member
of Arbuthnot Banking Group a UK listed
company. Previously with Citibank working
in the UK as Managing Director, UK Retail &
Wealth Management including Egg Banking
Plc and internationally as Head of Credit
Cards for the Middle East based out of the
UAE. Spent 14 years with Lloyds Bank Plc
working in retail and corporate banking across
all divisions. Chairman of Massoun Insurance
Services and a Director of Asteco Qatar and
Commercial Bank Investment Services.
Annual Report 2012 47
Mr. Khoda Fartash
Joined Commercial Bank in 2007 and
currently serves as EGM & Group Chief Legal
Ofcer. Previously with the law ?rm Allen &
Overy in London, Frankfurt and Milan. He has
12 years experience as a banking and ?nance
lawyer and is a quali?ed English Solicitor and
registered foreign lawyer at the Milan Bar.
Graduated from Oxford University in 1997
with a BA (Hons) in Oriental Studies (Arabic).
Mr. Gary Williams
Joined Commercial Bank in 2010 as Senior
AGM and Chief Internal Auditor. Previously with
Standard Chartered Bank for 25 years, the last
12 of which were in Group Internal Audit and
Operational Risk Assurance positions. Roles in
the Group Internal Audit function included
postings in the UK, Singapore, Hong Kong and
South Korea. Final role in Standard Chartered
Bank, prior to joining Commercial Bank was
to establish and manage the Operational
Risk Assurance function in 20 countries across
the Africa, Middle East and Pakistan regions
for the Bank.
Mr. Mohamad Mansour
Started banking career at the Treasury Bills
Department of the Central Bank of Lebanon.
Founding member and a former Senior
Investigator and Research Analyst of the
Financial Information Unit at the Central Bank
of Lebanon; led numerous money laundering
and terrorism ?nancing investigations with
regional and international counterparts as
well as conducting the Bank’s examinations on
anti money laundering programs. A Certi?ed
Anti Money Laundering Specialist (CAMS), and
Certi?ed Compliance Ofcer, actively involved
with local and international regulators on
enhancing the AML/CFT implementation,
raising awareness and introducing the latest
AML & CFT information technology solutions.
3.2 Executive Committees
Executive Management functions through
a number of committees, which support
the role of the Group Chief Executive Ofcer
(GCEO). The number of executive committees
and their responsibilities are determined
by the Board; membership of the various
committees is determined by the GCEO.
A summary of their main activities is set
out below.
Management Executive Committee (EXCO)
EXCO is chaired by the GCEO and meets on
a regular basis, monthly, or as required by the
business. Its principal function is to develop
the annual business plan and budget for the
Bank, and to monitor performance against it.
Management Risk Committee (MRC)
The MRC is the highest authority at
management levels on all risk-related issues
of the Bank, and reports on all risk policy and
portfolio issues to the Board Risk Committee.
It monitors and controls levels of credit, retail
and operational risk to ensure that the risk
strategies and policies approved by the Board
are adhered to and implemented. The MRC
also sets up and monitors the policies and
procedures relating to the management
of business continuity. The Chief Risk Ofcer
serves as chairman of the MRC, which meets
at least four times a year, and more frequently
if necessary.
Asset and Liability Committee (ALCO)
ALCO is a decision making body for
developing policies relating to asset and
liability and market risk management with
the objective of maximising shareholder
value, enhancing pro?tability, and protecting
the Bank from facing adverse consequences
arising from changes in extreme market
conditions and compliance with regulatory
guidelines. Its key functions are to formulate
policies on market risk, liquidity risk and
interest rate risk, and to ensure that such
risks are efectively addressed, controlled,
monitored and managed. The Group Chief
Financial Ofcer serves as chairman of ALCO.
Meetings of ALCO are held once a month or
more frequently if necessary, particularly in
the case of a volatile operating environment.
Group Special Assets Management (GSAM)
Committee
Special Assets are those assets of the Bank
which require extensive monitoring and
control in order to minimise risk, prevent
losses, maximise recoveries and restore
pro?ts through rehabilitation, restructuring,
workout, collection or legal actions. The GSAM
Committee supervises these activities, reviews
related policies and procedures and monitors
actions being taken on all accounts within
the Special Asset portfolio. The Group Head
of Special Assets Management serves as
chairman of the committee. Meetings are held
at least four times a year, or more frequently as
deemed appropriate by the chairman.
Management Credit Committee (MCC)
The MCC reviews, recommends and
implements approved credit policies
and procedures relating to the Bank.
The Committee reviews the delegated
authorities related to credit and recommends
amendments to the Board where appropriate.
It also escalates its decisions relating to credit
facilities which exceed its authority to the BEC.
The Chief Risk Ofcer serves as chairman of
MCC. Meetings are held as and when required.
Investment Committee
The Investment Committee reviews the
delegated authorities related to investments
and recommends amendments to the Board
where appropriate. The Committee also
assumes the responsibility to review and
approve the range of investment products
across the Bank. It also monitors and reviews
the performance of all the investment
portfolio activities. The Group Chief Executive
Ofcer serves as chairman of the committee.
Meetings are held at least four times a year,
or more frequently as deemed appropriate
by the Chairman.
The Commercial Bank of Qatar (Q.S.C.) 48
Corporate Governance
Continued
Crisis Management Committee (CMC)
The CMC is mainly responsible in heading
incidents which may result in a crisis situation
for the Bank. The Committee ensures that
a bank-wide Crisis Management Plan (CMP)
is developed and communicated to all
stakeholders including the establishment of
a Crisis Management Team. It also ensures
formal drills and training are conducted and
a comprehensive communication process is
developed regarding Crisis Management. In
the event of an incident which may conceivably
result in the activation of the Bank’s Crisis
Plan, the Bank’s Call Tree will be used to
communicate the incident to the Deputy
Chief Executive Ofcer who will confer with the
Group Chief Executive Ofcer as required and
decide whether the Bank’s Recovery Plans
require to be actioned. In the event that the
Bank’s Recovery Plans are activated this will
be rapidly communicated to all stakeholders
by way of activation of the Bank’s mobile
phone Call Trees. The Group Chief Executive
Ofcer serves as Chairman of the committee.
Meetings are held as and when required.
3.3 Senior Management Remuneration
Total remuneration earned by the senior
management in 2012 in QAR thousands was:
Fixed Remuneration 43,415
Discretionary Remuneration 21,980
Other Bene?ts 4,884
Total (2011: 53,611) 70,279
4. Ownership Structure
In accordance with Article (7) of the Bank’s
Articles of Association, no person (whether
natural or juridical) shall own at any time
more than 5% of the total shares in the Bank
by any means other than inheritance, with the
exception of (i) Qatar Investment Authority,
Qatar Holding LLC or any of their associated
companies and (ii) a custodian or depository
bank holding shares in respect of an ofering
of Global Depositary Receipts.
As at 31 December 2012, 85.13% of the
total number of shares in the Bank were
held by Qatari nationals (whether individuals
or entities) and 14.8% of such shares by
foreign investors. As at 31 December 2012, in
percentage terms, the largest shareholdings
in the Bank were as follows.
Qatar Holding LLC 16.67%
Al Watani Fund 3 2.98%
Al Watani Fund 4 2.63%
Al Watani Fund 8 2.60%
Qatar National Bank SAQ 2.05%
5. Compliance, Internal Audit
and Risk Governance
5.1 Compliance Culture
The Bank promotes a robust compliance
culture across the organization and requires
everyone, from the Board down to staf,
to consistently comply with applicable laws,
regulations and standards.
5.2 Compliance Set-up
The Bank has incorporated the regulatory
requirements into the Bank’s policies,
procedures and systems. The Bank has
comprehensive compliance and AML/CFT
policies describing the compliance and AML/
CFT functions at Commercial Bank Group,
and this has been assessed and evaluated
by internal and external bodies.
5.3 Compliance Milestones
Besides the achievements of the compliance
and AML/CFT annual plan approved by the
Board Audit and Compliance Committee, the
Bank has completed the alignment to comply
with the US (CISADA) regulations, impact
assessment of US (FATCA) regulations,
implementation of World Check Data ?le for
international sanctions and blacklist checking.
5.4 Compliance Awareness
As a result of the Bank’s commitments
to the implementation of the regulatory
requirements and to keep the Bank’s staf
up to the standard, the Bank has provided
its staf with an AML compliance E-Learning
course, live training and an induction program
for new joiners, covering diferent aspects
of regulatory requirements.
5.5 Internal Audit
The Bank’s Internal Audit function is headed
by the Chief Internal Auditor (CIA), who reports
directly into the Board Audit and Compliance
Committee. There was a total of 13 staf in
the Internal Audit function as at 31 December
2012, including the CIA. The role of the Internal
Audit function is to provide independent
assurance to the Board and senior
management of the Bank as to both the
adequacy of controls and of the efectiveness
of the operation of these controls.
This role is ful?lled by way of a combination
of unit or process speci?c functional audits,
assurance audits that usually involve the
review of multiple units within the Bank based
on a particular risk, theme or end-to-end
process and credit reviews, which
independently assess the quality of the Bank’s
credit portfolios. Audit work is in accordance
with an audit plan which is approved by the
Board Audit and Compliance Committee,
which is derived from a twice yearly risk
assessment exercise covering all auditable
units, systems and processes across the
entire Bank. In addition to planned audit
assignments, the Internal Audit function
is also involved in undertaking occasional,
unscheduled investigation work. During 2012
the Internal Audit function produced a total
of 38 audit and investigation reports, which
covered a total of 177 units within the Bank’s
inventory of auditable units.
All audit work undertaken is in accordance with
the Board Audit and Compliance Committee
approved Internal Audit Charter and Standard
Operating Procedures, which are based on the
Institute of Internal Auditors standards.
Annual Report 2012 49
5.6 Risk Governance
Risk governance is an integral part of the
Bank’s efective risk-based oversight and the
Board is focused on assessing, managing, and
mitigating risk.
Risk governance at the Bank is de?ned as the
Board and management’s oversight of risk.
It is the Board which is ultimately responsible
for ensuring that all risks to the Bank are
identi?ed, evaluated and suitably managed.
To this end, it is ensured that:
• Complete risk information is transmitted
to the Board.
• Non-executive directors have the required
level of expertise.
• The Board provides a forum for vetting
strategic risk issues.
The Bank’s Board is involved in risk-decisions
through the:
• Board Risk Committee (for risk policies,
enterprise wide risk reviews and portfolio
monitoring);
• Board Executive Committee (for credit
decisions and lending strategy); and
• Board Audit and Compliance Committee
(for compliance and internal audit matters).
At management level, risk governance is
implemented by adopting and integrating the
necessary systems to identify, manage, and
report risk. The level and nature of aggregate
risk arising in rapidly evolving balance sheets
are captured by systems and reports.
Risk management units have the visibility,
stature, and independence to consolidate
institution-wide risks and elevate concerns
to a level sufcient to prompt a response from
management and the Board.
The Bank’s risk governance structure ensures
risk governance is able to respond with ?exibility
due to timelier, more complete, and enterprise-
wide risk information, enabling the Board to
make critical decisions to curtail risk earlier.
6. The Bank’s Policies
6.1 Corporate Governance Charter
The Bank recognises that an efective
corporate governance framework is the
local component in the achievement of the
Bank’s corporate objectives and maximisation
of shareholder’s value. The Bank has
established corporate governance practices
and protocols in compliance with its Articles
of Association and relevant requirements and
in line with relevant corporate governance
leading practices.
The Corporate Governance Charter captures
the detailed guidelines of the Bank’s
governance framework.
6.2 Anti-Fraud Policy
The Bank promotes an anti-fraud control
environment by adopting the following
principles:
• Commitment to the principles of integrity,
respect, accountability and to an
environment of sound governance which
includes robust internal controls;
• Commitment to a culture that safeguards
public funds and property in order to
protect shareholder interest;
• Zero tolerance approach to fraudulent and/
or unethical conduct and hold all employees
accountable for their actions; and
• Consistent handling of all cases regardless
of positions held, connections to authorities,
nationality or length of services.
6.3 Policy on Promotion
The Bank is committed to fostering ongoing
education, professional and personal
development and career advancement of
our employees.
The Bank recognises that, in the course of
meeting objectives, the duties and functions
of its employees may change in complexity
and responsibility and promotions are given
pursuant to increased responsibility levels
but subject to exceptional past performance.
The added bene?ts of a promotion serve as
an incentive for better work performance,
enhance morale and create a sense of
individual achievement and recognition.
A promotion may occur through:
1. A reclassi?cation of an employee’s
existing position as a result of the employee
performing duties at a higher degree of
responsibility and complexity than the
current classi?cation calls for; or
2. The ?lling of a higher level vacancy (in the
event of a vacancy, the Bank will ?rst look
internally for suitable candidates and no
external advertisement of the vacancy shall
run unless and until exhausting all internal
recruitment avenues).
For promotion through the ?lling of a higher
level vacancy, employees need only satisfy
the quali?cations as speci?ed in the job
description for the vacant position (and not the
qualities, skills or knowledge of the incumbent)
and are eligible for promotion:
1. Pursuant to successful completion of the
probation period speci?ed by the conditions
of employment;
2. Pursuant to exceptional semi-annual and
annual performance appraisals; and
3. Regardless of age, gender, nationality
or religion.
6.4 Penalties or Fines Imposed on the
Bank by Regulatory Authorities
Penalties imposed on the Bank in 2012 by
Qatar Central Bank amounted to QAR 471,000
(2011: Nil) in respect of breaches of real estate
ratios set by Qatar Central Bank.
6.5 Material Issues Regarding the Bank’s
Employees and Stakeholders
There are no material issues regarding the
Bank’s employees and stakeholders to be
disclosed in this report.
6.6 Corporate Social Responsibility
The Bank, as a responsible corporate citizen,
recognises its social responsibility to integrate
business values and operations to meet the
expectations and needs of its stakeholders.
Commerce + Conscience + Compassion =
Corporate Social Responsibility
The Commercial Bank of Qatar (Q.S.C.) 50
Corporate Governance
Continued
The Bank is committed to promoting
sustainable development, protecting and
conserving human life, health, natural
resources and the environment and adding
value to the communities in which it operates.
In so doing, the Bank recognises the
importance of both ?nancial and non-?nancial
commitment and contribution.
Corporate Social Responsibility (CSR) involves
assessing all the ways that the Bank’s actions
and operations may potentially impact others.
The Bank’s approach to Corporate Social
Responsibility is rooted in its core values which
shape the way it does business, which are:
How the Bank Behaves
a. Stakeholder Engagement – establishing
relationships with stakeholders and
communities and soliciting their input
and involvement on critical issues.
b. Health and Safety – conducting business
with a high regard for the health and
safety of employees, contractors and the
communities including following local and
best practice health and safety guidelines
and standards.
c. Environmental Stewardship – operating
in a safe and environmentally responsible
manner and minimising the impact of
operations on the environment, including
by reducing waste.
What the Bank Invests in
a. Community Development – sustainable
programmes to improve quality of life in
the community.
b. Education and Training – programmes and
learning opportunities to develop a skilled,
competitive workforce.
c. Corporate Citizenship – philanthropic, social
development and volunteer programs,
community service projects, humanitarian
works, arts and sports.
What the Bank In?uences and Promotes
a. Human Rights – respect and protection
of fundamental human and worker rights,
including ensuring a discrimination-free
work environment; equal opportunities;
no racism of any form; no harassment
of any form; regulated working hours and
paid holidays; fair compensation and the
principal of ‘equal pay for equal work’ for
men and women.
b. Rule of Law – respect of local laws and
promotion of the principles of justice,
fairness and equality.
c. Transparency – promotion of openness
in all business dealings.
d. High Performance – high performance
team culture and a collaborative,
supportive work environment where
employees are encouraged to reach their
full professional potential.
What the Bank Believes in
Code of Business Conduct – conducting
business honestly and with integrity,
maintaining ethical behavior in all operations,
including ?ghting all forms of corruption.
Enforcing strict principles of corporate
governance and supporting transparency
in all operations.
The Bank supports many charities and NGOs
and actively promotes creative projects and
activities useful to society. In addition to broad
support of Sports, Cultural and Charitable
activities, the Bank focuses its CSR
programme on the promotion of Qatari
youth development and related educational
activities. In so supporting, the Bank strives
to be more than a ?nancial sponsor and is
committed to engaging in a broad range of
CSR activities to establish a long-standing and
sustainable social platform, enabling positive
change within the community. The ultimate
objective of the Bank’s CSR activities is to
foster relationships that enhance community
spirit in a responsible manner by contributing
to the development of the nation and
its communities for the bene?t of Qatar’s
future generations.
6.7 Environmental Policy
The Bank is committed to protecting the
natural resources and environments of the
communities in which we serve and operate
and minimising the impact of the Bank’s
activities on the environment.
In keeping with these beliefs and
commitments, the Bank endeavours
to ensure that all management and
employees comply with the following
environmental policies:
1. Conduct business in an environmentally
responsible manner;
2. Comply with all applicable environmental
laws and regulations;
3. Make environmental concerns an
integral part of the planning and decision
making process;
4. Control environmental impacts and prevent
or minimize pollution, including operating a
paperless environment;
5. Educate management and employees to be
accountable for environmental stewardship;
6. Promote the efcient use of resources and
reducing (and where possible eliminating)
waste through recycling and pursuing
opportunities to reuse waste;
7. Ensure the proper handling and disposal
of all waste;
8. Assess the environmental condition of
property interest acquired by the Bank and
appropriately address the environmental
impacts caused by these properties;
9. Support research and development of
programmes and technologies aimed
at minimizing the environmental impacts
of company operations; and
10. Notify the Board of any pertinent
environmental issues.
Annual Report 2012 51
6.8 Health Policy
The Bank, recognising that good health and
safety management has positive bene?ts
to an organisation, is committed to providing
and maintaining a healthy, safe and secure
working environment for all employees.
The Bank is committed to:
1. Ensuring the health, safety, security and
welfare of all its employees whilst at work;
2. Ensuring that visitors to the Bank’s
premises are not exposed to risks to their
health and safety;
3. Identifying hazards, assessing risks and
managing those risks;
4. Maintaining arrangements for ensuring the
safe use, handling, storage and transport of
articles and substances; and
5. Encouraging the development and
maintenance of a positive attitude towards
health and safety throughout the Bank.
The Bank maintains comprehensive Fire,
Health and Safety policies and provides
extensive Medical Insurance through an
internationally recognized insurance provider
for the bene?t of all permanent staf.
6.9 Code of Ethics
The Bank-wide Code of Ethics serves as a
guide to the everyday professional conduct
of its employees. The Code covers all
applicable laws and regulations and the
highest standards of business ethics that the
Bank’s employees should be aware of and
comply within the conduct of their day-to-day
business activities. In addition to the Bank-
wide Code of Ethics, the standards of conduct
expected from the Board are also covered in
the Board Charter. The Code extends to the
Bank’s subsidiaries and outsourced staf and
covers the following speci?c issues:
• Compliance with laws and regulations;
• Board and employee conduct;
• Restrictions on acceptance of gifts or
commissions;
• Avoidance of con?ict of interest;
• Quality service and operational efciency;
• Protection and proper use of company
assets;
• Prohibition on insider trading;
• Media relations and publicity;
• Whistle-blowing;
• Relations between employees and the Bank;
• Use of proprietary and insider information
and stakeholder information;
• Employee information and privacy; and
• Respect for human rights and prohibition of
discrimination within the workplace.
Abdullah bin Khalifa Al Attiyah
Chairman
The Commercial Bank of Qatar (Q.S.C.) 52
Report on the Consolidated
Financial Statements
We have audited the accompanying
consolidated ?nancial statements of The
Commercial Bank of Qatar (Q.S.C.) (the “Bank”)
and its subsidiaries (the “Group”), which
comprise the consolidated statement of
?nancial position as at 31 December 2012, and
the consolidated statement of comprehensive
income, consolidated statement of changes in
equity and consolidated statement of cash
?ows for the year then ended, and a summary
of signi?cant accounting policies and
other explanatory notes.
Board of Directors’ Responsibility for
the Consolidated Financial Statements
The Board of Directors is responsible for
the preparation and fair presentation of
these consolidated ?nancial statements
in accordance with International Financial
Reporting Standards and the applicable
provisions of Qatar Central Bank regulations,
and for such internal control as board of
directors determine is necessary to enable
the preparation of consolidated ?nancial
statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion
on these consolidated ?nancial statements
based on our audit. We conducted our audit
in accordance with International Standards
on Auditing. Those standards require
that we comply with ethical requirements
and plan and perform the audit to obtain
reasonable assurance about whether
the ?nancial statements are free from
material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts
and disclosures in the consolidated ?nancial
statements. The procedures selected
depend on the auditors’ judgment, including
the assessment of the risks of material
misstatement of the consolidated ?nancial
statements, whether due to fraud or error.
In making those risk assessments, the auditors
consider internal control relevant to the
entity’s preparation and fair presentation of
the consolidated ?nancial statements in order
to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the efectiveness of the entity’s internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of accounting
estimates made by board of directors, as well
as evaluating the overall presentation of the
consolidated ?nancial statements.
We believe that the audit evidence we
have obtained is sufcient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated ?nancial
statements present fairly, in all material
respects, the ?nancial position of the
Group as of 31 December 2012, and of its
?nancial performance and its cash ?ows
for the year then ended in accordance with
International Financial Reporting Standards
and the applicable provisions of Qatar
Central Bank regulations.
Report on Other Legal and
Regulatory Requirements
We have obtained all the information and
explanations which we considered necessary
for the purpose of our audit. We further
con?rm that the ?nancial information included
in the Annual Report of the Board of Directors
is in agreement with the books and records
of the Group and that we are not aware of
any contravention by the Bank of its Articles
of Association, the applicable provisions
of Qatar Central Bank Law No.33 of 2006
and amendments thereto and of the Qatar
Commercial Companies Law No. 5 of 2002
during the ?nancial year that would materially
afect its activities or its ?nancial position.
Firas Qoussous
Ernst & Young
Qatar Auditors’ Registry No. 236
27 January 2013
Doha
Independent Auditors’ Report to the Shareholders
of The Commercial Bank of Qatar (Q.S.C.)
Annual Report 2012 53
As at 31 December QAR ’000s
Consolidated Statement of Financial Position
Notes 2012 2011
Assets
Cash and balances with central bank 8 3,448,128 2,576,494
Due from banks 9 9,731,562 9,271,920
Loans and advances to customers 10 48,594,475 41,711,783
Investment securities 11 11,162,179 11,732,639
Investment in associates 12 4,054,157 3,926,480
Property and equipment 13 1,197,069 1,070,328
Other assets 14 1,850,182 1,348,400
Total assets 80,037,752 71,638,044
Liabilities
Due to banks 15 9,855,682 6,988,697
Customer deposits 16 41,385,546 37,988,683
Debt securities 17 8,705,816 6,871,674
Other borrowings 18 3,471,515 4,182,412
Other liabilities 19 1,679,815 1,376,282
Total liabilities 65,098,374 57,407,748
Equity
Share capital 20 (a) 2,474,464 2,474,464
Legal reserve 20 (b) 8,740,540 8,740,540
General reserve 20 (c) 26,500 26,500
Risk reserve 20 (d) 924,600 805,600
Fair value reserves 20 (e) 163,225 (68,548)
Other reserves 20 (f) 673,604 556,456
Proposed dividend 20 (g) 1,484,678 1,484,678
Retained earnings 451,767 210,606
Total equity attributable to equity holders of the Bank 14,939,378 14,230,296
Total liabilities and equity 80,037,752 71,638,044
The consolidated ?nancial statements were approved by the Board of Directors on 27th January 2013 and were signed on its behalf by:
HE Abdullah bin Khalifa Al Attiyah Mr. Hussain Ibrahim Alfardan Mr. A C Stevens
Chairman Managing Director Group Chief Executive Ofcer
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
The Commercial Bank of Qatar (Q.S.C.) 54
Notes 2012 2011
Interest income 23 2,898,193 2,876,150
Interest expense 24 (1,031,939) (938,550)
Net interest income 1,866,254 1,937,600
Fee and commission income 25 689,091 752,587
Fee and commission expense 26 (170,487) (166,978)
Net fee and commission income 518,604 585,609
Foreign exchange gain 27 155,563 129,536
Income from investment securities 28 365,972 160,495
Other operating income 29 77,598 50,266
Net operating income 2,983,991 2,863,506
Staf costs 30 (499,382) (453,373)
Depreciation 13 (121,948) (113,704)
Impairment loss on investment securities 11 (d) (61,917) (68,197)
Net impairment loss on loans and advances to customers 10 (c) (139,944) (239,403)
Other expenses 31 (407,052) (308,278)
Pro?t before share of results of associates 1,753,748 1,680,551
Share of results of associates 12 258,546 203,420
Pro?t for the year 2,012,294 I,883,971
Pro?t for the year attributable to:
Equity holders of the Bank 2,012,294 1,883,971
Earnings per share
Basic/Diluted earnings per share (QAR per share) 32 8.13 7.71
For the year ended 31 December QAR ’000s
Consolidated Income Statement
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 55
Notes 2012 201 1
Pro?t for the year 2,012,294 1,883,971
Other comprehensive income for the year
Share of other comprehensive income of investment in associates 21 10,717 (2,162)
Net movement in fair value of available-for-sale investments 21 221,056 (123,034)
Other comprehensive income (loss) for the year 231,773 (125,196)
Total comprehensive income for the year 2,244,067 1,758,775
Total comprehensive income for the year attributable to:
Equity holders of the Bank 2,244,067 1,758,775
Consolidated Statement of Comprehensive Income
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
For the year ended 31 December QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 56
Retained earnings
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserves
Other
reserves
Proposed
dividend Other Total Equity
Balance as at 1 January 2011 2,268,258 7,332,158 26,500 648,000 56,648 469,706 1,587,781 110,806 12,499,857
Total comprehensive income for the year
Pro?t for the year – – – – – – – 1,883,971 1,883,971
Other comprehensive loss 21 – – – – (125,196) – – – (125,196)
Total comprehensive income for the year – – – – (125,196) – – 1,883,971 1,758,775
– – – 157,600 – (157,600) Transfer to risk reserve 20 (d) – – –
Net movement in other reserves 20 (f) – – – – – 86,750 – (86,750) –
Social and sports fund appropriation 22 – – – – – – – (55,143) (55,143)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Increase in share capital 20 (a) 206,206 – – – – – – – 206,206
Increase in legal reserve 20 (b) – 1,408,382 – – – – – – 1,408,382
Dividends paid – – – – – – (1,587,781) – (1,587,781)
Proposed dividends 20 – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders 206,206 1,408,382 – – – – (103,103) (1,484,678) 26,807
Balance as at 31 December 2011 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 1,484,678 210,606 14,230,296
1,484,678 210,606 Balance as at 1 January 2012 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 14,230,296
Total comprehensive income for the year
Pro?t for the year – – – – – – – 2,012,294 2,012,294
Other comprehensive income 21 – – – – 231,773 – – – 231,773
Total comprehensive income for the year – – 231,773 – – 2,012,294 2,244,067
Transfer to risk reserve 20 (d) – – – 119,000 – – – (119,000) –
Net movement in other reserves 20 (f) – – – – – 117,148 – (117,148) –
Social and sports fund appropriation 22 – – – – – – – (50,307) (50,307)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Dividends paid – – – – – – (1,484,678) – (1,484,678)
Proposed dividends 20 (g) – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders – – – – – – – (1,484,678) (1,484,678)
Balance as at 31 December 2012 2,474,464 8,740,540 26,500 924,600 163,225 673,604 1,484,678 451,767 14,939,378
Consolidated Statement of Changes in Equity
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 57
Retained earnings
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserves
Other
reserves
Proposed
dividend Other Total Equity
Balance as at 1 January 2011 2,268,258 7,332,158 26,500 648,000 56,648 469,706 1,587,781 110,806 12,499,857
Total comprehensive income for the year
Pro?t for the year – – – – – – – 1,883,971 1,883,971
Other comprehensive loss 21 – – – – (125,196) – – – (125,196)
Total comprehensive income for the year – – – – (125,196) – – 1,883,971 1,758,775
– – – 157,600 – (157,600) Transfer to risk reserve 20 (d) – – –
Net movement in other reserves 20 (f) – – – – – 86,750 – (86,750) –
Social and sports fund appropriation 22 – – – – – – – (55,143) (55,143)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Increase in share capital 20 (a) 206,206 – – – – – – – 206,206
Increase in legal reserve 20 (b) – 1,408,382 – – – – – – 1,408,382
Dividends paid – – – – – – (1,587,781) – (1,587,781)
Proposed dividends 20 – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders 206,206 1,408,382 – – – – (103,103) (1,484,678) 26,807
Balance as at 31 December 2011 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 1,484,678 210,606 14,230,296
1,484,678 210,606 Balance as at 1 January 2012 2,474,464 8,740,540 26,500 805,600 (68,548) 556,456 14,230,296
Total comprehensive income for the year
Pro?t for the year – – – – – – – 2,012,294 2,012,294
Other comprehensive income 21 – – – – 231,773 – – – 231,773
Total comprehensive income for the year – – 231,773 – – 2,012,294 2,244,067
Transfer to risk reserve 20 (d) – – – 119,000 – – – (119,000) –
Net movement in other reserves 20 (f) – – – – – 117,148 – (117,148) –
Social and sports fund appropriation 22 – – – – – – – (50,307) (50,307)
Transactions with equity holders, recognised directly in equity
Contributions by and distributions to equity holders:
Dividends paid – – – – – – (1,484,678) – (1,484,678)
Proposed dividends 20 (g) – – – – – – 1,484,678 (1,484,678) –
Total contributions by and distributions to equity holders – – – – – – – (1,484,678) (1,484,678)
Balance as at 31 December 2012 2,474,464 8,740,540 26,500 924,600 163,225 673,604 1,484,678 451,767 14,939,378
QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 58
For the year ended 31 December QAR ’000s
Notes
2012
201 1
Cash ?ows from operating activities
Pro?t for the year 2,012,294 1,883,971
Adjustments for:
Net impairment loss on loans and advances to customers 139,944 239,403
Impairment loss on investment securities 61,917 68,197
Depreciation 13 121,948 113,704
Amortization of transaction costs 17 & 18 20,527 15,113
Gain on investment securities at fair value through pro?t or loss 28 (2,664) –
Net gain on disposal of available-for-sale securities 28 (337,161) (136,307)
Gain on disposal of property and equipment (364) (37)
Share of results of associates 12 (258,546) (203,420)
Pro?t before changes in operating assets and liabilities 1,757,895 1,980,624
Change in due from banks (2,186,297) (165,878)
Change in loans and advances to customers (7,022,636) (8,286,541)
Change in other assets (475,217) (267,873)
Change in due to banks 597,752 243,525
Change in customer deposits 3,396,863 4,708,021
Change in other liabilities 300,325 (54,106)
Contribution to social and sports activities support fund (47,099) (40,882)
(5,436,309) (3,863,734)
Net cash used in operating activities (3,678,414) (1,883,110)
Cash ?ows from investing activities
Acquisition of investment securities (7,031,632) (4,795,399)
Investment in associates – (1,150)
Dividend received from associates 141,398 116,670
Proceeds from disposal of investment securities 8,101,244 3,111,821
Acquisition of property and equipment 13 (248,690) (115,110)
Proceeds from the sale of property and equipment 365 137
Net cash from/(used in) investing activities 962,685 (1,683,031)
Cash ?ows from ?nancing activities
Net proceeds from issue of shares – 1,614,588
Proceeds from issue of debt securities 17 1,791,934 –
Repayment of debt securities 17 – (1,820,000)
Repayment of other borrowings 18 (2,366,000) –
Proceeds from other borrowings 18 1,650,219 1,816,714
Dividends paid (1,484,678) (1,587,781)
Net cash (used in)/from ?nancing activities (408,525) 23,521
Net decrease in cash and cash equivalents (3,124,254) (3,542,620)
Cash and cash equivalents as at 1 January 3,827,719 7,370,339
Cash and cash equivalents as at 31 December 34 703,465 3,827,719
Operational cash ?ows from interest and dividend:
Interest paid 1,002,400 975,121
Interest received 2,872,323 2,883,151
Dividend received 26,147 24,188
Statement of Cash Flows
The attached notes 1 to 38 form an integral part of these consolidated ?nancial statements.
Annual Report 2012 59
As at and for the year ended 31 December 2012 QAR ’000s
Notes to the Consolidated Financial Statements
1. Reporting entity
The Commercial Bank of Qatar (Q.S.C.) (“the Bank”) is an entity domiciled in the State of Qatar and was incorporated in
1975 as a public shareholding company under Emiri Decree No.73 of 1974. The commercial registration of the Bank is 150.
The address of the Bank’s registered ofce is PO Box 3232, Doha, State of Qatar. The consolidated ?nancial statements of
the Bank for the year ended 31 December 2012 comprise the Bank and its subsidiaries (together referred to as “the Group”).
The Group is primarily engaged in conventional banking, brokerage services and credit card business and operate through
its head ofce and branches established in the State of Qatar and the Bank have 29 branches in Qatar.
The principal subsidiaries of the Group are as follows:
Name
of subsidiary
Country of
incorporation
Capital of the
subsidiary
Activity of the
subsidiary
Percentage of ownership
2012 2011
Orient1 Limited Bermuda US$ 20,000,000 Holding
company
100% 100%
Global Card Services L.L.C. Sultanate
of Oman
OMR 500,000 Credit card
business
100% 100%
CBQ Finance Limited Bermuda US$ 1,000 Debt issuance
for the Bank
100% 100%
Commercialbank Investment Services (S.P.C.) Qatar QAR 100,000,000 Brokerage
services
100% 100%
2. Basis of preparation
(a) Statement of compliance
The consolidated ?nancial 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 Qatar Central Bank
(“QCB”) regulations.
The Group presents its statement of ?nancial position broadly in the order of liquidity. An analysis regarding recovery or
settlement within twelve months after the end of reporting date (“current”) and more than twelve months of the reporting
date (“non-current”) is presented in Note 4(c)(iii).
(b) Basis of measurement
The consolidated ?nancial statements have been prepared on the historical cost basis except for the following items which
are measured at fair value:
• investment securities designated at fair value through income statement;
• derivatives;
• available-for-sale ?nancial assets; and
• the carrying values of recognised assets and liabilities 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 risks that are being hedged.
(c) Functional and presentation currency
These consolidated ?nancial statements are presented in Qatari Riyals (“QAR”), which is the Bank’s functional and
presentation currency. Except as otherwise indicated, ?nancial information presented in QAR has been rounded to the
nearest thousand. Each entity in the group determines its own functional currency and items included in the ?nancial
statements of each entity are measured using that functional currency.
The Commercial Bank of Qatar (Q.S.C.) 60
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
2. Basis of preparation (continued)
(d) Use of estimates and judgments
The preparation of the consolidated ?nancial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that afect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may difer 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 afected.
Information about signi?cant areas of estimation uncertainty and critical judgements in applying accounting policies that have
the most signi?cant efect on the amounts recognised in the consolidated ?nancial statements are described in note 5.
3. Signi?cant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
?nancial statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The ?nancial statements of subsidiaries are included in the consolidated
?nancial statements from the date that control commences until the date that control ceases.
Control is the power to govern the ?nancial and operating policies of an entity so as to obtain bene?ts from its activities and
is generally assumed when the Group holds, directly or indirectly, majority of the voting rights of the entity. In assessing
control, the Group takes into consideration potential voting rights that currently are exercisable. The accounting policies
of subsidiaries are consistent with the accounting policies adopted by the Group.
(ii) Special purpose entities
Special purpose entities (“SPEs”) are entities that are created to accomplish a narrow and well-de?ned objective such as the
securitisation of particular assets, or the execution of a speci?c borrowing or lending transaction. An SPE is consolidated
if, based on an evaluation of the substance of its relationship with the Group and the SPE’s risks and rewards, the Group
concludes that it controls the SPE. The following circumstances may indicate a relationship in which, in substance, the Group
controls and consequently consolidates an SPE:
• the activities of the SPE are being conducted on behalf of the Group according to its speci?c business needs so that
the Group obtains bene?ts from the SPE’s operation;
• the Group has the decision-making powers to obtain the majority of the bene?ts of the activities of the SPE or,
by setting up an ‘autopilot’ mechanism, the Group has delegated these decision-making powers;
• the Group has rights to obtain the majority of the bene?ts of the SPE and therefore may be exposed to risks incident
to the activities of the SPE;
• the Group retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain
bene?ts from its activities.
Annual Report 2012 61
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(a) Basis of consolidation (continued)
(iii) Transactions eliminated on consolidation
Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from
intra-group transactions, are eliminated in preparing the consolidated ?nancial statements.
(iv) Associates
Associates are entities over which the Group has signi?cant in?uence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
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 investment in associates
includes goodwill (net of any accumulated impairment loss) identi?ed on acquisition.
The Group’s share of its associates’ post-acquisition pro?ts or losses is recognised in the consolidated income statement;
its share of post-acquisition movements 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.
For preparation of the consolidated ?nancial statements, consistent accounting policies for similar transactions and other
events in similar circumstances are used.
(v) Joint ventures
Joint ventures are entities where the Group has a contractual arrangement with one or more parties to undertake activities
through entities that are subject to joint control.
The Group recognises interests in a jointly controlled entity using the equity method of accounting. The accounting policy
given in Note 3(a) (iv) therefore applies for joint ventures.
(vi) Funds management
The Group manages and administers assets held in unit trusts and other investment vehicles on behalf of investors.
The ?nancial statements of these entities are not included in these consolidated ?nancial statements except when the
Group controls the entity. Information about the Group’s funds management is set out in Note 36.
The Commercial Bank of Qatar (Q.S.C.) 62
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(b) Foreign currency
(i) 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.
The gains and losses on revaluation of foreign currency non-monetary available-for-sale investments are recognised
in the consolidated statement of changes in equity.
Foreign currency diferences 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
pro?t or loss.
(ii) Foreign operations
The results and ?nancial position of all the Group’s entities that have a functional currency diferent from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each statement of ?nancial position presented are translated at the closing rate for the
reporting date;
• income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative efect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
• all resulting exchange diferences are recognised in other comprehensive income.
(c) Financial assets and ?nancial liabilities
(i) Recognition and initial measurement
The Group initially recognises loans and advances to customers, due from / to banks, customer deposits, debt securities
and other borrowings on the date at which they are originated. All other ?nancial assets and liabilities are initially recognised
on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
A ?nancial asset or ?nancial liability is measured initially at fair value plus, for an item not at fair value through pro?t or loss,
transaction costs that are directly attributable to its acquisition or issue.
(ii) Classi?cation
Financial assets
At inception a ?nancial asset is classi?ed in one of the following categories:
• loans and receivables (LaR);
• held to maturity (HTM);
• available-for-sale (AFS); or
• at fair value through pro?t or loss (FVTPL), either as: held for trading; or FVTPL on initial designation.
Annual Report 2012 63
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(ii) Classi?cation (continued)
Financial liabilities
The Group has classi?ed and measured its ?nancial liabilities at amortised cost.
(iii) Derecognition
The Group derecognises a ?nancial asset when the contractual rights to the cash ?ows from the ?nancial asset expire,
or when it transfers the ?nancial asset in a transaction in which substantially all the risks and rewards of ownership of the
?nancial 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 ?nancial asset. Any interest in transferred ?nancial 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 ?nancial position. On derecognition of a ?nancial asset, the diference between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset transferred), and consideration received (including any new asset
obtained less any new liability assumed) is recognised in pro?t or loss.
The Group enters into transactions whereby it transfers assets recognised on its statement of ?nancial 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.
The Group derecognises a ?nancial liability when its contractual obligations are discharged, cancelled or expired.
(iv) Ofsetting
Financial assets and liabilities are ofset and the net amount presented in the statement of ?nancial position when, and only
when, the Group has a legal right to set of the recognised amounts and it intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a
group of similar transactions such as in the Group’s trading activity.
(v) Measurement principles
(i) Amortised cost measurement
The amortised cost of a ?nancial asset or liability is the amount at which the ?nancial asset or liability is measured at initial
recognition, minus principal repayments, plus or minus the cumulative amortisation using the efective interest method
of any diference between the initial amount recognised and the maturity amount, minus any reduction for impairment
loss. The calculation of efective interest rate includes all fees paid or received that are an integral part of the efective
interest rate (EIR).
The Commercial Bank of Qatar (Q.S.C.) 64
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(v) Measurement principles (continued)
(ii) Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction on the measurement date.
The Group measures the fair value of listed investments at the best bid on close for the investment. For unlisted
investments, the Group recognises any increase in the fair value, when they have reliable indicators to support such
an increase. These reliable indicators are limited to the most recent transactions for the speci?c investment or similar
investments made in the market on a commercial basis between willing and independent buyers and sellers.
The fair value of investments in mutual funds and portfolios whose units are unlisted are measured at the net asset
value, if the net asset value is a reliable measure of fair value.
Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price.
Where the Group has positions with ofsetting risks, mid-market prices are used to measure the ofsetting risk
positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values re?ect
the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the
counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such
as liquidity risk or model uncertainties; to the extent that the Group believes a third-party market participant would take
them into account in pricing a transaction.
All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The Group’s
derivative trading instruments includes forward foreign exchange contracts and interest rate swaps. 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 statement of comprehensive income.
(iii) Identi?cation and measurement of impairment
At each reporting date the Group assesses whether there is objective evidence that ?nancial assets not carried at fair
value through pro?t or loss are impaired. A ?nancial asset or a group of ?nancial assets is impaired when objective
evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss
event has an impact on the future cash ?ows of the asset(s) that can be estimated reliably.
Objective evidence that ?nancial assets (including equity securities) are impaired can include signi?cant ?nancial
difculty 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 group, or economic conditions
that correlate with defaults in the group.
Annual Report 2012 65
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(c) Financial assets and ?nancial liabilities (continued)
(v) Measurement principles (continued)
(iii) Identi?cation and measurement of impairment (continued)
The Group considers evidence of impairment loss for loans and advances to customers and held-to-maturity
investment securities at both a speci?c asset and collective level. All individually signi?cant loans and advances to
customers and held-to-maturity investment securities are assessed for speci?c impairment. All individually signi?cant
loans and advances to customers and held-to-maturity investment securities found not to be speci?cally impaired are
then collectively assessed for any impairment that has been incurred but not yet identi?ed. Loans and advances to
customers and held-to-maturity investment securities that are not individually signi?cant 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 diference between the carrying amount
of the ?nancial asset and the present value of estimated future cash ?ows discounted at the asset’s original efective
interest rate. Impairment losses are recognised in pro?t or loss and re?ected in an allowance account against loans
and advances to customers.
For the purposes of a collective evaluation of impairment, ?nancial assets are grouped on the basis of similar credit
risk characteristics. Those characteristics are relevant to the estimation of future cash ?ows for groups of such assets
by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets
being evaluated.
Future cash ?ows in a group of ?nancial assets that are collectively evaluated for impairment are estimated on the
basis of the contractual cash ?ows of the assets in the Group and historical loss experience for assets with credit risk
characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable
data to re?ect the efects of current conditions that did not afect the period on which the historical loss experience is
based and to remove the efects of conditions in the historical period that do not currently exist.
For listed equity investments, a decline in the market value from cost by 20% or more, or a decline in the market value
from cost for a continuous period of 9 months or more, 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 pro?t or loss as a reclassi?cation adjustment. The cumulative
loss that is reclassi?ed from other comprehensive income to pro?t or loss is the diference between the acquisition
cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously
recognised in pro?t or loss. Changes in impairment provisions attributable to time value are re?ected as a component
of interest income.
In subsequent periods, the appreciation of fair value of previously impaired available-for-sale equity investment
securities is recorded in fair value reserve. If, in a subsequent period, the fair value of a debt instrument classi?ed as
available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss
was recognised in the consolidated statement of income, the impairment loss is reversed through the consolidated
statement of income.
The Commercial Bank of Qatar (Q.S.C.) 66
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(d) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid
?nancial assets with maturities of three months or less from the acquisition date that are subject to an insigni?cant 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 include amounts due from banks and amounts due to banks with an original maturity of 90 days or less.
(e) Loans and advances to customers
Loans and advances to customers are non-derivative ?nancial assets with ?xed 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.
Loans and advances to customers, cash and balances with central banks and due from banks are classi?ed as ‘loans
and receivables’.
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 efective interest method.
(f) Investment securities
Subsequent to initial recognition investment securities are accounted for depending on their classi?cation as either
‘held to maturity’, ‘fair value through pro?t or loss’, or ‘available-for-sale’.
(i) Held-to-maturity ?nancial assets
Held-to-maturity investments are non-derivative assets with ?xed or determinable payments and ?xed maturity that the
Group has the positive intent and ability to hold to maturity, and which were not designated as at fair value through pro?t or
loss or as available-for-sale. Held-to-maturity investments were carried at amortised cost using the efective interest method.
(ii) Fair value through pro?t or loss
The Group has classi?ed its investments as held for trading where such investments are managed for short term pro?t
taking or designated certain investments as fair value through pro?t or loss. Fair value changes on these investments are
recognised immediately in pro?t or loss.
(iii) Available-for-sale ?nancial assets
Available-for-sale investments are non-derivative investments that are designated as available-for-sale or are not classi?ed
as another category of ?nancial assets. 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 pro?t or loss using the efective interest method. Dividend income is recognised in pro?t 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 pro?t or loss.
Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, whereupon
the cumulative gains and losses previously recognised in other comprehensive income are transferred to pro?t or loss.
Annual Report 2012 67
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(g) Derivatives
(i) Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classi?ed as trading
assets or liabilities. Derivatives held for risk management purposes are measured at fair value on the statement of ?nancial
position. The Group designates certain derivatives held for risk management as well as certain non-derivative ?nancial
instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group
formally documents the relationship between the hedging derivative instrument(s) and hedged item(s), including the risk
management objective and strategy in undertaking the hedge, together with the method that will be used to assess the
efectiveness 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 instrument(s) is (are) expected to be highly efective in ofsetting
the changes in the fair value or cash ?ows of the respective hedged item(s) during the period for which the hedge is
designated, and whether the actual results of each hedge are within a range of 80-125 percent. The Group makes an
assessment for a cash ?ow hedge of a forecast transaction, as to whether the forecast transaction is highly probable
to occur and presents an exposure to variations in cash ?ows that could ultimately afect pro?t 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 ?rm commitment that could afect pro?t or loss, changes in the fair value of the derivative are recognised
immediately in pro?t or loss 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 efective interest method is used, is amortised to pro?t
or loss as part of the recalculated efective interest rate of the item over its remaining life.
(ii) Derivatives held for trading purposes
The Group’s derivative trading instruments includes, forward foreign exchange contracts and interest rate swaps.
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 pro?t or loss.
The Commercial Bank of Qatar (Q.S.C.) 68
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(h) Property and equipment
(i) 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.
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 diferent useful lives, they are accounted for as separate items
(major components) 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
pro?t or loss.
(ii) 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 bene?ts embodied within the part will ?ow 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 pro?t or loss as incurred.
(iii) Depreciation
The depreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value.
Depreciation is recognised in pro?t 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 re?ects the expected pattern of consumption of the future economic
bene?ts embodied in the asset and is based on cost of the asset less its estimated residual value. Land is not depreciated.
The estimated useful lives for the current and comparative years are as follows:
Buildings 20 years
Furniture and equipment 3 – 8 years
Motor Vehicles 5 years
(i) Impairment of non-?nancial assets
Assets that have an inde?nite useful life are not subject to amortisation and are tested annually for impairment.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identi?able cash ?ows
(cash-generating units). Non-?nancial assets other than goodwill that sufered impairment are reviewed for possible
reversal of the impairment at each reporting date.
Annual Report 2012 69
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(j) 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 out?ow of economic bene?ts will be required to settle the obligation.
Provisions are determined by discounting the expected future cash ?ows at a pre-tax rate that re?ects current market
assessments of the time value of money and, where appropriate, the risks speci?c to the liability.
(k) Financial guarantees
Financial guarantees are contracts that require the Group to make speci?ed payments to reimburse the holder for a loss
it incurs because a speci?ed debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantee liabilities are recognised initially at their fair value, and this initial fair value is amortised over the
life of the ?nancial guarantee. The ?nancial guarantee liability is subsequently carried at the higher of this amortised
amount and the present value of any expected payment when a payment under the guarantee has become probable.
Financial guarantees are included within other liabilities.
(l) Employee bene?ts
De?ned contribution plans
The Group provides for its contribution to the State administered retirement fund for Qatari employees in accordance with
the retirement law, and the resulting charge is included with in the personnel cost under general administration expenses
in the consolidated income statement. The Group has no further payment obligations once the contributions have been
paid. The contributions are recognised when they are due.
De?ned bene?t plan
The Group makes provision for end of service bene?ts payable to its expatriate employees on the basis of the employees’
length of service in accordance with the employment policy of the Group and the applicable provisions of Labour Law.
This provision is included in other provisions as part of other liabilities in the consolidated statement of ?nancial position.
The expected costs of these bene?ts are accrued over the period of employment.
Short-term employee bene?ts
Short-term employee bene?t 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 under short-term cash bonus or pro?t-sharing
plans 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.
(m) 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 Bank’s shareholders.
Interest income and expenseInterest income and expense for all interest-bearing ?nancial instruments, except for those classi?ed as held for trading,
are recognized within ‘interest income’ and ‘interest expense’ in the consolidated statement of comprehensive income
using the efective interest method.
Once a ?nancial asset or a group of similar ?nancial assets has been written down as a result of an impairment loss, interest
income is recognized using the rate of interest used to discount the future cash ?ows for the purpose of measuring the
impairment loss.
The Commercial Bank of Qatar (Q.S.C.) 70
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(o) Fees and commission income and expense
Fees and commission income and expense that are integral to the efective interest rate on a ?nancial asset or liability are
included in the measurement of the efective interest rate.
Other fees and commission income, including account servicing fees, investment management fees, sales commission,
placement fees 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.
(p) Income from investment securities
Gains or losses on the disposal of investment securities are recognised in pro?t or loss as the diference between fair value
of the consideration received and carrying amount of the investment securities.
Unrealised gains or losses on fair value changes from remeasurement of investment securities classi?ed as held for trading
or designated as fair value through pro?t or loss are recognised in pro?t or loss.
(q) Dividend income
Dividend income is recognised when the right to receive income is established.
(r) Earnings per share
The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the pro?t or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the pro?t or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the efects of all dilutive potential
ordinary shares.
(s) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker is the person or group that allocates resources to and assesses the
performance of the operating segments of an entity. The Group has determined the Board of Directors of the Bank as
its chief operating decision maker.
All transactions between operating segments are conducted on an arm’s length basis, with intra-segment revenue
and costs being eliminated in head ofce. Income and expenses directly associated with each segment are included
in determining operating segment performance.
(t) Fiduciary activities
The Group acts as fund manager and in other ?duciary capacities that result in the holding or placing of assets on behalf
of individuals, corporate and other institutions. These assets and income arising thereon are excluded from these
consolidated ?nancial statements, as they are not assets of the Group.
(u) Repossessed collateral
Repossessed collaterals in settlement of customers’ debts are stated under “Other assets”. According to QCB instructions,
the Group should dispose of any land and properties acquired in settlement of debts within a period not exceeding three
years from the date of acquisition although this period can be extended with the approval of QCB.
Annual Report 2012 71
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
3. Signi?cant accounting policies (continued)
(v) Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with
comparative information.
(w) Parent bank ?nancial information
Statement of ?nancial position and income statement of the Parent bank, disclosed as supplementary information,
is prepared following the same accounting policies as mentioned above except for; investment in subsidiaries,
associates and joint ventures which are not consolidated and are carried at cost; and, any dividends received from
subsidiaries, associates and joint ventures are recognised in the income statement.
(x) New standards and interpretations
During the period, the Group has adopted the following standards efective for the annual period beginning on or after
1 January 2012.
IFRS 7 Financial Instruments (Disclosures)
The amendment requires additional quantitative and qualitative disclosures relating to transfers of ?nancial assets, when:
• Financial assets are derecognised in their entirety, but the entity has a continuing involvement in them (e.g., options
or guarantees on the transferred assets)
• Financial assets are not derecognised in their entirety
The amended disclosures are more extensive and onerous than previous disclosures. This amendment did not have any
impact on the Group.
The following amendments to standards became efective in 2012, but did not have any impact on the accounting policies,
?nancial position or performance of the Group:
Standards Content
IAS 12 Income Taxes – Tax recovery of underlying assets (Amendment)
IFRS 1 First-time adoption – Severe hyperin?ation and removal of ?xed dates for ?rst-time adopters (Amendment)
Standards and amendments issued but not adopted:
The Group is currently considering the implications of the new standards and amendments to standards which are
efective for future accounting periods and has not early adopted any of the new or amended Standards as listed below:
Standards Content Efective date
IFRS 9 Financial Instruments: Classi?cation & Measurement (Part 1) 1 January 2015
IFRS 10 Consolidated Financial Statements 1 January 2013
IFRS 11 Joint Arrangements 1 January 2013
IFRS 12 Disclosure of Interests in Other Entities 1 January 2013
IFRS 13 Fair Value Measurement 1 January 2013
IAS 1 Presentation of Items of Other Comprehensive Income (Amendment) 1 January 2013
IAS 19 Employee Bene?ts (Revised) 1 January 2013
IAS 28 Investments in Associates and Joint Ventures (Efective 1 January 2013) 1 January 2013
IAS 32 Ofsetting Financial Assets and Financial Liabilities – Amendments to IAS 32 1 January 2014
IFRS 7 Disclosures – Ofsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7 1 January 2013
The Commercial Bank of Qatar (Q.S.C.) 72
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management
(a) Introduction and overview
The Group’s business involves taking risks in a targeted manner and managing them professionally. The core functions of
the Group’s risk management are to identify all key risks for the Group, measure these risks, manage the risk positions and
determine capital allocations. The Group regularly reviews its risk management policies and systems to re?ect changes in
markets, products and best market practice.
The Group’s aim is to achieve an appropriate balance between risk and return and minimise potential adverse efects
on the Group’s ?nancial performance. The Group de?nes risk as the possibility of losses or pro?ts foregone, which may
be caused by internal or external factors.
Financial instruments
Financial instruments comprise the Group’s ?nancial assets and liabilities. Financial assets include cash and balances with
Central bank, due from banks, loans and advances, investment securities, derivative ?nancial assets and certain other
assets and ?nancial liabilities include customer deposits, borrowings under repurchase agreements and due to banks,
debt issued and other borrowed funds, derivative ?nancial liabilities and certain other liabilities. Financial instruments also
include rights and commitments included in of- balance sheet items.
Note 3(c) describes the accounting policies followed by the Group in respect of recognition and measurement of the key
?nancial instruments and their related income and expense.
Risk management
The Group derives its revenue from assuming and managing customer risk for pro?t. Through a robust governance
structure, risk and return are evaluated to produce sustainable revenue, to reduce earnings volatility and increase
shareholder value. The most important types of risk are credit risk, liquidity risk, market risk and operational risk. Credit risk
re?ects the possible inability of a customer to meet his/her repayment or delivery obligations. Market risk, which includes
foreign currency, interest rate risks and other price risks, is the risk of ?uctuation in asset and commodity values caused by
changes in market prices and yields. Liquidity risk results in the inability to accommodate liability maturities and withdrawals,
fund asset growth or otherwise meet contractual obligations at reasonable market rates. Operational risk is the potential
for loss resulting from events involving people, processes, technology, legal issues, external events or execution or
regulatory issues.
The Group’s Market Risk and Structural Risk Management policies envisage the use of interest rate derivative contracts and
foreign exchange derivative contracts as part of its asset and liability management process.
Risk and other committees
The governance structure of the Group is headed by the Board of Directors. The Board of Directors evaluates risk involving
the Group Chief Executive Ofcer and the following Board and Management Committees:
1. Board Risk Committee is responsible for all aspects of Enterprise Risk Management including but not restricted to
credit risk, market risk, and operational risk. This committee sets the policy on all risk issues and maintains oversight
of all Group risks through the Management Risk Committee.
2. Board Audit Committee is responsible for setting the policy on all Audit issues and maintains oversight of all Bank
audit issues through the Management Audit Committee. In addition, it is also be responsible for Compliance &
Anti- Money Laundering.
3. Policy, Strategy and Governance Committee is a Board committee which is responsible for all policies and strategies
of the business and compliance of corporate Governance.
Annual Report 2012 73
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(a) Introduction and overview (continued)
Risk and other committees (continued)
4. Board Executive Committee is responsible for evaluating and granting credit facilities and approval of the Group’s
investment activities within authorized limits per Qatar Central Bank and Board of Directors’ guidelines.
5. Management Credit Committee is the highest management level authority on all counterparty risk exposures product
programmes, associated expenditure programmes there under and underwriting exposures on syndications and
securities transactions.
6. Management Risk Committee is the highest management authority on all risk related issues in the Group and its
subsidiaries and afliates in which it has strategic investments. This committee provides recommendations on all risk
policy and portfolio issues to the Board Risk Committee.
7. Asset and Liability Committee (ALCO) is a management committee which is a decision making body for developing
policies relating to all asset and liability management matters.
(b) Credit risk
The Group takes on exposure to credit risk, which is the risk that counterparty will cause a ?nancial loss for the Group by
failing to discharge an obligation. Credit risk is the most important risk for the Group’s business; management therefore
carefully manages its exposure to credit risk. Credit risk is attributed to both on-statement of ?nancial position ?nancial
instruments such as loans, overdrafts, debt securities and other bills, investments, and acceptances and credit equivalent
amounts related to of-balance sheet ?nancial instruments. The Group’s approach to credit risk management preserves
the independence and integrity of risk assessment, while being integrated into the business management processes.
Policies and procedures, which are communicated throughout the organisation, guide the day-to-day management of
credit exposure and remain an integral part of the business culture. The goal of credit risk management is to evaluate and
manage credit risk in order to further enhance this strong credit culture.
(ii) Credit risk measurement
(a) Loans and advances
The Group’s aim is to maintain a sound assets portfolio by enhancing its loan mix. This is being achieved through
a strategy of reducing exposure to non-core client relationships while increasing the size of the consumer portfolio
comprising of consumer loans, vehicle loans, credit cards and residential mortgages, which have historically recorded
very low loss rates. In measuring credit risk of loan and advances to customers and to banks at a counterparty level,
the Group re?ects three components (i) the ‘probability of default’ by the client or counterparty on its contractual
obligations; (ii) current exposures to the counterparty and its likely future development, from which the Group derive
the ‘exposure at default’; and (iii) the likely recovery ratio on the defaulted obligations (the ‘loss given default’).
(i) The Group assesses the probability of default of individual counterparties using internal rating tools tailored to the
various categories of counterparty. They combine statistical analysis along with the business relationship ofcers
and credit risk ofcers assessment and are validated, where appropriate, by comparison with externally available
data. Clients of the Group are segmented based on a 10 point rating scale. The Group’s rating scale re?ects the
range of default probabilities de?ned for each rating class. This means that, in principle, exposures migrate between
classes as the assessment of their probability of default changes. The rating tools are kept under review and
upgraded as necessary.
The ratings of the major rating agency are mapped to Group’s rating grades based on the long-term average default
rates for each external grade. The Group uses the external ratings where available to benchmark internal credit risk
assessment. Observed defaults per rating category vary year on year, especially over an economic cycle.
The Commercial Bank of Qatar (Q.S.C.) 74
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Credit risk measurement (continued)
(a) Loans and advances (continued)
(ii) Exposure at default is based on the amounts the Group expects to be owed at the time of default. For example,
for a loan this is the face value. For a commitment, the Group includes any amount already drawn plus the further
amount that may have been drawn by the time of default, should it occur.
(iii) Loss given default or loss severity represents the Group’s expectation of the extent of loss on a claim should default
occur. It is expressed as percentage loss per unit of exposure and typically varies by type of counterparty, type and
seniority of claim and availability of collateral or other credit mitigation.
(b) Debt securities and other bills
For debt securities and other bills, external rating such as Standard & Poor’s and Moody’s ratings or their equivalents
are used by Group Treasury for managing of the credit risk exposures. The investments in those securities and bills
are viewed as a way to gain a better credit quality mapping and maintain a readily available source to meet the funding
requirement at the same time.
(ii) Risk limit control and mitigation policies
Portfolio diversi?cation
Portfolio diversi?cation is an overriding principle, therefore, the credit policies are structured to ensure that the
Group is not over exposed to a given client, industry sector or geographic area. To avoid excessive losses if any single
counter-party is unable to ful?l its payment obligations, large exposure limits have been established per credit policy.
Limits are also in place to manage exposures to a particular country or sector. These risks are monitored on an
ongoing basis and subject to an annual or more frequent review, when considered necessary.
Collateral
In order to proactively respond to credit deterioration the Group employs a range of policies and practices to mitigate
credit risk.
The most traditional of these is the taking of security for funds advanced, which is common practice. The Group
implements guidelines on the acceptability of speci?c classes of collateral or credit risk mitigation. The principal
collateral types for loans and advances are:
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory and accounts receivable;
• Charges over ?nancial instruments such as debt securities and equities.
Longer-term ?nance and lending to corporate entities are generally secured; revolving individual credit facilities are
generally unsecured. In addition, in order to minimise the credit loss the Group will seek additional collateral from the
counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances.
Collateral held as security for ?nancial assets other than loans and advances is determined by the nature of the
instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios of ?nancial instruments.
Annual Report 2012 75
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Credit risk measurement (continued)
(b) Debt securities and other bills (continued)
Credit-related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees
and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which
are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up
to a stipulated amount under speci?c terms and conditions – are collateralised by the underlying shipments of goods
to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially
exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than
the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining
speci?c credit standards. The Group monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term commitments.
Credit risk arising from derivative ?nancial instruments is, at any time, limited to those with positive fair values, as recorded
on the statement of ?nancial position. With gross-settled derivatives, the Group is also exposed to a settlement risk,
being the risk that the Group honours its obligation but the counterparty fails to deliver the counter-value.
(iii) Maximum exposure to credit risk before collateral held or other credit enhancements
2012 201 1
Credit risk exposures relating to assets recorded on the consolidated
statement of ?nancial position are as follows:
Balances with central bank 3,024,354 2,211,906
Due from banks 9,731,562 9,271,920
Loans and advances to customers 48,594,475 41,711,783
Investment securities – debt 10,010,277 10,525,009
Other assets 912,306 827,037
Total as at 31 December 72,272,974 64,547,655
Other credit risk exposures are as follows:
Guarantees 12,048,098 9,088,622
Letter of credit 7,541,840 5,217,592
Unutilised credit facilities 5,326,125 5,859,107
Total as at 31 December 24,916,063 20,165,321
97,189,037 84,712,976
The above table represents a worse-case scenario of credit risk exposure to the Group, without taking account of any
collateral held or other credit enhancements attached. For assets recorded on the statement of ?nancial position, the
exposures set out above are based on net carrying amounts as reported in the consolidated statement of ?nancial position.
The Commercial Bank of Qatar (Q.S.C.) 76
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure
Geographical sectors
The following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any
collateral held or other credit support), as categorized by geographical region. For this table, the Group has allocated
exposures to regions based on the country of domicile of its counterparties.
2012
Qatar Other GCC Other Middle East Rest of the world Total
Balances with
central bank 3,024,354 – – – 3,024,354
Due from banks and
?nancial institutions 3,991,495 2,562,195 273,014 2,904,858 9,731,562
Loans and advances
to customers 45,352,295 2,281,335 145,600 815,245 48,594,475
Investment
securities – debt 8,248,367 1,125,629 – 636,281 10,010,277
Other assets 460,671 169,627 341 281,667 912,306
61,077,182 6,138,786 418,955 4,638,051 72,272,974
2011
Qatar Other GCC Other Middle East Rest of the world Total
Balances with central bank 2,211,906 – – – 2,211,906
Due from banks and
?nancial institutions 6,177,703 2,536,149 18,665 539,403 9,271,920
Loans and advances
to customers 38,989,926 2,180,481 – 541,376 41,711,783
Investment securities – debt 9,629,440 509,223 – 386,346 10,525,009
Other assets 462,600 112,643 9 251,785 827,037
57,471,575 5,338,496 18,674 1,718,910 64,547,655
Annual Report 2012 77
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
2012
Qatar Other GCC Other Middle East Rest of the world Total
Guarantees 5,642,000 1,864,332 324,596 4,217,170 12,048,098
Letter of credit 3,889,389 47,995 100,475 3,503,981 7,541,840
Unutilised credit facilities 5,026,737 299,388 – – 5,326,125
14,558,126 2,211,715 425,071 7,721,151 24,916,063
2011
Qatar Other GCC Other Middle East Rest of the world Total
Guarantees 4,997,422 1,335,794 752,402 2,003,004 9,088,622
Letter of credit 1,292,280 37,020 7,031 3,881,261 5,217,592
Unutilised credit facilities 5,486,835 372,272 – – 5,859,107
11,776,537 1,745,086 759,433 5,884,265 20,165,321
The Commercial Bank of Qatar (Q.S.C.) 78
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
Industry sectors
The following table breaks down the Group’s credit exposure at carrying amounts before taking into account collateral held
or other credit enhancements, as categorized by the industry sectors of the Group’s counterparties.
Gross exposure
2012
Gross exposure
2011
Funded
Government 14,908,357 12,191,199
Government agencies 4,043,620 6,802,475
Industry 1,359,544 2,020,860
Commercial 6,810,623 5,537,182
Services 16,511,179 13,099,292
Contracting 3,778,961 2,782,738
Real estate 16,179,614 13,257,588
Personal 6,985,502 7,338,519
Others 1,695,574 1,517,802
Total funded 72,272,974 64,547,655
Un-funded
Government institutions & semi government agencies 3,135,373 868,527
Financial services 6,395,483 5,559,196
Commercial and others 15,385,207 13,737,598
Total Un-funded 24,916,063 20,165,321
Total 97,189,037 84,712,976
Total maximum exposure net of collateral is QAR 23 billion (2011: QAR 24 billion)
Annual Report 2012 79
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of ?nancial assets with credit risk exposure (continued)
Credit risk exposure
The table below presents an analysis of ?nancial assets by rating agency designation based on Standard & Poor’s ratings
or their equivalent:
2012 2011
Equivalent grades
AAA to AA- 38,779,759 38,896,269
A+ to A- 7,117,909 7,018,070
BBB+ to BBB- 46,661,602 35,500,030
BB+ to B- 3,717,461 2,471,569
Unrated/equivalent internal grading 912,306 827,038
97,189,037 84,712,976
The Commercial Bank of Qatar (Q.S.C.) 80
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(v) Credit quality
The following table sets out the credit qualities of the Group’s credit exposure at carrying amounts before taking into account collateral held or
other credit enhancements.
Loans and advances to customers Due from banks Investment securities – debt
2012 2011 2012 2011 2012 2011
Neither past due nor impaired:
A: Low risk – excellent 10,695,370 14,251,335 7,713,461 8,013,589 9,154,311 10,046,901
B: Standard/satisfactory risk 37,084,177 26,978,058 2,018,101 1,258,331 855,966 478,108
47,779,547 41,229,393 9,731,562 9,271,920 10,010,277 10,525,009
Past due but not impaired :
A: Low risk – excellent 5,238 7,281 – – – –
B: Standard/satisfactory risk 971,339 514,885 – – – –
Carrying amount 976,577 522,166 – – – –
Impaired:
C: Substandard 92,569 184,255 – – – –
D: Doubtful 73,025 66,096 – – – –
E: Bad debts 299,569 257,275 – – 202,126 260,842
465,163 507,626 – – 202,126 260,842
Less: impairment
allowance- speci?c (359,992) (321,881) – – (202,126) (260,842)
Less: impairment
allowance- Collective (266,820) (225,521) – – – –
(161,649) (39,776) – – – –
Carrying amount – net 48,594,475 41,711,783 9,731,562 9,271,920 10,010,277 10,525,009
Investment securities – debt
Held to maturity 3,324,511 5,648,715
Available for sale 6,830,628 5,137,136
Investment securities designated at
fair value through income statement 57,264 –
Less: impairment allowance (202,126) (260,842)
Carrying amount – net 10,010,277 10,525,009
Note: None of the other assets are past due or impaired as at 31 December 2012 and 31 December 2011.
Annual Report 2012 81
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(v) Credit quality (continued)
Impaired loans and advances to customers and investment in debt securities
Individually impaired loans and advances to customers and investment debt securities (other than those carried at fair value
through pro?t or loss) 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 agreement(s).
Investment debt securities carried at fair value through pro?t or loss are not assessed for impairment but are subject to the
same internal grading system, where applicable.
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.
Loans and advances to customers less than 90 days as at 31 December past due are not considered impaired, unless other
information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past
due but not impaired were as follows:
2012 2011
Up to 30 days 581,199 328,798
31 to 60 days 272,591 66,492
Above 60 days 122,787 126,876
Gross 976,577 522,166
Rescheduled loans and advances to customers
Restructuring activities include extended payment arrangements, approved external management plans, modi?cation 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. Following
restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar
accounts as non impaired. The carrying value of renegotiated loans and advances as at 31 December 2012 was QAR 4,297
million (2011: QAR 3,058 million).
(vi) 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 indices 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 is QAR 324 million (2011: QAR 189 million) for past due up to 30 days, QAR 11 million (2011: QAR 24
million) for past due from 31 to 60 days and QAR 89 million (2011: QAR 41 million) for past due above 60 days.
The Commercial Bank of Qatar (Q.S.C.) 82
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(b) Credit risk (continued)
(vii) Repossessed collateral
During the year, the Group acquired ownership of land and building by taking possession of collateral held as security for
an amount of QAR 344 million (2011: Nil).
Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness.
Repossessed property is classi?ed in the consolidated statement of ?nancial position within other assets.
(viii) Write-of policy
The Group writes of a loan or an investment debt security balance, and any related allowances for impairment losses,
when Group Credit determines that the loan or security is uncollectible. QCB approval is required for such write of when
the amount to be written of exceeds Qatar Riyal hundred thousand.
This determination is made after considering information such as the occurrence of signi?cant changes in the
borrower’s/issuer’s ?nancial position such that the borrower/issuer can no longer pay the obligation, or that proceeds
from collateral will not be sufcient to pay back the entire exposure. For smaller balance standardised loans, write-of
decisions generally are based on a product-speci?c past due status. The amount written of during the year was
QAR 127 million (2011: QAR 867 million).
(c) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of e.g. customer deposits
being withdrawn, cash requirements from contractual commitments, or other cash out?ows, such as debt maturities or
margin calls for derivatives etc. Such out?ows would deplete available cash resources for client lending, trading activities and
investments. In extreme circumstances, lack of liquidity could result in reductions in the consolidated statement of ?nancial
position and sales of assets, or potentially an inability to ful?l lending commitments. The risk that the Group will be unable to
do so is inherent in all banking operations and can be afected by a range of institution-speci?c and market-wide events
including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.
(i) Management of liquidity risk
The management of liquidity risk is governed by the Group’s liquidity policy. The primary objective of liquidity risk
management; over which ALCO has oversight, is to provide a planning mechanism for unanticipated changes in the
demand or needs for liquidity created by customer behaviour or abnormal market conditions. ALCO emphasises the
maximisation and preservation of customer deposits and other funding sources. ALCO also monitors deposit rates,
levels, trends and signi?cant changes. Deposit marketing plans are regularly reviewed for consistency with the liquidity
policy requirements. ALCO has in place a contingency plan, which is periodically reviewed. The Group’s ability to raise
wholesale and/or long term funding at competitive costs is directly impacted by our credit ratings, which are as follows:
Moody’s: Long Term A1, Short Term Prime 1 and ?nancial strength C-, outlook stable.
Fitch: Long Term A, Short Term F1 and Financial strength C, outlook stable.
Standard & Poor’s: Long Term A-, Short Term A-2, outlook stable.
Annual Report 2012 83
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(ii) 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 under the heading ‘Liquidity adequacy
ratio’ (LAR). The minimum ratio limit set by QCB is 100%.
Following table sets out the LAR position of the Group during the year as follows:
2012 2011
At 31 December 102.18 1 12.55
Average for the year 106.23 1 10.07
Maximum for the year 111.91 130.38
Minimum for the year 100.1 1 104.58
(iii) Maturity analysis
The following table sets out the maturity pro?le of the Group’s assets and liabilities. The contractual/expected maturities of
assets and liabilities have been determined on the basis of the remaining period at 31 December to the contractual maturity
date and do not take account of the efective maturities as indicated by the Group’s deposit retention history and the
availability of liquid funds. Management monitors the maturity pro?le to ensure that adequate liquidity is maintained.
The Commercial Bank of Qatar (Q.S.C.) 84
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis (continued)
Carrying
amount
Demand/
within 1 month 1-3 months
3 months
– 1 year
Subtotal
1 year 1-5 years
More than
5 years No Maturity
31 December 2012
Cash and
balances with
central bank 3,448,128 1,033,721 – – 1,033,721 – – 2,414,407
Due from banks 9,731,562 6,977,586 484,800 2,087,176 9,549,562 182,000 – –
Loans and
advances to
customers 48,594,475 2,162,809 1,274,851 4,262,383 7,700,043 10,173,224 30,721,208 –
Investment
securities 11,162,179 11,421 534,502 1,481,812 2,027,735 4,245,900 3,736,642 1,151,902
Investment in
associates 4,054,157 – – – – – – 4,054,157
Property and
equipment and
others assets 3,047,251 715,124 144,270 124,741 984,135 866,047 – 1,197,069
Total 80,037,752 10,900,661 2,438,423 7,956,112 21,295,196 15,467,171 34,457,850 8,817,535
Due to banks 9,855,682 7,584,548 522,572 – 8,107,120 1,748,562 – –
Customer
deposits 41,385,546 30,264,374 7,509,315 3,062,600 40,836,289 549,257 – –
Debt securities 8,705,816 – – – – 6,549,887 2,155,929 –
Other borrowings 3,471,515 – – 1,818,345 1,818,345 1,653,170 – –
Other liabilities 1,679,815 1,045,966 301,412 175,065 1,522,443 157,372 – –
Total 65,098,374 38,894,888 8,333,299 5,056,010 52,284,197 10,658,248 2,155,929 –
Diference 14,939,378 (27,994,227) (5,894,876) 2,900,102 (30,989,001) 4,808,923 32,301,921 8,817,535
Annual Report 2012 85 85
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis (continued)
Carrying
amount
Demand/
within 1 month 1-3 months
3 months
– 1 year
Subtotal
1 year 1-5 years
More than
5 years No Maturity
31 December 2011
Cash and
balances with
central bank 2,576,494 462,572 – – 462,572 – – 2,113,922
Due from banks 9,271,920 7,296,015 1,542,745 433,160 9,271,920 – – –
Loans and
advances to
customers 41,711,783 4,991,773 564,390 1,081,623 6,637,786 7,981,931 27,092,066 –
Investment
securities 11,732,639 12,055 173,670 2,200,018 2,385,743 3,822,272 4,316,994 1,207,630
Investment in
associates 3,926,480 – – – – – – 3,926,480
Property and
equipment and
others assets 2,418,728 696,202 131,454 94,449 922,105 426,295 – 1,070,328
Total 71,638,044 13,458,617 2,412,259 3,809,250 19,680,126 12,230,498 31,409,060 8,318,360
Due to banks 6,988,697 5,703,207 134,680 – 5,837,887 1,150,810 – –
Customer
deposits 37,988,683 27,875,676 7,351,672 2,742,140 37,969,488 19,195 – –
Debt securities 6,871,674 – – – – 4,718,736 2,152,938 –
Other borrowings 4,182,412 – 2,365,698 182,000 2,547,698 1,634,714 – –
Other liabilities 1,376,282 917,341 222,130 86,919 1,226,390 149,892 – –
Total 57,407,748 34,496,224 10,074,180 3,011,059 47,581,463 7,673,347 2,152,938 –
Diference 14,230,296 (21,037,607) (7,661,921) 798,191 (27,901,337) 4,557,151 29,256,122 8,318,360
The Commercial Bank of Qatar (Q.S.C.) 86
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (?nancial liabilities and derivatives)
The table below summarises the maturity pro?le of the Group’s ?nancial liabilities at 31 December based on contractual undiscounted
repayment obligations.
Carrying
amount
Gross
undiscounted
cash ?ows
Less than
1 month 1-3 months
3 months
– 1 year
1-5 years
More than
5 years
31 December 2012
Non-derivative ?nancial liabilities
Due to banks 9,855,682 9,877,210 7,601,115 523,714 – 1,752,381 –
Customer deposits 41,385,546 41,848,180 30,602,688 7,593,259 3,096,836 555,397 –
Debt securities 8,705,816 10,716,123 – – – 8,074,159 2,641,964
Other borrowings 3,471,515 3,566,207 – – 1,867,944 1,698,263 –
Other liabilities 1,329,857 1,329,857 696,008 301,412 175,065 157,372 –
Total liabilities 64,748,416 67,337,577 38,899,811 8,418,385 5,139,845 12,237,572 2,641,964
Derivative ?nancial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
Total Up to 1 Year 1-5 years
More than
5 Years
Derivatives Held for Trading:
Forward foreign exchange contracts
Out?ow (2,067,611) (2,067,611) – –
In?ow 2,090,693 2,090,693 – –
Interest rate swaps
Out?ow (243,904) (28,853) (102,453) (112,598)
In?ow 246,749 29,686 103,365 113,698
Derivatives Held as Fair Value Hedges:
Cross currency interest rate swaps
Out?ow (1,117,638) (29,444) (1,088,194) –
In?ow 1,191,944 32,904 1,159,040 –
Total Out?ows (3,429,153) (2,125,908) (1,190,647) (112,598)
Total in?ows 3,529,386 2,153,283 1,262,405 113,698
Annual Report 2012 87 87
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (?nancial liabilities and derivatives) (continued)
Carrying
amount
Gross
undiscounted
cash ?ows
Less than
1 month
1-3 months
3 months
– 1 year
1-5 years
More than
5 years
31 December 2011
Non-derivative ?nancial liabilities
Due to banks 6,988,697 7,020,188 5,719,918 135,075 – 1,165,195 –
Customer deposits 37,988,683 38,414,487 28,188,127 7,434,075 2,772,876 19,409 –
Debt securities 6,871,674 9,166,459 – – – 5,580,235 3,586,224
Other borrowings 4,182,412 4,203,115 – 2,370,129 182,341 1,650,645 –
Other liabilities 1,110,690 1,110,690 651,749 222,130 86,919 149,892 –
Total liabilities 57,142,156 59,914,939 34,559,794 10,161,409 3,042,136 8,565,376 3,586,224
Derivative ?nancial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
Total Up to 1 Year 1-5 years
More than
5 Years
Derivatives Held for Trading:
Forward foreign exchange contracts
Out?ow (979,422) (979,422) – –
In?ow 979,199 979,199 – –
Interest rate swaps
Out?ow (272,006) (29,416) (106,227) (136,363)
In?ow 277,294 30,796 108,719 137,779
Derivatives Held as Fair Value Hedges:
Cross currency interest rate swaps
Out?ow (1,156,408) (31,776) (1,124,632) –
In?ow 1,186,746 31,880 1,154,866 –
Total Out?ows (2,407,836) (1,040,614) (1,230,859) (136,363)
Total in?ows 2,443,239 1,041,875 1,263,585 137,779
The Commercial Bank of Qatar (Q.S.C.) 88
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(c) Liquidity risk (continued)
(v) Of-balance sheet items
Below 1 year Above 1 year Total
As at December 2012
Loan commitments 1,323,176 4,002,949 5,326,125
Guarantees and other ?nancial facilities 16,952,282 2,637,656 19,589,938
Capital commitments 393,822 – 393,822
Total 18,669,280 6,640,605 25,309,885
As at December 2011
Loan commitments 1,054,582 4,804,525 5,859,107
Guarantees and other ?nancial facilities 12,214,409 2,091,805 14,306,214
Capital commitments 479,243 – 479,243
Total 13,748,234 6,896,330 20,644,564
(d) Market risks
The Group takes on exposure to market risks, which is the risk that the fair value or future cash ?ows of a ?nancial instrument
will ?uctuate 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 speci?c 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 and by product type.
The market risks arising from trading and non-trading activities are concentrated in Group Treasury and monitored by two
teams separately. Regular reports are submitted to the Board of Directors and heads of each business unit.
Trading portfolios include those positions arising from market-making transactions where the Group acts as principal with
clients or with the market.
Non-trading portfolios primarily arise from the interest rate management of the entity’s retail and commercial banking
assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Group’s
held-to-maturity and available-for-sale investments.
(i) Management of market risks
Overall authority for market risk is vested in ALCO. Group Market Risk is responsible for the development of detailed risk
management policies (subject to review and approval by ALCO) and for the day-to-day review of their implementation.
Annual Report 2012 89
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(i) Management of market risks (continued)
The Group’s proprietary investments are managed according to the Group’s internal investment policy, which has
been approved by the Board of Directors and drafted in accordance with the Qatar Central Bank guidelines. The Group’s
trading activities are conducted by Treasury and Investments Division. These activities are subject to business line
guidelines and policies. The Group employs several techniques to measure and control activities including sensitivity
analysis, position limits and risk based limits. The maximum limit of the Group’s total proprietary investments (i.e. total of
fair value through pro?t and loss, held to maturity and available for sale investment excluding Qatar Government issued or
guaranteed investment or debt security portfolios) is restricted to 70% of the Group’s capital and reserves (Tier 1 capital).
However the individual limit for the held for trading investment portfolio is 10% of capital and reserves (Tier 1 capital) with
a maximum permissible loss to carry for local securities at any given time. Investment policy is reviewed by the Board of
Directors annually and day to day limits are independently monitored by the Market Risk Management department.
Investment proposals are approved at the Investment Committee and decisions driven by the investment strategy,
which is developed by the business line under ALCO oversight and approved by the Board.
(ii) Exposure to interest rate risk – non-trading portfolio
The principal risk to which non-trading portfolios are exposed is the risk of loss from ?uctuations in the future cash ?ows
or fair values of ?nancial 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.
The Group takes on exposure to the efects of ?uctuations in the prevailing levels of market interest rates on both its fair
value and cash ?ow risks. Interest margins may increase as a result of such changes but may reduce losses in the event
that unexpected movements arise. The Board sets limits on the level of mismatch of interest rate repricing that may be
undertaken, which is monitored daily by Group Treasury.
The Asset and Liability Management (“ALM”) process, managed through ALCO, is used to manage interest rate risk
associated with non-trading ?nancial instruments. Interest rate risk represents the most signi?cant market risk exposure
to the Group’s non-trading ?nancial instruments.
The Group’s goal is to manage interest rate sensitivity so that movements in interest rates do not adversely afect net
interest income. Interest rate risk is measured as the potential volatility to the net interest rate income caused by changes
in market interest rates. The Group typically manages the interest rate risk of its non-trading ?nancial instruments
by segmenting these assets and liabilities into two broad portfolios: non-discretionary and discretionary. The non-
discretionary portfolio consists of the Group’s customer driven loans and deposit positions and securities required
to support regulatory requirements. To manage the resulting interest rate sensitivity of the Group’s non-discretionary
portfolio, the Group uses a discretionary portfolio of securities, long dated deposits, inter-bank takings and placements,
and when warranted, derivatives. Strategically positioning the discretionary portfolio, the Group largely manages the
interest rate sensitivity in the non-discretionary portfolio.
The following table summarises the interest / pro?t rate sensitivity position at year end, by reference to the re-pricing
period of the Group’s assets, liabilities and of- balance sheet exposures.
The Commercial Bank of Qatar (Q.S.C.) 90
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
A summary of the Group’s interest rate gap position on non-trading portfolios is as follows:
Repricing in:
Carrying
amount
Less than 3
months 3-12 months 1-5 years
More than
5 years
Non-interest
sensitive
Efective
interest rate %
31 December 2012
Cash and balances with
central bank 3,448,128 1,033,721 – – – 2,414,407
Due from banks 9,731,562 7,462,386 2,087,176 182,000 – – 0.89
Loans and advances to customers 48,594,475 27,966,992 18,838,262 1,503,779 – 285,442 5.15
Investment securities 11,162,179 261,823 2,112,649 3,342,004 4,293,801 1,151,902 4.69
Investment associates 4,054,157 – – – – 4,054,157 –
Property and equipment and
other assets 3,047,251 – – – – 3,047,251 –
80,037,752 36,724,922 23,038,087 5,027,783 4,293,801 10,953,159
Due to banks (9,855,682) (8,718,807) (1,136,875) – – – 0.64
Customer deposits (41,385,546) (28,256,660) (3,062,600) (549,257) – (9,517,029) 1.52
Debt securities (8,705,816) – – (6,549,887) (2,155,929) – 5.34
Other borrowings (3,471,515) (1,653,170) (1,818,345) – – – 1.66
Other liabilities (1,679,815) – – – – (1,679,815) –
Equity (14,939,378) – – – – (14,939,378) –
(80,037,752) (38,628,637) (6,017,820) (7,099,144) (2,155,929) (26,136,222)
Interest rate sensitivity gap – (1,903,715) 17,020,267 (2,071,361) 2,137,872 (15,183,063)
Cumulative Interest rate
sensitivity gap (1,903,715) 15,116,552 13,045,191 15,183,063 –
Annual Report 2012 91 91
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
Repricing in:
Carrying
amount
Less than 3
months 3-12 months 1-5 years
More than
5 years
Non-interest
sensitive
Efective
interest rate %
31 December 2011
Cash and balances with
central bank 2,576,494 462,572 – – – 2,113,922
Due from banks 9,271,920 8,838,760 433,160 – – – 0.83
Loans and advances to customers 41,711,783 26,309,909 13,317,281 1,986,614 – 97,979 6.03
Investment securities 11,732,639 430,326 2,220,981 4,319,018 3,554,684 1,207,630 4.69
Investment associates 3,926,480 – – – – 3,926,480
Property and equipment and
other assets 2,418,728 – – – – 2,418,728
71,638,044 36,041,567 15,971,422 6,305,632 3,554,684 9,764,739
Due to Bank (6,988,697) (5,837,887) (1,150,810) – – 0.51
Customer deposits (37,988,683) (27,374,170) (2,551,460) (19,195) – (8,043,858) 1.71
Debt securities (6,871,674) – (4,718,736) (2,152,938) – 4.73
Other borrowings (4,182,412) – (2,547,698) (1,634,714) – – 0.94
Other liabilities (1,376,282) – – – – (1,376,282)
Equity (14,230,296) – – – – (14,230,296)
(71,638,044) (33,212,057) (6,249,968) (6,372,645) (2,152,938) (23,650,436)
Interest rate sensitivity gap – 2,829,510 9,721,454 (67,013) 1,401,746 (13,885,697)
Cumulative Interest rate
sensitivity gap 2,829,510 12,550,964 12,483,951 13,885,697 –
The Commercial Bank of Qatar (Q.S.C.) 92
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Sensitivity analysis
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s ?nancial assets
and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include
a 50 basis point (bp) parallel fall or rise in all yield curves worldwide and a 50 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 ?nancial position, is as follows:
50 bp parallel
increase
50 bp parallel
decrease
Sensitivity of net interest income
2012
At 31 December (61,141) 61,141
Average for the year (72,170) 72,170
2011
At 31 December (80,387) 80,387
Average for the year (70,798) 70,798
Sensitivity of reported equity to interest rate movements
2012
At 31 December 1,350 (1,350)
Average for the year 1,400 (1,400)
2011
At 31 December 1,450 (1,450)
Average for the year 1,308 (1,308)
Interest rate movements afect reported equity in the following ways:
• retained earnings arising from increases or decreases in net interest income and the fair value changes reported in pro?t or loss; and
• fair value reserves arising from increases or decreases in fair values of available-for-sale-?nancial instruments is reported directly in other
comprehensive income.
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.
Annual Report 2012 93
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios
Foreign currency transactions
The Group monitors any concentration risk in relation to any individual currency in regard to the translation of foreign
currency transactions and monetary assets and liabilities. The table shows the net foreign currency exposure by major
currencies at the end of the reporting period along with the sensitivities if there were to be a change in the currency
exchange rate.
2012 201 1
Net foreign currency exposure:
Pounds Sterling 19,221 (8,677)
Euro 528,857 (10,081)
USD (2,685,959) (2,475,774)
Other currencies 3,203,459 3,039,278
Increase/(decrease)
in pro?t or loss
Increase/(decrease)
in fair value reserve
2012 201 1
2012 201 1
5% increase/(decrease) in currency
exchange rate
Pound Sterling 961 (434) 45 35
Euro 26,443 (504) 268 238
Other currencies 160,173 151,964 16,646 12,025
Open exchange position in other currencies represents Group’s investment in associates denominated in RO and AED.
As these currencies and Qatar Riyal are pegged to the USD, there is no impact to income statement and impact to equity
is insigni?cant.
The Commercial Bank of Qatar (Q.S.C.) 94
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios
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 non-trading equity price risk exposure arises from equity securities classi?ed as held for trading and available for
sale. A 10 per cent increase in the Qatar Exchange and Bombay Stock Exchange and a 15 per cent increase in the Abu Dhabi
Securities Exchange market index at 31 December 2012 would have increased equity by QAR 43 million (2011: QAR 39 million).
An equivalent decrease would have resulted in an equivalent but opposite impact.
The Group is also exposed to equity price risk and the sensitivity analysis thereof is as follows:
2012 201 1
Increase/(decrease) in other comprehensive income:
Qatar Exchange 9,229 14,564
Bombay Stock Exchange 29,511 20,388
Abu Dhabi Securities Exchange 4,128 3,941
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 diferent from the one stated above and is subject to impairment assessment at the end of each reporting period.
(e) Operational risks
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s
involvement with ?nancial instruments, including processes, personnel, technology and infrastructure, and from external
factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour.
The Group’s objective is to manage operational risk so as to balance the avoidance of ?nancial losses and damage to the
Group’s reputation with overall cost efectiveness and to avoid Control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address Operational risk is assigned
to senior management within each business unit. This responsibility is supported by the development of overall Group
standards for the management of operational risk in the following areas:
• requirements for appropriate segregation of duties, including the independent authorisation of transactions;
• requirements for the reconciliation and monitoring of transactions;
• compliance with regulatory and other legal requirements;
• documentation of controls and procedures;
• requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures
to address the risks identi?ed;
• requirements for the reporting of operational losses and proposed remedial action;
• development of contingency plans;
• training and professional development;
• ethical and business standards; and
• risk mitigation, including insurance where this is efective.
Annual Report 2012 95
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(f) Capital management
Regulatory capital
The Group’s policy is to maintain a strong capital base so as to ensure investor, creditor and market con?dence and to
sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised
and the Group recognises the need to maintain a balance between the higher returns that might be possible with greater
gearing and the advantages and security aforded by a sound capital position.
The Group and its individually regulated operations have complied with all externally imposed capital requirements
throughout the period.
The capital adequacy ratio of the Group is calculated in accordance with the Basel Committee guidelines as adopted by
the QCB.
The Group’s regulatory capital position under Basel II and QCB regulations after deduction of Investment in Associates
at 31 December was as follows:
2012 201 1
Tier 1 capital 10,346,812 10,051,703
Tier 2 capital 1,075,982 924,683
Total regulatory capital 11,422,794 10,976,386
Tier I capital includes share capital, legal reserve, general reserve, other reserves and retained earnings including current
year pro?t and excluding proposed dividend.
Tier 2 capital includes risk reserve (up to 1.25% of the risk weighted assets), fair value reserves (45% of positive fair value
items and 100 % deduction for negative fair value items) and subordinated debt, if any.
The Commercial Bank of Qatar (Q.S.C.) 96
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
4. Financial risk management (continued)
(f) Capital management (continued)
Regulatory capital (continued)
Risk weighted assets and carrying amounts
Basel II Risk weighted amount Carrying amount
2012 201 1 2012 201 1
Cash and balances with central bank – – 3,448,128 2,576,494
Due from banks 4,749,160 4,168,880 9,731,562 9,271,920
Loans and advances to customers 40,373,111 37,138,297 48,594,475 41,711,783
Investment securities 1,562,099 1,765,403 11,162,179 11,732,639
Investment in associates 12,754 13,716 4,054,157 3,926,480
Other assets 3,047,251 2,418,728 3,047,251 2,418,728
Of balance sheet items 8,781,018 7,799,584 33,182,250 26,308,882
Total risk weighted assets for credit risk 58,525,393 53,304,608 – –
Risk weighted assets for market risk 3,115,549 2,536,790 – –
Risk weighted assets for operational risk 5,446,593 5,389,899 – –
67,087,535 61,231,297
2012 2011
Risk weighted assets 67,087,535 61,231,297
Regulatory capital 11,422,794 10,976,386
Risk weighted assets as a percentage of
regulatory capital (Capital ratio) 17.0% 17.9%
The minimum ratio limit determined by QCB is 10% and the Basel II capital adequacy requirement is 8%.
Annual Report 2012 97
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments
(a) Key sources of estimation uncertainty
The Group makes estimates and assumptions that afect 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 reason able under the circumstances.
(i) Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy.
The speci?c counterparty component of the total allowances for impairment applies to ?nancial assets evaluated
individually for impairment and is based upon management’s best estimate of the present value of the cash ?ows that are
expected to be received. In estimating these cash ?ows, management makes judgements about counterparty’s ?nancial
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 ?ows considered recoverable are independently approved by the Credit Risk
function. Minimum impairment on speci?c counter parties are determined based on the QCB regulations.
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 ?nancial assets, but the individual impaired items cannot yet be identi?ed.
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 de?ne 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 ?ows for speci?c
counterparty allowances and the model assumptions and parameters used in determining collective allowances.
The Group reviews its loan portfolio to assess impairment at the end of each reporting period. In determining whether
an impairment loss should be recorded in the statement of income, the Group makes judgements as to whether there is
any observable data indicating that there is a measurable decrease in the estimated future cash ?ows from a portfolio of
loans before the decrease can be identi?ed 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 ?ows. The methodology and assumptions used for estimating both the
amount and timing of future cash ?ows are reviewed regularly to reduce any diferences between loss estimates
and actual loss experience.
The Commercial Bank of Qatar (Q.S.C.) 98
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(a) Key sources of estimation uncertainty (continued)
(ii) Determining fair values
The determination of fair value for ?nancial assets and liabilities for which there is no observable market price requires
the use of valuation techniques as described in accounting policy. For ?nancial 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 afecting the speci?c instrument.
Where the fair values of ?nancial assets and ?nancial liabilities recorded on the statement of ?nancial position cannot
be derived from active markets, they are determined using a variety of valuation techniques that include the use of
mathematical models. The input to these models is 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 ?nancial instruments
The Group’s accounting policy on fair value measurements is discussed in the signi?cant accounting policies section 3.(c)v.ii.
The Group measures fair values using the following fair value hierarchy that re?ects the signi?cance 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 signi?cant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using signi?cant unobservable inputs. This category includes all instruments where
the valuation technique includes inputs not based on observable data and the unobservable inputs have a signi?cant
efect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for
similar instruments where signi?cant unobservable adjustments or assumptions are required to re?ect diferences
between the instruments.
Fair values of ?nancial assets and ?nancial liabilities that are traded in active markets are based on quoted market prices
or dealer price quotations. For all other ?nancial instruments the Group determines fair values using valuation techniques.
Valuation techniques include net present value and discounted cash ?ow models and comparison to similar instruments
for which market observable prices exist.
Annual Report 2012 99
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies (continued)
(i) Valuation of ?nancial instruments (continued)
The table below analyses ?nancial instruments measured at fair value at the end of the reporting period, by the level in the
fair value hierarchy into which the fair value measurement is categorised:
Level 1 Level 2 Carrying amount
31 December 2012
Derivative assets – 431,202 431,202
Investment securities 431,268 7,064,489 7,948,351
431,268 7,495,691 8,379,553
Derivative liabilities – 349,958 349,958
– 349,958 349,958
31 December 2011
Derivative assets – 343,799 343,799
Investment securities 393,868 5,358,253 6,229,663
393,868 5,702,052 6,573,462
Derivative liabilities – 265,592 265,592
– 265,592 265,592
All unquoted available for sale equities and investment funds are recorded at fair value except for investments with a
carrying value of QR 453 million (2011: QR 478 million), which are recorded at cost since their fair value cannot be reliably
estimated. There have been no transfers between levels 1, 2 and 3 during the year 2012 and 2011.
The Commercial Bank of Qatar (Q.S.C.) 100
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
5. Use of estimates and judgments (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies (continued)
(ii) Financial asset and liability classi?cation
The Group’s accounting policies provide scope for assets and liabilities to be designated at inception into diferent
accounting categories in certain circumstances:
• in classifying ?nancial 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 ?nancial assets at fair value through pro?t or loss, the Group has determined that it has met one of the
criteria for this designation set out in accounting policies.
• in classifying ?nancial 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 classi?cation of ?nancial assets and liabilities are given in Note 7.
(iii) Qualifying hedge relationships
In designating ?nancial instruments in qualifying hedge relationships, the Group has determined that it expects the hedges
to be highly efective over the period of the hedging relationship.
(iv) Impairment of investments in equity and debt securities
Investments in equity and debt securities are evaluated for impairment on the basis described in the signi?cant accounting
policies section.
(v) 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.
(vi) Going concern
The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satis?ed
that the Group has the resources to continue in business for the foreseeable future. Furthermore, the management is not
aware of any material uncertainties that may cast signi?cant doubt upon the Group’s ability to continue as a going concern.
Therefore, the consolidated ?nancial statements continue to be prepared on the going concern basis.
Annual Report 2012 101
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments
For management purposes, the Group is divided into three operating segments, which are based on business lines,
together with its associated companies, as follows:
Commercial Banking:
1. Wholesale Banking provides an extensive range of conventional funded and non-funded credit facilities, demand
and time deposit services, currency exchange facilities, interest rate swaps and other derivative trading services,
loan syndication and structured ?nancing services to corporate, commercial and multinational customers.
Money market funds and proprietary investment portfolio are also managed by this operating segment.
2. Retail Banking provides personal current, savings, time and investment account services, credit card and debit
card services, consumer and vehicle loans, residential mortgage services and custodial services to retail and
individual customers.
3. Subsidiaries:
a) Orient 1 and Global Card Services L.L.C. provide credit card services in the Sultanate of Oman.
b) Commercialbank Investment Services (S.P.C.) provides brokerage services in the State of Qatar.
c) CBQ Finance Limited.
Unallocated assets, liabilities and revenues are related to certain central functions and non-core business operations.
(For example, Group head quarters, staf apartments, common property & equipment, cash functions and development
projects and related payables, net of intra-group transactions).
Associated Companies – includes the Group’s strategic investments in the National Bank of Oman in the Sultanate of Oman,
and United Arab Bank in United Arab Emirates, and Asteco Qatar L.L.C., Gekko L.L.C. and Massoun Insurance Services L.L.C.
which operate in the State of Qatar. All Associated Companies are accounted for under the equity method.
Management monitors the results of the operating segments separately to make decisions about resource allocation and
performance assessment. Transfer prices between operating segments are on an arm’s length basis.
The Commercial Bank of Qatar (Q.S.C.) 102
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(a) By operating segment
Segment assets and liabilities comprise operating assets and liabilities which are directly handled by the operating
segment, and income or expenses are attributed with the assets and liabilities’ ownership. The following table summarizes
performance of the operating segments:
Wholesale
Banking Retail Banking
Total
Commercial
Banking Subsidiaries Unallocated Total
31 December 2012
Net interest income 1,358,356 510,739 1,869,095 2,640 (5,481) 1,866,254
Net fee, commission
and other income 814,354 259,443 1,073,797 6,261 37,679 1,117,737
Segmental revenue 2,172,710 770,182 2,942,892 8,901 32,198 2,983,991
Impairment loss on
investment securities (61,917) – (61,917) – – (61,917)
Net impairment loss
on loans and advances
to customers (130,438) (9,839) (140,277) 333 – (139,944)
Segmental pro?t 1,761,677 (6,789) (1,140) 1,753,748
Share of results
of associates – – – – – 258,546
Net pro?t for the year – – – – – 2,012,294
Other information
Assets 61,018,542 12,058,948 73,077,490 288,499 2,617,606 75,983,595
Investments in associates – – – – – 4,054,157
Liabilities 52,970,660 1 1,948,655 64,919,315 22,528 156,531 65,098,374
Contingent items 23,868,360 1,047,703 24,916,063 – – 24,916,063
Intra-group transactions are eliminated from this segmental information (Assets: QAR 451 million, Liabilities: QAR 279 million)
Annual Report 2012 103
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(a) By operating segment (continued)
Wholesale
Banking Retail Banking
Total
Commercial
Banking Subsidiaries Unallocated Total
31 December 2011
Net interest income 1,524,416 415,023 1,939,439 2,059 (3,898) 1,937,600
Net fee, commission
and other income 605,399 279,582 884,981 6,310 34,615 925,906
Segmental revenue 2,129,815 694,605 2,824,420 8,369 30,717 2,863,506
Impairment loss on
investment securities (68,197) – (68,197) – – (68,197)
Net impairment loss
on loans and advances
to customers (209,586) (30,329) (239,915) 512 – (239,403)
Segmental pro?t 1,682,567 1,597 (3,613) 1,680,551
Share of results of
associates – – – – – 203,420
Net pro?t for the year – – – – – 1,883,971
Other information
Assets 56,575,141 9,243,798 65,818,939 250,857 1,641,768 67,711,564
Investments in associates – – – – – 3,926,480
Liabilities 47,087,481 10,167,407 57,254,888 64,424 88,436 57,407,748
Contingent items 18,535,026 1,630,295 20,165,321 – – 20,165,321
Intra-group transactions are eliminated from this segmental information (Assets: QAR 419 million, Liabilities: QAR 247 million)
The Commercial Bank of Qatar (Q.S.C.) 104
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement
of ?nancial position
As at 31 December 2012
Cash and balances
with central bank 3,448,123 – – – – 5 3,448,128
Due from banks 3,991,495 2,562,195 273,014 1,736,213 355,908 812,737 9,731,562
Loans and advances to customers 45,352,295 2,281,335 145,600 391,915 101 423,229 48,594,475
Investment securities 8,561,202 1,216,352 33,091 278,382 477,123 596,029 11,162,179
Investment in associates 12,753 4,041,404 – – – – 4,054,157
Property and equipment
and other assets 2,592,603 169,627 341 280,456 968 3,256 3,047,251
Total assets 63,958,471 10,270,913 452,046 2,686,966 834,100 1,835,256 80,037,752
Due to banks 2,389,733 5,256,060 1,068,976 993,159 78,125 69,629 9,855,682
Customer deposits 31,415,646 3,997,243 68,868 3,020,845 340 2,882,604 41,385,546
Debt securities – – – 8,705,816 – – 8,705,816
Other borrowings – 2,744,235 – 363,727 – 363,553 3,471,515
Other liabilities 1,318,358 172,106 626 182,838 12 5,875 1,679,815
Equity 14,939,378 – – – – – 14,939,378
Total liabilities and equity 50,063,115 12,169,644 1,138,470 13,266,385 78,477 3,321,661 80,037,752
Annual Report 2012 105 105
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement of Income
Year ended 31 December 2012
Net interest income 1,894,399 26,028 (875) (32,985) 8,649 (28,962) 1,866,254
Fee, commission
and other income 1,045,008 50,837 1,378 4,447 5,213 10,854 1,117,737
Net operating income 2,939,407 76,865 503 (28,538) 13,862 (18,108) 2,983,991
Staf cost (489,036) – – – – (10,346) (499,382)
Depreciation (121,604) – – – – (344) (121,948)
Impairment loss on investment
securities (6,994) (8,191) – (1,174) (14,871) (30,687) (61,917)
Net impairment loss on loans
and advances to customers (140,277) 333 – – – – (139,944)
Other expenses (407,401) – – – – 349 (407,052)
Pro?t before share of results
of associates 1,774,095 69,007 503 (29,712) (1,009) (59,136) 1,753,748
Share of results of associates 1,278 257,268 – – – – 258,546
Net pro?t for the year 1,775,373 326,275 503 (29,712) (1,009) (59,136) 2,012,294
The Commercial Bank of Qatar (Q.S.C.) 106
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement
of ?nancial position
As at 31 December 2011
Cash and balances
with central bank 2,576,489 – – – – 5 2,576,494
Due from banks 6,177,704 2,536,149 18,367 400,418 13,776 125,506 9,271,920
Loans and advances to customers 38,989,926 2,180,481 – 427,192 54,600 59,584 41,71 1,783
Investments securities 9,999,663 695,646 48,339 231,684 534,185 223,122 11,732,639
Investment in associates 12,753 3,913,727 – – – – 3,926,480
Property and equipment
and other assets 2,052,562 112,643 9 250,506 782 2,226 2,418,728
Total assets 59,809,097 9,438,646 66,715 1,309,800 603,343 410,443 71,638,044
Due to banks 2,773,237 2,980,599 510,767 650,064 67,800 6,230 6,988,697
Customer deposits 32,805,763 2,392,441 47,123 2,742,145 309 902 37,988,683
Debt securities – – – 6,871,674 – – 6,871,674
Other borrowings 180,989 3,274,687 – 363,635 – 363,101 4,182,412
Other liabilities 1,092,536 104,327 84 178,492 41 802 1,376,282
Equity 14,230,296 – – – – – 14,230,296
Total liabilities and equity 51,082,821 8,752,054 557,974 10,806,010 68,150 371,035 71,638,044
Annual Report 2012 107 107
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
6. Operating segments (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East Europe North America
Rest of
the world Total
Consolidated statement of Income
Year ended 31 December 2011
Net interest income 1,856,418 107,205 (502) (36,272) 7,314 3,437 1,937,600
Fee, commission
and other income 891,619 12,758 1 1 1,338 5,768 14,412 925,906
Net operating income 2,748,037 119,963 (491) (34,934) 13,082 17,849 2,863,506
Staf Cost (450,971) – – – – (2,402) (453,373)
Depreciation (113,643) – – – – (61) (113,704)
Impairment loss
on investment securities (1,314) (20,410) – (23,133) (7,822) (15,518) (68,197)
Net impairment loss on loans
and advances to customers (239,915) 512 – – – – (239,403)
Other expenses (307,314) – – – – (964) (308,278)
Pro?t before share of results of
associates 1,634,880 100,065 (491) (58,067) 5,260 (1,096) 1,680,551
Share of results of associates (962) 204,382 – – – – 203,420
Net pro?t for the year 1,633,918 304,447 (491) (58,067) 5,260 (1,096) 1,883,971
The Commercial Bank of Qatar (Q.S.C.) 108
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
7. Financial assets and liabilities
(a) Accounting classi?cations and fair values
The table below sets out the carrying amounts and fair values of the Group’s ?nancial assets and ?nancial liabilities:
Fair value
through
pro?t or loss
Held-to-
maturity
Loans and
receivables
(at amortised
cost)
Available
-for-sale
Other
amortised
cost
Total
carrying
amount Fair value
31 December 2012
Cash and balances
with central bank – – 3,448,128 – – 3,448,128 3,448,128
Due from banks – – 9,731,562 – – 9,731,562 9,731,562
Derivative assets 431,202 – – – – 431,202 431,202
Loans and advances to customers – – 48,594,475 – – 48,594,475 48,594,475
Investment securities:
Measured at fair value 57,264 – – 7,891,087 – 7,948,351 7,948,351
Measured at amortised cost – 3,213,828 – – – 3,213,828 3,845,395
488,466 3,213,828 61,774,165 7,891,087 – 73,367,546 73,999,113
Derivative liabilities 349,958 – – – – 349,958 349,958
Due to banks – – – – 9,849,098 9,849,098 9,849,098
Customer deposits – – – – 41,385,546 41,385,546 41,385,546
Debt securities – – – – 8,705,816 8,705,816 9,550,448
Other borrowings – – – – 3,471,515 3,471,515 3,471,515
349,958 – – – 63,411,975 63,761,933 64,606,565
Annual Report 2012 109 109
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
7. Financial assets and liabilities (continued)
(a) Accounting classi?cations and fair values (continued)
The table below sets out the carrying amounts and fair values of the Group’s ?nancial assets and ?nancial liabilities:
Fair value
through
pro?t or loss
Held-to-
maturity
Loans and
receivables
(at amortised
cost)
Available
-for-sale
Other
amortised
cost
Total
carrying
amount Fair value
31 December 2011
Cash and balances
with central bank – – 2,211,906 – – 2,211,906 2,21 1,906
Due from banks – – 9,271,920 – – 9,271,920 9,271,920
Derivative assets 343,799 – – – – 343,799 343,799
Loans and advances to customers – – 41,613,804 – – 41,613,804 41,613,804
Investment securities:
Measured at fair value – – 6,229,663 – 6,229,663 6,229,663
Measured at amortised cost – 5,502,976 – – – 5,502,976 6,133,083
343,799 5,502,976 53,097,630 6,229,663 – 65,174,068 65,804,175
Derivative liabilities 265,592 – – – – 265,592 265,592
Due to banks – – – – 6,988,697 6,988,697 6,988,697
Customer deposits – – – – 37,988,683 37,988,683 37,988,683
Debt securities – – – – 6,871,674 6,871,674 7,422,726
Other borrowings – – – – 4,182,412 4,182,412 4,185,308
265,592 – – – 56,031,466 56,297,058 56,851,006
The Commercial Bank of Qatar (Q.S.C.) 110
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
8. Cash and balances with central bank
2012 201 1
Cash 423,774 364,588
Cash reserve with QCB* 1,990,633 1,749,334
Other balances with QCB 1,033,721 462,572
3,448,128 2,576,494
*The cash reserve with QCB is mandatory reserve not available for use in the Group’s day to day operations.
9. Due from banks
2012 201 1
Current accounts 80,230 89,744
Placements 8,866,816 8,929,827
Loans to banks 784,516 252,349
9,731,562 9,271,920
10. Loans and advances to customers
(a) By type
2012 201 1
Loans 46,996,364 40,788,068
Overdrafts 1,861,600 1,946,848
Bills discounted 278,533 112,905
Bankers acceptances 285,442 97,979
49,421,939 42,945,800
Deferred pro?t (200,652) (686,615)
Speci?c impairment of loans and advances to customers (359,992) (321,881)
Collective impairment allowance (266,820) (225,521)
Net loans and advances to customers (Note) 48,594,475 41,711,783
The aggregate amount of non-performing loans and advances to customers amounted QAR 539 million which represents
1.09% of total loans and advances to customers (2011: QAR 508 million, 1.20% of total loans and advances to customers).
Speci?c impairment of loans and advances to customers includes QAR 98 million of interest in suspense
(2011: QAR 73 million).
Note 2012 201 1
Government and related agencies 7,694,409 7,399,252
Wholesale 29,488,574 25,559,965
Retail 11,411,492 8,752,566
Net loans and advances to customers 48,594,475 41,711,783
Annual Report 2012 111 111
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(b) By sector
Loans Overdrafts Bills discounted
Bankers
acceptances Total
31 December 2012
Government and related agencies 7,302,564 391,845 – – 7,694,409
Non-banking ?nancial institutions 1,016,820 3,188 – – 1,020,008
Industry 1,308,807 97,589 – 4,481 1,410,877
Commercial 6,536,611 148,404 47,254 176,914 6,909,183
Services 4,697,202 172,192 16,150 26,250 4,911,794
Contracting 3,432,568 278,541 72,648 77,648 3,861,405
Real estate 15,868,596 111,287 136,139 – 16,116,022
Personal 6,577,536 657,527 6,342 – 7,241,405
Others 255,660 1,027 – 149 256,836
46,996,364 1,861,600 278,533 285,442 49,421,939
Less: Deferred Pro?t (200,652)
Speci?c impairment allowance (359,992)
Collective impairment allowance (266,820)
(827,464)
Net loans and advances to customers 48,594,475
The Commercial Bank of Qatar (Q.S.C.) 112
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(b) By sector (continued)
Loans Overdrafts Bills discounted
Bankers
acceptances Total
31 December 2011
Government and related agencies 6,747,899 651,353 – – 7,399,252
Non-banking ?nancial institutions 645,616 7,723 – – 653,339
Industry 2,279,857 78,593 – 23,410 2,381,860
Commercial 5,437,181 142,302 49,549 24,597 5,653,629
Services 2,569,793 107,341 9,454 10,822 2,697,410
Contracting 2,597,676 170,195 48,926 39,150 2,855,947
Real estate 13,272,787 15,824 998 – 13,289,609
Personal 6,846,331 773,517 3,978 – 7,623,826
Others 390,928 – – – 390,928
40,788,068 1,946,848 112,905 97,979 42,945,800
Less: Deferred Pro?t (686,615)
Speci?c impairment allowance (321,881)
Collective impairment allowance (225,521)
(1,234,017)
Net loans and advances to customers 41,711,783
Annual Report 2012 113
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
10. Loans and advances to customers (continued)
(c) Movement in impairment loss on loans and advances to customers
2012 201 1
Balance at 1 January 547,402 979,823
Allowance made during the year 283,326 442,304
Recoveries during the year (113,785) (49,757)
Net allowance for impairment during the year * 169,541 392,547
Written of during the year (90,131) (824,968)
Balance at 31 December 626,812 547,402
* This includes net interest suspended during the year QAR 30 million (2011: QAR 153 million). The movement includes the
efect of interest suspended on loans and advances to customers as per QCB regulations.
Further analysis is as follows:
Wholesale Retail Total
Balance at 1 January 2012 376,752 170,650 547,402
Allowance made during the year 221,036 62,290 283,326
Recoveries during the year (80,166) (33,619) (113,785)
Written of during the year (83,151) (6,980) (90,131)
Balance at 31 December 2012 434,471 192,341 626,812
Balance at 1 January 2011 294,882 684,941 979,823
Allowance made during the year 255,393 186,911 442,304
Recoveries during the year (15,788) (33,969) (49,757)
Written of during the year (157,735) (667,233) (824,968)
Balance at 31 December 2011 376,752 170,650 547,402
The Commercial Bank of Qatar (Q.S.C.) 114
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities
Investment securities as at 31 December 2012 totalled QAR 11,162,179 (2011: QAR 11,732,639). The analysis of investment
securities is detailed below:
2012 201 1
Available-for-sale 7,891,087 6,229,663
Held to maturity 3,213,828 5,502,976
Investment securities designated at fair value through income statement 57,264 –
Total 11,162,179 11,732,639
The carrying value of investments securities pledged under Repurchase agreements (REPO) is QAR 1,968 million
(2011:QAR 1,281 million)
(a) Available-for-sale
2012 201 1
Quoted Unquoted Quoted Unquoted
Equities 427,876 386,284 391,010 430,180
State of Qatar debt securities 2,926,400 2,020,060 547,448 3,102,658
Debt and other securities* 1,584,123 208,602 982,811 389,116
Investment funds – 337,742 – 386,440
Total 4,938,399 2,952,688 1,921,269 4,308,394
* Fixed rate securities and ?oating rate securities amounted to QAR 1,523 million and QAR 270 million respectively
(2011: QAR 1,081 million and QAR 290 million respectively).
Annual Report 2012 115
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities (continued)
(b) Held to maturity
2012 201 1
Quoted Unquoted
Quoted Unquoted
By issuer
State of Qatar debt securities 740,698 2,358,377 1,539,084 3,843,019
Other debt securities – 114,753 – 120,873
Total * 740,698 2,473,130 1,539,084 3,963,892
By interest rate
Fixed rate securities 740,698 2,358,377 1,539,084 3,843,019
Floating rate securities – 114,753 – 120,873
Total 740,698 2,473,130 1,539,084 3,963,892
* The fair value of held to maturity investments amounted to QAR 3,845 million at 31 December 2012 (2011: QAR 6,133 million).
(c) Investment securities designated at fair value through income statement
2012 2011
Debt securities 57,264 –
Balance at 31 December 57,264 –
The Commercial Bank of Qatar (Q.S.C.) 116
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
11. Investment securities (continued)
(d) Movement in impairment loss on investment securities
2012 2011
Balance at 1 January 260,842 283,303
Allowance for impairment during the year 1,344 21,509
Recoveries during the year (23,660) (2,314)
Write-of during the year (36,400) (41,656)
Balance at 31 December * 202,126 260,842
* Further breakup as follows:
2012 2011
Available-for-sale – debt securities 91,443 115,103
Held to maturity 110,683 145,739
202,126 260,842
The Group has also taken impairment loss for investments in Equities and funds during the year totalling QAR 60.6 million
(2011: QAR 46.7 million).
Annual Report 2012 117
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
12. Investments in associates
2012 2011
Balance at 1 January 3,926,480 3,839,542
Investments acquired during the year – 1,940
Share of results 258,546 203,420
Cash dividend (141,398) (116,670)
Other movements 10,529 (1,752)
Balance at 31 December 4,054,157 3,926,480
Amount Ownership %
2012 2011 Country Company’s Activities 2012 2011
Name of the Company
National Bank of Oman
SAOG (‘NBO’) 1,604,243 1,538,990 Oman Banking 34.9 34.9
United Arab Bank PJSC (‘UAB’) 2,435,883 2,374,737 UAE Banking 40 40
Asteco LLC 1,906 2,256 Qatar Facilities management 30 30
Gekko LLC – – Qatar
Electronic payment
infrastructure 50 50
Massoun Insurance Services LLC 12,125 10,497 Qatar Insurance brokerage 50 50
The summarised ?nancial position and results of associates as at the end of reporting period are as follows:
2012 2011
Total assets 38,900,140 31,838,134
Total liabilities 33,757,868 27,137,761
Operating income 1,698,430 1,455,615
Net pro?t 788,827 648,586
Share of results 258,546 203,420
Shares of National Bank of Oman SAOG are listed on the Muscat Securities Market, having a market value of QAR 1,042 million
as at 31 December 2012 (31 December 2011: QAR 1,141 million).
Shares of United Arab Bank PJSC are listed on the Abu Dhabi Securities Market, having a market value of QAR 1,216 million as
at 31 December 2012 (31 December 2011: QAR 1,438 million).
The Commercial Bank of Qatar (Q.S.C.) 118
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
13. Property and equipment:
Land and
buildings
Leasehold
improvements
Furniture and
equipment
Motor
Vehicles
Capital Work
in progress Total
Cost
Balance at 1 January 2011 788,823 70,112 490,361 6,915 216,487 1,572,698
Acquisitions / transfers 21,873 227 121,183 354 (28,527) 115,110
Disposals – – – (551) – (551)
Foreign currency translation – – (2) – – (2)
Balance at 31 December 2011 810,696 70,339 611,542 6,718 187,960 1,687,255
Balance at 1 January 2012 810,696 70,339 611,542 6,718 187,960 1,687,255
Acquisitions / transfers 149,518 18,863 64,620 981 14,708 248,690
Disposals (1,540) (1,460) – (1,495) – (4,495)
Balance at 31 December 2012 958,674 87,742 676,162 6,204 202,668 1,931,450
Accumulated depreciation
Balance at 1 January 2011 138,398 52,101 307,573 5,604 – 503,676
Charged during the year 27,274 6,589 79,085 756 – 113,704
Disposals – – – (451) – (451)
Foreign currency translation – – (2) – – (2)
Balance at 31 December 2011 165,672 58,690 386,656 5,909 – 616,927
Balance at 1 January 2012 165,672 58,690 386,656 5,909 – 616,927
Depreciation for the year 28,906 7,970 84,513 559 – 121,948
Disposals (1,540) (1,460) – (1,494) – (4,494)
Balance at 31 December 2012 193,038 65,200 471,169 4,974 – 734,381
Net carrying amounts
Balance at 31 December 2011 645,024 11,649 224,886 809 187,960 1,070,328
Balance at 31 December 2012 765,636 22,542 204,993 1,230 202,668 1,197,069
Annual Report 2012 119
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
14. Other assets
2012 2011
Interest receivable and Accrued income 321,698 295,828
Prepaid expenses 32,068 19,080
Accounts receivable 128,715 150,788
Repossessed collateral* 856,093 412,206
Positive fair value of derivatives (Note 35) 431,202 343,799
Clearing cheques 30,691 36,622
Others 49,715 90,077
1,850,182 1,348,400
* This represents the value of the properties acquired in settlement of debts and subsequent additions, which have been
stated at their carrying value net of any allowance for impairment. The estimated market values of these properties at the
end of the reporting period are not materially diferent from the carrying values.
15. Due to banks
2012 2011
Balances due to central banks 16,380 700,000
Current accounts 583,485 281,700
Placements with banks 7,507,255 4,856,187
Repurchase agreements with banks 1,748,562 1,150,810
9,855,682 6,988,697
16. Customer deposits
(a) By type
2012 2011
Current and call deposits 14,845,171 11,350,636
Saving deposits 3,692,906 3,630,898
Time deposits 22,847,469 23,007,149
41,385,546 37,988,683
(b) By sector
2012 2011
Government 3,250,755 5,791,316
Government and semi government agencies 6,509,328 8,778,012
Individuals 11,756,110 10,071,423
Corporate 14,385,014 9,962,814
Non-banking ?nancial institutions 5,484,339 3,385,118
41,385,546 37,988,683
The Commercial Bank of Qatar (Q.S.C.) 120
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
17. Debt securities
EMTN Programme – Senior unsecured notes: On 11 April 2012, the Commercial Bank of Qatar through CBQ Finance
Limited, a wholly-owned subsidiary, completed an issuance of US$ 500 million (or QAR 1,820 million) ?ve year senior
unsecured ?xed rate notes under its US$ 5 billion European Medium Term Note (“EMTN”) Programme that it established
in 2011. The notes carry a ?xed coupon of 3.375% per annum with interest payable semi-annually in arrears and are listed
on the London Stock Exchange. The estimated fair value of the EMTN notes as at 31 December 2012 was QAR 1.89 billion.
Senior and Subordinated Notes: On 18 November 2009, the Commercial Bank of Qatar through CBQ Finance Limited,
a wholly-owned subsidiary, completed the issuance of the following notes:
• Senior Notes: US$ 1,000 million or QAR 3,640 million ?ve-year Senior Notes paying a ?xed coupon of 5.00%
per annum. Interest is payable semi-annually in arrears and the principal is payable in full at maturity of ?ve years.
The estimated fair value of the Senior Notes as at 31 December 2012 was QAR 3.85 billion (2011: QAR 3.79 billion).
• Subordinated Notes: US$ 600 million or QAR 2,184 million ten-year Subordinated Notes paying a ?xed coupon
of 7.50% per annum. Interest is payable semi-annually in arrears and the principal is payable in full at maturity
of ten years. The estimated fair value of the Subordinated Notes as at 31 December 2012 was QAR 2.68 billion
(2011: QAR 2.52 billion).
These notes have been irrevocably guaranteed by the Commercial Bank of Qatar and are listed and traded on the London
Stock Exchange.
CHF denominated Fixed Rate Bond: On 7 December 2010, the Commercial Bank of Qatar through CBQ Finance Limited,
a wholly-owned subsidiary, completed the issuance of a CHF 275 million ?ve year bond paying a ?xed coupon of 3.0% per
annum. Interest and 0.01% agency commission is payable annually in arrears and the principal is payable in full at maturity
of ?ve years. This bond has been irrevocably guaranteed by the Commercial Bank of Qatar and is listed and traded on the
‘SIX’ Swiss Exchange AG, Zurich.
The Group entered into cross currency interest rate swaps to convert its CHF 275 million borrowing into a USD denominated
borrowing and pay a ?oating rate of USD 3 month LIBOR plus applicable margins on the USD notional amount and receive a
coupon of 3% per annum on the CHF denominated notional amount.
2012 2011
EMTN Programme – Senior notes 1,796,024 –
Senior Notes 3,623,332 3,615,093
Subordinated Notes 2,155,929 2,152,938
CHF Fixed Rate Bonds 1,130,531 1,103,643
Total 8,705,816 6,871,674
Annual Report 2012 121
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
17. Debt securities (continued)
Movements in debt securities are analysed as follows:
2012 2011
Balance at beginning of the year 6,871,674 8,629,875
Additions 1,791,934 –
Repayments – (1,820,000)
Fair value adjustment 26,565 48,697
Amortisation of discount and transaction cost 15,643 13,101
Balance at 31 December 8,705,816 6,871,674
The table below shows the maturity pro?le of debt securities:
2012 2011
Up to 1 year – –
Between 1 and 3 years 4,753,863 3,615,093
Over 3 years 3,951,953 3,256,581
Balance at 31 December 8,705,816 6,871,674
18. Other borrowings
2012 2011
Syndicated loan (a) – 2,365,698
Bilateral loan (b) 1,818,345 1,816,714
Club loan (c) 1,653,170 –
Total 3,471,515 4,182,412
Notes:
(a) A Syndicated loan with a value of US$ 650 million (or QAR 2,366 million) matured and was repaid on 28 February 2012.
(b) Bilateral loans: The Bank has entered into certain bi-lateral loan agreements amounting to US$ 500 Million or QAR 1,820
million in 2011 to obtain ?nancing facilities; all loans are at ?oating rate on general commercial terms, except one loan
agreement amounting to US$ 100 million or QAR 364 million, wherein the lender has the right to claim settlement in
equivalent QAR at the prevailing exchange rate on maturity.
(c) The Bank established a Club term loan facility on 6 February 2012 for US$ 455 million (or QAR 1,656 million) with a group
of international banks.
The Commercial Bank of Qatar (Q.S.C.) 122
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
18. Other borrowings (continued)
Movements in other borrowings are analysed as follows:
2012 2011
Balance at beginning of the year 4,182,412 2,363,686
Additions to borrowings 1,650,219 1,816,714
Repayments (2,366,000) –
Amortisation of discount and transaction cost 4,884 2,012
Balance at 31 December 3,471,515 4,182,412
The table below shows the maturity pro?le of other borrowings:
2012 2011
Up to 1 year 1,818,345 2,547,698
Between 1 and 3 years 1,653,170 1,634,714
Over 3 years – –
Balance at 31 December 3,471,515 4,182,412
Annual Report 2012 123
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
19. Other liabilities
2012 2011
Interest payable 163,502 133,963
Accrued expense payable 50,719 65,488
Other provisions (Note i) 143,694 137,504
Negative fair value of derivatives (Note 35) 349,958 265,592
Unearned income 80,304 66,631
Cash margins 138,119 120,733
Accounts payable 286,304 266,465
Directors’ remuneration 40,500 36,000
Social responsibility fund 225 3,282
Social & Sports Activities Support Fund (‘Daam’) (Note 22) 50,307 47,099
Dividend payable 11,957 9,988
Managers’ cheque and payment order 22,060 16,704
Unclaimed balances 7,896 10,977
Due for trade acceptances 285,442 97,979
Others 48,828 97,877
Total 1,679,815 1,376,282
The Commercial Bank of Qatar (Q.S.C.) 124
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
19. Other liabilities (continued)
(i) Other provisions –
Provident
fund (a)
Pension
fund (b) Total 2012 Total 201 1
Balance at 1 January 136,565 939 137,504 130,167
Provisions made during the year 6,965 7,914 14,879 19,128
Earnings of the fund 4,114 – 4,114 3,684
Provident fund – staf contribution 6,651 4,207 10,858 9,654
Transferred to state retirement fund authority – (11,469) (11,469) (7,091)
Payments during the year (12,192) – (12,192) (18,038)
Balance at 31 December 142,103 1,591 143,694 137,504
(a) The provident fund includes the Group’s obligations for end of service bene?ts to expatriate staf per Qatar labour law
and the employment contracts.
(b) Pension fund contributions in respect of the national staf are paid to the State administered retirement fund at the end
of each month. The Group has no further payment obligations once the contributions have been paid. The contributions
are recognized when they are due.
Annual Report 2012 125
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
20. Equity
(a) Share capital
The issued, subscribed and paid up capital of the Bank is QAR 2,474,463,720 (2011: QAR 2,474,463,720) divided into
247,446,372 (2011: 247,446,372) ordinary shares of QAR 10 each.
Ordinary shares
In thousands of shares 2012 201 1
On issue at the beginning of the reporting period 247,446 226,826
New shares issued – 20,620
On issue at 31 December 247,446 247,446
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 shareholders’ Annual/Extra-ordinary General meeting of the Bank.
On 17 January 2011 the Bank received the ?nal tranche of the private placement proceeds from Qatar Holding LLC amounting
to QAR 1.61 billion being the value of 20,620,530 new ordinary shares, with an issue price of QAR 78.30 per share including
a premium of QAR 68.30 per share. Further to the approval at the Extraordinary General Assembly of the Bank, held on
21 February 2011, the new ordinary shares were issued on 22 February 2011 and the nominal value of QAR 10 per ordinary
share was applied to paid up share capital.
(b) Legal reserve
In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net pro?t 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 speci?ed in the Qatar Commercial Companies’ Law No. 5 of 2002 and is subject to
the approval of QCB.
The legal reserve includes share premium received on issuance of new shares in accordance with Qatar Commercial
Companies Law (5) of 2002.
(c) General reserve
As per the Bank’s Articles of Association, the general reserve may only be used in accordance with a resolution from the
General Assembly upon the Board of Directors recommendation and after obtaining Qatar Central Bank approval.
(d) Risk reserve
In accordance with QCB regulations, a risk reserve should be created to cover contingencies on both the public and private
sector ?nancing assets, with a minimum requirement of 2% of the total private sector exposure granted by the Group inside
and outside Qatar after the exclusion of the speci?c provisions and interest in suspense. The ?nance provided to/or secured
by the Ministry of Finance or ?nance against cash guarantees is excluded from the gross direct ?nance. From distributable
pro?t of the year, total amount of transfer made to the risk reserve was QAR 119.0 million (2011: QAR 157.6 million).
The Commercial Bank of Qatar (Q.S.C.) 126
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
20. Equity (continued)
(e) Fair value reserves
The fair value reserve arises from the revaluation of the available-for-sale investments, change of post acquisition fair value
reserve of its associates and exchange gain or loss on consolidation of subsidiaries.
(f) Other reserves
This represents the Group’s share of pro?t from investment in associates and joint ventures, net of cash dividend received,
as required by QCB regulations as follows:
2012 201 1
Balance as at 1 January 556,456 469,706
Share of result of associates 258,546 203,420
Dividend from associates transferred to retained earnings (141,398) (116,670)
Net movement 117,148 86,750
Balance as at 31 December 673,604 556,456
(g) Proposed dividend
The Board of Directors has proposed a cash dividend of 60% (or QAR 6 per share) for the year 2012. This is subject to
approval at the Annual General Assembly.
(h) Dividends paid
During the year, the shareholders received a dividend of QAR 6 per share totalling QAR 1.48 billion in respect of the year
ended 31 December 2011 (2011: QAR 7 per share totalling QAR 1.59 billion in respect of the year ended 31 December 2010).
Annual Report 2012 127
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
21. Other comprehensive income
2012 201 1
Available-for-sale investments:
Positive change in fair value 362,267 62,207
Negative change in fair value (4,966) (142,874)
Net change in fair value 357,301 (80,667)
Net amount transferred to pro?t or loss (136,245) (42,367)
Share of other comprehensive income of associates 10,717 (2,162)
Total other comprehensive income 231,773 (125,196)
22. Contribution to Social and Sports Activities Support Fund (‘Daam’)
Pursuant to Law No. 13 of 2008, the Bank made an appropriation of QAR 50 million from retained earnings for its contribution
to the Social and Sports Activities Support Fund (‘Daam’) of Qatar. This amount represents 2.5% of the net pro?t for the year
ended 31 December 2012.
23. Interest income
2012 201 1
Amounts deposited with central banks 7,288 9,938
Amounts deposited with banks 56,586 41,654
Debt securities 521,665 508,922
Loans and advances to customers 2,312,654 2,315,636
2,898,193 2,876,150
24. Interest expense
2012 201 1
Amount deposited by banks 49,952 27,043
Customer deposits 476,811 493,502
Other borrowings 68,602 25,696
Debt securities 436,574 392,309
1,031,939 938,550
The Commercial Bank of Qatar (Q.S.C.) 128
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
25. Fee and commission income
2012 201 1
Loans and ?nancing advisory service 280,596 358,418
Credit and debit card fees 241,954 232,752
Indirect credit facilities 120,324 117,752
Banking and other operations 26,401 26,052
Investment activities for customers 19,816 17,613
689,091 752,587
26. Fee and commission expense
2012 201 1
Brokerage services 994 642
Credit and debit card fees 155,043 149,127
Others 14,450 17,209
170,487 166,978
27. Foreign exchange gain
2012 201 1
Dealing in foreign currencies 137,430 126,802
Revaluation of assets and liabilities 18,133 2,734
155,563 129,536
28 Income from investment securities
2012 201 1
Net gain on disposal of available-for-sale securities 337,161 136,307
Gain on investment securities at fair value through pro?t or loss 2,664 –
Dividend income 26,147 24,188
365,972 160,495
Annual Report 2012 129
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
29. Other operating income
2012 201 1
Rental income 30,522 33,614
Gain on sale of property and equipment and other income 47,076 15,911
Management fees from associates – 741
77,598 50,266
30. Staf costs
2012 201 1
Staf costs 465,134 428,037
Staf provident fund and pension fund cost (Note 19 (i)) 14,879 19,128
Training 19,369 6,208
499,382 453,373
31. Other Expenses
2012 201 1
Marketing and advertisement 61,615 44,207
Professional fees 74,055 51,610
Communication, utilities and insurance 39,183 40,806
Board of Directors’ remuneration and meeting attendance fees 42,720 38,230
Occupancy, IT Consumables and maintenance 91,272 77,261
Printing and stationery 8,703 7,173
Travel and entertainment costs 3,324 2,875
Outsourcing service costs 64,762 26,301
Others 21,418 19,815
407,052 308,278
The Commercial Bank of Qatar (Q.S.C.) 130
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
32. Earning per share
Earnings per share of the Bank is calculated by dividing pro?t for the year attributable to the equity holders of the Bank by
the weighted average number of ordinary shares in issue during the year:
2012 201 1
Pro?t for the year attributable to the equity holders of the Bank 2,012,294 1,883,971
Weighted average number of outstanding shares in thousands 247,446 244,509
Earning per share (QAR) 8.13 7.71
The weighted average number of shares in thousands have been calculated as follows:
2012 201 1
Qualifying shares at the beginning of the year 247,446 226,826
Efect of share issued to Qatar Holding (QH) – 17,683
Weighted average number of shares in thousands at 31 December 247,446 244,509
33. Contingent liabilities and other commitments
(a) Contingent liabilities
2012 201 1
Unused facilities 5,326,125 5,859,107
Guarantees 12,048,098 9,088,622
Letters of credit 7,541,840 5,217,592
Total 24,916,063 20,165,321
(b) Other commitments
2012 201 1
Forward foreign exchange contracts and derivatives at notional value 8,266,187 6,143,561
Capital commitments 393,822 479,243
Total 8,660,009 6,622,804
Annual Report 2012 131
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
33. Contingent liabilities and other commitments (continued)
(b) Other commitments (continued)
Unused facilities
Commitments to extend credit represent contractual commitments to make loans and revolving credits. The total
contractual amounts do not necessarily represent future cash requirements, since commitments may expire without
being drawn upon.
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 speci?c
event. Guarantees and standby letters of credit carry the same credit risk as loans.
Lease commitments
The Group leases a number of branches and ofce premises under operating leases. Lease rentals are payable as follows:
2012 201 1
Less than one year 7,108 5,602
Between one and ?ve years 23,311 33,610
More than ?ve years 1,498 5,924
31,917 45,136
34. Cash and cash equivalents
2012 201 1
Cash and balances with Central Bank * 1,457,495 827,160
Due from banks up to 90 days 7,353,090 8,838,446
Due to banks up to 90 days (8,107,120) (5,837,887)
703,465 3,827,719
*Cash and balances with Central bank do not include the mandatory cash reserve.
The Commercial Bank of Qatar (Q.S.C.) 132
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
35. Derivatives
Notional/expected amount by term to maturity
Positive
fair value
Negative
fair value
Notional
amount
within
3 months
3 – 12
months
1-5
years
More than 5
years
At 31 December 2012:
Derivatives held for trading:
Forward foreign exchange
contracts and interest rate swaps 329,028 349,958 7,236,881 4,174,795 39,809 2,064,757 957,520
Derivatives held for
fair value hedges:
Cross currency Interest rate swaps 102,174 – 1,029,306 – – 1,029,306 –
Total 431,202 349,958 8,266,187 4,174,795 39,809 3,094,063 957,520
At 31 December 2011:
Derivatives held for trading:
Forward foreign exchange
contracts and interest rate swaps 268,189 265,592 5,114,255 1,977,434 61,246 2,048,204 1,027,371
Derivatives held for
fair value hedges:
Cross currency interest rate swaps 75,610 – 1,029,306 – – 1,029,306 –
Total 343,799 265,592 6,143,561 1,977,434 61,246 3,077,510 1,027,371
The bank maintains strict control limits on net open derivative positions, i.e. the diference between purchase and sale contracts, by both amount and
term. At any one time the amount subject to credit risk is limited to the current fair value of instruments that are favourable to the bank (i.e. assets)
which in relation to derivatives is only a small fraction of the contract or notional values used to express the volume of instruments outstanding.
This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements.
Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where the bank requires margin deposits
from counter-parties.
36. Investment custodian
As at the end of the reporting period, the Group holds QAR 191 million (2011: QAR 175 million) worth of international investment securities on
behalf of its customers. Out of this amount, investment securities with a value of QAR 152 million equivalent to USD 42 million (2011: QAR 133 million
equivalent to USD 36.5 million) are held with an international custody and settlement house. The remaining investment securities are held with
the ?nancial institutions through whom the securities were purchased. These ?nancial institutions are industry leaders in their respective ?elds.
The Group has established maximum limits for such holding with each ?nancial institution according to its risk management policy.
Annual Report 2012 133 133
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
37. Related parties disclosure
The Group carries out various transactions with subsidiaries and associate companies and with members of the Board of Directors, the executive
management or companies in which they have signi?cant interest or any other parties of important in?uence in the Group’s ?nancial or operations
decisions. The balances at the year end with these accounts were as follows:
2012 201 1
Board members
Loans, advances and ?nancing activities (a) 2,604,579 2,516,789
Deposits 331,283 183,640
Contingent liabilities, guarantees and other commitments 29,507 23,356
Interest income earned from facilities granted to board members 27,739 35,233
Other fee income earned from transactions with board members 387 3,252
Interest paid on deposits accounts of board members 10,788 15,671
Remuneration, meeting attendance fees and salaries paid to board members 46,080 41,454
Associated companies
NBO’s deposit with the Group 329,478 675
Bank’s deposit with NBO 91,533 237,053
NBO’s contingent liabilities to the Group:
Letter of Guarantee 10,575 11,192
Unutilised credit facilities 254,800 254,800
Interest rate swap (notional amount) – 14,182
Interest rate swap (fair value) – 488
UAB’s deposit with the Group 101,075 183,369
Bank’s deposit with UAB 364,987 182,737
UAB’s contingent liabilities to the Group:
Letter of Guarantee 27,850 29,281
Letter of Credit 5,470 620
Asteco’s deposit with the Group 5,439 6,148
GEKKO’s deposit with the Group 126 580
Massoun’s deposit with the Group 19,317 19,855
Interest income earned from Associates 1,918 550
Interest income incurred to Associates 368 836
Senior management compensation/Transaction
Fixed remuneration 43,415 35,975
Discretionary remuneration 21,980 12,864
Fringe bene?ts 4,884 4,772
Loans and advances (b) 24,004 26,267
(a) A signi?cant portion of the loans, advances and ?nancing activities’ balance at 31 December with the members of the Board and the companies in
which they have signi?cant in?uence are secured against tangible collateral or personal guarantees. Moreover, the loans, advances and ?nancing
activities are performing satisfactorily with all obligations honored as arranged. The pricing of any such transactions are primarily based on the
banker customer relationship at the prevailing market rates.
(b) No impairment losses have been recorded against balances outstanding during the period with key management personnel, and no speci?c
allowance has been made for impairment losses on balances with key management personnel at the period end.
The Commercial Bank of Qatar (Q.S.C.) 134
Notes to the Consolidated Financial Statements
Continued
As at and for the year ended 31 December 2012 QAR ’000s
38. Comparatives
Certain amounts in the prior year ?nancial statements and supporting note disclosures have been reclassi?ed to conform
to the current year’s ?nancial statements format and minimum disclosures as prescribed by the Qatar Central Bank (QCB).
However, such reclassi?cations were not material and did not have an impact on the previously reported net pro?t,
other comprehensive income or the total consolidated equity for the comparative year.
During 2012, the QCB required all banks to bring acceptances onto the statement of ?nancial position. The Group concluded
that it was appropriate to afect the change for the prior year. As a result, the comparatives in the statement of ?nancial
position have been restated to include customer acceptances. The Group has revised the statement of ?nancial position
for the year ended 31 December 2011.
The table below details the efect of the adjustments to the consolidated statement of ?nancial position:
As previously
reported
Efect of
adjustments
After
adjustments
Gross loans and advances to customers 42,847,821 97,979 42,945,800
Other liabilities 1,278,303 97,979 1,376,282
Total assets 71,540,065 97,979 71,638,044
Total liabilities 57,309,769 97,979 57,407,748
As at and for the year ended 31 December 2012 QAR ’000s
135
Financial statements of the parent bank
(a) Statement of Financial Position – Parent Bank
As at 31 December 2012 201 1
Assets
Cash and balances with central bank 3,448,123 2,576,489
Due from banks 9,731,437 9,271,621
Loans and advances to customers 48,587,855 41,709,638
Investment securities 11,334,983 11,905,443
Investment in associates 3,403,682 3,403,682
Property and equipment 1,195,396 1,070,021
Other assets 1,848,721 1,346,857
Total assets 79,550,197 71,283,751
Liabilities
Due to banks 9,849,098 6,987,863
Customer deposits 41,574,595 38,179,363
Debt securities 8,705,816 6,871,674
Other borrowings 3,471,515 4,182,412
Other liabilities 1,672,784 1,368,574
Total liabilities 65,273,808 57,589,886
Equity
Share capital 2,474,464 2,474,464
Legal reserve 8,740,365 8,740,365
General reserve 26,500 26,500
Risk reserve 924,600 805,600
Fair value reserves 157,665 (63,403)
Proposed dividend 1,484,678 1,484,678
Retained earnings 468,117 225,661
Total equity 14,276,389 13,693,865
Total liabilities and equity 79,550,197 71,283,751
Supplementary Information
Annual Report 2012
As at and for the year ended 31 December 2012 QAR ’000s
The Commercial Bank of Qatar (Q.S.C.) 136
Financial statements of the parent bank (continued)
(b) Income Statement – Parent Bank
For the year ended 31 December 2012 201 1
Interest income 2,897,119 2,875,771
Interest expense (1,033,505) (940,230)
Net interest income 1,863,614 1,935,541
Fee and commission income 684,060 750,573
Fee and commission expense (169,365) (166,366)
Net fee and commission income 514,695 584,207
Foreign exchange gain 155,484 129,468
Income from investment securities 365,972 160,495
Other operating income 75,325 45,426
Net operating income 2,975,090 2,855,137
Staf costs (489,036) (449,057)
Depreciation (121,604) (113,643)
Impairment loss on investment securities (61,917) (68,197)
Net impairment loss on loans and advances to customers (140,277) (239,915)
Other expenses (407,401) (305,371)
Pro?t before dividend income from associates 1,754,855 1,678,954
Dividend income from associates 141,398 1 16,670
Pro?t for the year 1,896,253 1,795,624
Supplementary Information
Continued
The Commercial Bank of Qatar (Q.S.C.)
PO Box 3232
Doha, State of Qatar
www.cbq.qa
Commercial Bank was founded in 1975, as
Qatar’s ?rst private sector bank. Today, we ofer
a complete range of banking services, including:
current and savings accounts, loans, credit cards,
insurance, brokerage and investment services.
We are committed to delivering excellent service
and innovation that makes banking easy and
gives you greater ?exibility over the way you
manage your money.
doc_172022017.pdf