EUROPE WAVE | Page 6 Traders weigh end of Asia LNG premium
Sunday, February 10, 2019 Jumada II 5, 1440 AH
QNB REPORT : Page 24 GULF TIMES Fed delivers dovish message and markets BUSINESS see no hikes in 2019
QSE-listed companies step up IR eff orts in 2018, says offi cial By Peter Alagos nounced the winners of the ‘2018 place and Qatar Islamic Bank for the Business Reporter IR Excellence Programme’. The pro- third place. gramme surveyed expert opinion of QSE Listing Department direc- the domestic and international invest- tor Abdul Aziz al-Emadi said, “Qatar he Qatar Stock Exchange’s (QSE) ment community, and also featured a Stock Exchange has been actively pro- ‘Investor Relations Excellence detailed ranking of corporate investor moting IR for a number of years, we TProgramme’ has helped encour- relations websites. want to see our listed companies com- age QSE-listed companies to step-up Given the important role of chief ex- mitted to improving the fl ow of infor- their IR eff orts last year, an offi cial has ecutive offi cers in leading and driving mation in the market, because they are said. IR process eff ectively in listed compa- the corporate ambassadors for Qatar. “The IR Excellence Programme re- nies, a new category of awards was in- “As a direct result of the excellence fl ects Qatar Stock Exchange’s desire troduced to recognise the CEO’s excel- programme, we have noticed that a to achieve best international prac- lence in investor relations. number of companies have made a tice among our listed companies for a The winners are Oordeoo Group meaningful contribution to their IR ef- transparent investment environment,” (Best Qatari Company overall); QNB forts in 2018. We look forward to see- QSE CEO Rashid bin Ali al-Mansoori (Best Large Cap Company); Vodafone ing a stronger engagement from the re- said in a speech during the ‘4th Annual (Best Mid Cap Company); Al Meera maining companies to further improve IR Excellence Programme Awards’ cer- (Best Small Cap Company); Ooredoo’s the IR standards across all Qatar listed emony held in Doha on Wednesday. Sheikh Saud bin Nasser al-Thani (Best companies,” al-Emadi added. “We may all be justly proud of the chief executive offi cer), Ooredoo’s Ajay Al-Mansoori also lauded the ad- recovery in our indices last year and Bahri (Best chief fi nancial offi cer), and vanced IR level achieved by Qatari the corporate performances that drove Ooredoo’s Andreas Goldeau (Best in- listed companies, saying, “For the that recovery but the trading environ- vestor relations offi cer). fourth year running, we have rewarded Al-Mansoori joins the awardees of the QSE’s ‘2018 IR Excellence Programme’ held in Doha recently. PICTURE: Anas Khalid ment remains challenging and we must QSE also awarded the ‘Best Inves- companies and individuals that have all continue to seek ways to improve,” tor Relations Website’ category to demonstrated the highest investor re- programme is globally-benchmarked ogy and all ranking criteria were made companies to review categories and se- al-Mansoori continued. QNB, which took home the fi rst-place lations standards in the country.” against best practices to ensure a trans- public via the QSE’s website and other lection criteria and improve their inves- During the ceremony, QSE an- award, followed by Ooredoo in second Established in 2015, the excellence parent methodology. The methodol- public channels. This enabled all listed tor relations practices accordingly. Annual General Assembly, Extraordinary General Assembly, Board of Directors’ Report and Consolidated Financial Statements 31 December 2018
Invitation to the Shareholders to attend the Ordinary and Extraordinary General Meetings The Board of Directors of Ahli Bank QPSC (the “Bank”) is pleased to invite the valued Proposed Amendments to the Articles of Association shareholders to attend the Annual General Meeting to be held on Monday 25/02/2019 Article (6) before amendment Article (6) after amendment Article (52) before amendment Article (52) after amendment at 4:30 pm, at Le Crillon Ballroom, La Cigale Hotel, Doha, Qatar, to be immediately The share capital of the Company is QAR The share capital of the Company is QAR An Extraordinary General Assembly 1. An Extraordinary General Assembly followed by an Extraordinary General Meeting, to discuss the below Agenda. 2,103,604,350 (Two billion one hundred ;^VIPSSPVU[OYLLO\UKYLK meeting shall only be valid if attended by meeting shall only be valid if attended In case the quorum of either of the Annual General Meeting or the Extraordinary three million six hundred and four thirteen million nine hundred sixty four shareholders representing at least three by shareholders representing at least General Meeting is not met, the second adjourned meeting shall be held at the same [OV\ZHUKHUK[OYLLO\UKYLKÄM[`8H[HYP thousand and seven hundred eighty) quarters of the capital of the Company. If three quarters of the capital of the venue on Monday 04/03/2019 at 6:30 pm. Riyals divided into 210,360,435 (two 8H[HYP9P`HSZKP]PKLKPU[V this quorum is not present, the General Company. If this quorum is not hundred ten million three hundred sixty (Two billion three hundred thirteen million Assembly shall be called to another present, the General Assembly shall Faisal Bin AbdulAziz Bin Jassem Al-Thani [OV\ZHUKHUKMV\YO\UKYLK[OPY[`Ä]L nine hundred sixty four thousand and meeting to be held within 30 days be called to another meeting to be Chairman & Managing Director shares with the par value of ten Qatari seven hundred eighty) shares having a MVSSV^PUN[OLKH[LVM[OLÄYZ[TLL[PUN held within 30 days following the date Riyals per each as follows: par value of one Qatari Riyals per each The second meeting shall be valid if VM[OLÄYZ[TLL[PUN(UKZH]LMVY[OL Agenda of the Annual General Meeting Name Number Par Value share. attended by shareholders representing exclusion in Clause (2) of this Article /LHYPUN[OLZ[H[LTLU[VM[OL)VHYKHIV\[[OL)HUR»ZVWLYH[PVUZHUKP[ZÄUHUJPHS of Shares of Shares half the capital of the Company. If the (52), the second meeting shall be valid WVZP[PVUMVY[OLÄUHUJPHS`LHYLUKLK+LJLTILY HUKHWWYV]PUN[OLTHUK[V quorum is not present in the second if attended by shareholders Qatari Individuals, discuss the Bank’s future plans. meeting, an invitation shall be sent for a representing half the capital of the Institutions third meeting to be held after 30 days of Company. If the quorum is not present /LHYPUN[OL(\KP[VY»Z9LWVY[MVY[OLH\KP[LKÄUHUJPHSZHUK[OLÄUHSHJJV\U[MVY[OL and Others 111,360,673 1,113,606,730 the date of the second meeting. The third in the second meeting, an invitation `LHYLUKLK+LJLTILY HUKHWWYV]PUNP[ Qatar Investment meeting shall be valid regardless of the shall be sent for a third meeting to be ;VKPZJ\ZZHUKHWWYV]L[OLÄUHUJPHSZ[H[LTLU[ZMVY[OLÄUHUJPHS`LHYLUKLK (\[OVYP[` number of present shareholders. If the held after 30 days of the date of the +LJLTILY HUKHWWYV]PUN[OLT Qatar Holding 37,122,427 371,224,270 matter is related to the dissolution, second meeting. The third meeting Total 210,360,435 2,103,604,350 liquidation, transformation or merger of shall be valid regardless of the number 4. To approve the Board’s recommendation for distribution of cash dividends for the the Company, or if the project for which of present shareholders. `LHY [V[OLYLNPZ[LYLKZOHYLOVSKLYZHZH[[OL(.4H[[OLYH[LVM HUKPU the Company is founded is sold or 2. If the matter is related to the [OLMVYTVMMYLLZOHYLZVM Article (7) before amendment Article (7) after amendment otherwise disposed of, a meeting shall be dissolution, liquidation, transformation, Except for Qatar Investment Authority or Except for Qatar Investment Authority or valid only if attended by a number of /LHYPUN[OL)VHYKYLWVY[VU[OL)HUR»ZNV]LYUHUJLMVY[OL`LHY HUKHWWYV]PUN merger, or acquisition of the Company, Qatar Holding, no natural or juridical Qatar Holding, no natural or juridical shareholders representing at least three it. or if the project for which is Company person may subscribe to more than three person may subscribe to more than three quarters of the capital. 6. To absolve the Chairman and members of the Board of Directors of any liability in WLYJLU[ VM[OLZOHYLJHWP[HSVM[OL WLYJLU[ VM[OLZOHYLJHWP[HSVM[OL is founded is sold or otherwise [OLKPZJOHYNLVM[OLPYK\[PLZHUKYLZWVUZPIPSP[PLZMVY[OLÄUHUJPHS`LHYLUKLK Company or own, at any time, in excess Company or own, at any time, in excess The Board of Directors shall publish the disposed of, a meeting shall be valid +LJLTILY HUK[VHWWYV]L[OLPYMLLZ of such percentage other than by way of of such percentage other than by way of resolutions of the Extraordinary General only if attended by a number of inheritance or will. inheritance or will. Assembly if they included amendment to shareholders representing at least ;VHWWYV]L[OLHWWVPU[TLU[VM[OLL_[LYUHSH\KP[VYVM[OL)HURMVY[OLÄUHUJPHS`LHY the Articles of Association. three quarters of the capital and the 2019 and to approve its fees. Subject to the maximum permitted resolutions in any of the cases referred ownership limits per person under the to in this Clause 2 shall not be valid Agenda of the Extraordinary Annual General Meeting ÄYZ[WHYHNYHWOVM[OPZ(Y[PJSLMVYLPNULYZ unless it is approved by shareholders 1. To approve the increase of the Bank’s capital by the number of free shares approved TH`V^U\W[V VM[OL[V[HSZOHYLZVM YLWYLZLU[PUN VM[OL*VTWHU`»Z I`[OL(.4»ZYLZVS\[PVULX\HS[V HTV\U[PUN[V ZOHYLZZ\JO[OH[ the Company. capital. The Board of Directors shall [OL)HUR»ZJHWP[HSILJVTLZ ZOHYLZHUK[VHTLUK(Y[PJSL VM[OL publish the resolutions of the )HUR»Z(Y[PJSLZVM(ZZVJPH[PVU[VYLÅLJ[[OLJHWP[HSPUJYLHZL Article (27) before amendment Article (27) after amendment Extraordinary General Assembly if they The Directors of the Board appointed by The Independent Director appointed in included amendment to the Articles of 2. To approve the change of nominal value per share to become one Riyal per share Qatar Investment Authority, and the accordance with Article (26) hereof and Association. instead of ten Riyals per share pursuant to the instructions of Qatar Financial Independent Director appointed in Qatar Investment Authority for the two Markets Authority in their letter No. (2019100169) dated 6/1/2019 and amending accordance with Article (26) hereof shall members of the Board appointed by it Article (54) before amendment Article (54) after amendment (Y[PJSL VM[OL(Y[PJSLZVM(ZZVJPH[PVU[VYLÅLJ[[OH[ be excluded from Clause (3) above. Qatar shall be excluded from Clause (3) above. The Ordinary and Extraordinary General Save as stated in Clause (2) of Article ;VHWWYV]LHSSV^PUNMVYLPNULYZ[VV^U\W[VHTH_PT\TVM VM[OL)HUR»Z Investment Authority shall deposit not The guarantee shares shall not be Assemblies’ resolutions shall be taken by (52), the Ordinary and Extraordinary capital, and adding a paragraph in Article (7) of the Bank’s Articles of Association to SLZZ[OHU VMP[ZZOHYLPU[OLZOHYL subject to trading, pledge or attachment the absolute majority of the votes General Assemblies’ resolutions shall be YLÅLJ[[OH[ capital of the Company as guarantee for until the termination of membership term represented in the meeting. taken by the absolute majority of the its representative directors, and such HUKHWWYV]HSVM[OLÄUHUJPHSZ[H[LTLU[Z votes represented in the meeting. 4. To approve the amendment of Article (27) of the Articles of Association to exclude deposited guarantee shares shall not be MVY[OLSHZ[ÄUHUJPHS`LHYK\YPUN^OPJO[OL Qatar Investment Authority from depositing guarantee shares to guarantee the subject to trading, pledge or attachment Director discharged his duties. membership of the two directors who represent it in the Board of Directors. until the termination of membership term 5. To approve the amendment of Article (52) of the Articles of Association such that in HUKHWWYV]HSVM[OLÄUHUJPHSZ[H[LTLU[Z case a resolution which relates to the dissolution, liquidation, transformation, merger MVY[OLSHZ[ÄUHUJPHS`LHYPU^OPJO[OL or acquisition of the Company or sale of the project for which the Company was Director discharged his duties. created or its disposal in any manner, such resolution shall only be valid if approved I`ZOHYLOVSKLYZYLWYLZLU[PUN VM[OL*VTWHU`»ZJHWP[HS Notes 6. To approve the amendment of Article (54) of the Articles of Association such that its ,]LY`ZOHYLOVSKLYHZH[ ZOHSSOH]L[OLYPNO[[VH[[LUK[OL)HUR»Z.LULYHS (Z[H[LTLU[[OH[PUJS\KLZ[OLPUMVYTH[PVUZ[PW\SH[LKI`(Y[PJSLVM[OL contents are compatible with the amendment to Article (52). Assembly meetings. A shareholder who cannot attend in person is kindly requested Commercial Companies Law No. 11 of 2015 including amounts received by the to appoint another shareholder (other than a board member) in writing to represent Chairman and Directors of the Board as remuneration, fees, credit facilities, and 7. To approve the authorisation of the Chairman of the Board of Directors, or the Vice him. The number of shares held by a shareholder as a proxy should not under any ILULÄ[Z^PSSILH]HPSHISLMVY[OLZOHYLOVSKLY»ZYL]PL^H[SLHZ[VUL^LLRILMVYL[OL Chairman of the Board of Directors or the Executive Director of the Legal JPYJ\TZ[HUJLZL_JLLK VM[OL[V[HSZOHYLZ3LNHSS`PUJVTWL[LU[HUK General Assembly, at the Compliance Department, Second Floor, Ahli Bank QPSC Department, Mr. Mohamed Abdunnabi Mahmoud Aof, to complete the necessary incapacitated persons shall be represented by their legal representative and the /LHK6ɉJL¶(S:HKK procedures for the amendment of the Articles of Association and the Memorandum minors shall be represented by the father or the guardian. Representatives of legal :OHYLOVSKLYZHYLYLX\LZ[LK[VH[[LUK[OLTLL[PUNVULOV\YILMVYL[OLZWLJPÄLK of Association in accordance with the above, including attendance and signing entities shall present authorisation letters duly signed and sealed, authorising them time, in order to facilitate the registration procedures. before the Authentication Department at the Ministry of Justice and Ministry of to attend the General Assembly meeting of the Bank and to represent such legal Economy and Trade and other governmental entities. entity in this meeting along with a copy of a valid commercial register.
Board of Directors’ Report Independent Auditors’ Report to the Shareholders of Ahli Bank QPSC Dear Shareholders, Report on the Audit of the Consolidated Financial Statements Key audit matter How the matter was addressed in our audit On behalf of the Board of Directors, I am delighted to present Ahlibank’s Annual Report Opinion >LOH]LH\KP[LK[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZVM(OSP)HUR87:*[OL First-time adoption of IFRS 9: Financial Instruments (continued) MVY[OL`LHYLUKLK+LJLTILY “Bank”) and its subsidiaries (together the Group), which comprise the consolidated Refer to the following notes of the ¶ HZZLZZLK[OLYLHZVUHISLULZZVM 0U [OL)HURJVTWSL[LK `LHYZVMZLY]PUN8H[HY»ZLJVUVT`HUK[OL8H[HYP Z[H[LTLU[VMÄUHUJPHSWVZP[PVUHZH[+LJLTILY HUK[OLJVUZVSPKH[LK JVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z! forward looking information community at large. Like many years before, our performance was steady and statement of income, consolidated statement of comprehensive income, consolidated 5V[LJ¶:PNUPÄJHU[HJJV\U[PUN incorporated into the impairment consistent focused on our long-term goals and our Bank’s vision. Z[H[LTLU[VMJOHUNLZPULX\P[`HUKJVUZVSPKH[LKZ[H[LTLU[VMJHZOÅV^ZMVY[OL`LHY WVSPJPLZVUÄUHUJPHSHZZL[ZHUK calculations [OLULUKLKHUKUV[LZ[V[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZPUJS\KPUNHZ\TTHY` ÄUHUJPHSSPHIPSP[PLZ Our performance was testament to our conscientious and prudent approach, VMZPNUPÄJHU[HJJV\U[PUNWVSPJPLZHUKV[OLYL_WSHUH[VY`PUMVYTH[PVU We have also assessed whether the 5V[L`P¶:PNUPÄJHU[HJJV\U[PUN related disclosures of this area were YL^HYKPUN\ZVUJLTVYL^P[OHZVSPKHUKZ[LHK`ÄUHUJPHSWLYMVYTHUJLMVY[OL`LHY 0UV\YVWPUPVU[OLHJJVTWHU`PUNJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZWYLZLU[MHPYS`PUHSS policies on application of new and adequate in accordance with the LUKLK HUK0HTWSLHZLK[VYLWVY[WVZP[P]LYLZ\S[ZMVYV\Y)HURMVY[OL`LHY TH[LYPHSYLZWLJ[Z[OLJVUZVSPKH[LKÄUHUJPHSWVZP[PVUVM[OL.YV\WHZH[+LJLTILY revised IFRS requirements of International Financial HJOPL]PUNHUL[WYVÄ[VM8(9 TPSSPVUJVTWHYLK[V8(9 TPSSPVUMVY[OL`LHY HUKP[ZJVUZVSPKH[LKÄUHUJPHSWLYMVYTHUJLHUKP[ZJVUZVSPKH[LKJHZOÅV^ZMVY 5V[L¶-PUHUJPHSYPZRTHUHNLTLU[ Reporting Standards and applicable 2017, with earnings per share equal to QAR 3.16 (QAR 3.04 in 2017). Total assets grew the year then ended in accordance with International Financial Reporting Standards provision of QCB regulations. 5V[L ¶(JJV\U[PUNHUKJSHZZPÄJH[PVU to reach QAR 40.4 billion compared to QAR 39.9 billion at the end of 2017. (IFRSs) and the applicable provisions of Qatar Central Bank regulations. VMÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZ Basis for Opinion The Bank continues to have a high quality credit portfolio, whereby Non-performing 0TWHPYTLU[VMÄUHUJPHSHZZL[Z 3VHUZ573ZL_JS\KPUNWLYMVYTPUNSVHUZ\UKLY^H[JOSPZ[Z[VVKH[ I``LHY We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s end. ;OL.YV\W»ZÄUHUJPHSHZZL[ZIV[OVUHUK We have assessed and tested the design Responsibilities for the Audit of the Consolidated Financial Statements section of our VɈIHSHUJLZOLL[HTV\U[[V8(9 HUKVWLYH[PUNLɈLJ[P]LULZZVM[OL (ZHYLZ\S[VM[OLZ[HISLWLYMVYTHUJLMVY[OL`LHY HUK[HRPUNPU[VJVUZPKLYH[PVU report. We are independent of the Group in accordance with the International Ethics billion and QAR 42.9 billion as at 31 relevant controls over data governance, [OLILULÄ[VM[OLZOHYLOVSKLYZHUK[OL)HURHUK[VZ\WWVY[[OL)HUR»ZNYV^[OHZ^LSS Standards Board for Accountants’ Codes of Ethics for Professional Accountants +LJLTILY HUK YLZWLJ[P]LS`0U methodologies, inputs and assumptions as its capital adequacy ratio, and to build additional reserves to hedge against future (IESBA Code) together with the ethical requirements that are relevant to our audit of addition, the expected credit loss (ECL) used by the Group in calculating [OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZPU[OL:[H[LVM8H[HYHUK^LOH]LM\SÄSSLKV\Y risks which will ensure long-term value for the shareholders, the Board recommended provisioning recognized for the year impairment allowances. other ethical responsibilities in accordance with these requirements and the IESBA LUKLK+LJLTILY HTV\U[LK[V HUKHWWYV]LK[OLKPZ[YPI\[PVUVMJHZOKP]PKLUKZH[[OLYH[LVM HUKMYLLZOHYLZH[ In addition, our work performed include *VKL>LILSPL]L[OH[[OLH\KP[L]PKLUJL^LOH]LVI[HPULKPZZ\ɉJPLU[HUK QR. 126.2 million. [OLYH[LVM appropriate to provide a basis for our opinion. the below procedures, among others on The Group has adopted IFRS 9 from the Group’s IFRS 9 ECL model: Maintaining appropriate levels of committed stable funding remained a priority for the Key Audit Matters 1HU\HY` ^OPJOPZJVTWSL_ ¶ 9L]PL^HUKHZZLZZ[OL Board of Directors. To this extent, the Bank increased and extended circa USD 200 Key audit matters are those matters that, in our professional judgment, were of most accounting standard that requires reasonableness and appropriateness TPSSPVUJVTTP[[LKZ[HISLM\UKPUN]PH[OLÄYZ[[YHUJOLVMHUL^<:+4PSSPVU(ZPHU ZPNUPÄJHUJLPUV\YH\KP[VM[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZVM[OLJ\YYLU[`LHY considerable judgements, which were of the data, assumptions and *S\I3VHUHUK[OLL_[LUZPVUHUKPUJYLHZLVMIPSH[LYHSMHJPSP[PLZPU+LJLTILYVM ;OLZLTH[[LYZ^LYLHKKYLZZLKPU[OLJVU[L_[VMV\YH\KP[VM[OLJVUZVSPKH[LKÄUHUJPHS key in the development of new models to methodologies used within the Bank’s This, coupled with strong asset quality and stable relationships within our Corporate statements as a whole, and in forming our opinion thereon, and we do not provide a measure expected credit losses on IFRS9 ECL model (PD, LGD, and EAD) separate opinion on these matters. Banking Department, contributed to both Moody’s and Fitch Ratings agencies’ revised ÄUHUJPHSHZZL[ZJHYYPLKH[HTVY[PaLKJVZ[ and customer internal rating systems or at FVOCI (debt instruments). There is V\[SVVRZMYVTULNH[P]L[VZ[HISL4VVK`»ZHɉYTLK(OSPIHUR»Z(7YPTLKLWVZP[ Key audit matter How the matter was addressed and methodology. HYPZR[OH[ÄUHUJPHSHZZL[ZHYLPTWHPYLK in our audit ¶ (ZZLZZTLU[VU^OL[OLYZPNUPÄJHU[ YH[PUN^OPSL-P[JO9H[PUNZHSZVHɉYTLKMVY(OSPIHUR»Z3VUN;LYT0ZZ\LY+LMH\S[9H[PUN and adequate impairment provisions are increase in credit risk (SICR) (IDR) at ‘A’. These ratings moved in parallel with those of Qatar’s economic First-time adoption of IFRS 9: Financial Instruments not provided in accordance to indicators are present for the WLYMVYTHUJLHUKHYL[LZ[HTLU[[VV\YV^UZ\Z[HPUHISLÄUHUJPHSWLYMVYTHUJLHUK requirements of IFRS 9 and the The Group adopted IFRS 9: Financial We updated our understanding of the ÄUHUJPHSHZZL[ZWVY[MVSPVIHZLK asset quality. applicable provisions of Qatar Central 0UZ[Y\TLU[ZMYVT1HU\HY` ^OPJO )HUR»ZHKVW[PVUVM0-9: HUKPKLU[PÄLK on IFRS9 and Qatar Central resulted in changes in accounting the internal controls including entity level Bank regulations. Investment in new and innovative technology remained an important pillar to our Banks guidance and the policies and adjustments to amounts controls adopted by the Bank for the possible implications on strategy, with Ahlibank at the forefront of NFC adoption across its ATM network in previously recognised in the consolidated accounting, processes and systems Financial assets might be inaccurate due 8H[HY7PVULLYPUN[OPZJ\Z[VTLYJLU[YPJ[LJOUVSVN` ZH^(OSPIHURHZ[OLÄYZ[PU to: the ECL staging and ÄUHUJPHSZ[H[LTLU[Z(ZWLYTP[[LKI` under the new accounting standard. expected the market to provide contactless cards and ATMs. transitional provisions of IFRS 9, the ¶ ;OLTL[OVKVSVNPLZ\ZLK[VKL]LSVW In addition, our work performed include provisioning. Group elected not to restate the probability of default (PD); loss given Our commitment to the digital space will continue, as will our cautious approach and the below procedures: JVTWHYH[P]LÄN\YLZHUKYLJVYKLKHU default (LGD); and (exposure at default ¶ L]HS\H[LK[OLHWWYVWYPH[LULZZVMRL` safeguarding of customer information and transactions data through strong cyber HKQ\Z[TLU[VM8(9 TPSSPVU[V[OL EAD) are inappropriate. technical decisions, judgments and security and corporate governance. opening retained earnings as at 1 accounting policy elections made by ¶ 0UHWWYVWYPH[LZLNTLU[H[PVUVM 1HU\HY` Throughout our 35-year journey, we have been proud to recognise the contributions the Group to ensure compliance with portfolios is used to develop risk our people make to the success of our Bank and their individual achievements. The changes required to processes, IFRS 9 impairment requirements. parameters. Accordingly, during the year we honoured colleagues for their long-service and systems and controls to comply with ¶ L]HS\H[LK^P[O[OLHZZPZ[HUJLVMV\Y ¶ ;OLU\TILYHUKYHUNLVM commitment to our Bank. 0-9: ^LYLJVTWSL_HUKZPNUPÄJHU[HZ specialists, the reasonableness of forward-looking scenarios are not the standard requires a fundamental management’s key judgements and representative of an appropriate range On behalf of the Board of Directors, I extend our sincere appreciation and gratitude to change to the way, when Expected Credit estimates made in the ECL of possible outcomes. His Highness Sheikh Tamim Bin Hamad Al-Thani, the Amir for his wise leadership, may Losses (ECL) are recognised and how calculation, which include but not ¶ ,_[YHWVSH[PVU[LJOUPX\LZ\ZLK[V God protect him, and to His Excellency the Prime Minister Sheikh Abdullah Bin Nasser these are measured. limited to the selection of methods, project scenarios and Bin Khalifa Al-Thani and His Excellency the Minister of Finance and His Excellency the There was a risk that: models, assumptions and data parameters (PD, LGD, and Minister of Economy and Commerce for their guidance and support. We also extend ¶ Q\KNLTLU[ZHZZ\TW[PVUZHUK sources. EAD) in future periods are appreciation to His Excellency Sheikh Abdulla Bin Saoud Al-Thani, the Governor of estimates, which includes adopting a ¶ L]HS\H[LK[OLHWWYVWYPH[LULZZHUK inappropriate. Qatar Central Bank, and his deputy, His Excellency Sheikh Mohammed Bin Hamad Bin ºKLMH\S[»KLÄUP[PVUHUKKL]LSVWPUN7+Z test the mathematical accuracy of the 8HZZPT(S(IK\SSHO(S;OHUPHUKHSS[OL8H[HY*LU[YHS)HURZ[HɈMVY[OLPYKLKPJH[PVU at origination, lifetime-PDs, and ECL model applied. to the banking community. macroeconomic models with a ¶ [LZ[LKJLY[HPU0;JVU[YVSZYLSH[LK[V[OL number of scenarios and probabilities JYLKP[PTWHPYTLU[WYVJLZZHUK]LYPÄLK The loyalty of our customers and the unwavering support of our shareholders is for each scenario and other the integrity of data used as input to paramount to our achievements and we are truly grateful for your trust and dedication post-model adjustments and the models management overlays are inadequate; to our Bank. ¶ L]HS\H[LKZ`Z[LTIHZLKHUKTHU\HS ¶ PUHKLX\H[LKH[HHZ^LSSHZSHJRVM Finally, I would like to thank the Board of Directors, the Bank’s management team and controls over the recognition and uniformity in the data are used which measurement of impairment LTWSV`LLZMVY[OLPYLɈVY[ZLUHISPUN[OLYLZ\S[ZHJOPL]LKK\YPUN @V\HSSYLTHPU THRLZP[KPɉJ\S[[VKL]LSVWTVKLSZ allowances. an integral part of the Bank and your contributions are greatly appreciated. ^OPJOHYLZ\ɉJPLU[MVY0-9: ¶ L]HS\H[LKWVZ[TVKLSHKQ\Z[TLU[Z impairment requirements. In conclusion, I ask God Almighty to help us along our journey as we move past this and management overlays in order proud milestone and beyond, to achieve even greater prosperity and success, to assess the reasonableness contributing to our community and the vision of our beloved country. of these adjustments.
Al Salamu Alaikum
Faisal Bin AbdulAziz Bin Jassem Al-Thani Chairman & Managing Director ahlibank.com.qa 4423 2393 Consolidated Financial Statements 31 December 2018
Independent Auditors’ Report to the Shareholders of Ahli Bank QPSC (continued)
Key audit matter How the matter was addressed Other Information ,]HS\H[L[OLHWWYVWYPH[LULZZVMHJJV\U[PUNWVSPJPLZ\ZLKHUKYLHZVUHISLULZZVM in our audit The Board of Directors is responsible for the other information. The other information accounting estimates and related disclosures made by the management. comprises the Board of Directors Report and supplementary information which we 0TWHPYTLU[VMÄUHUJPHSHZZL[ZJVU[PU\LK *VUJS\KLVU[OLHWWYVWYPH[LULZZVM[OLTHUHNLTLU[\ZLVM[OLNVPUNJVUJLYU obtained prior to the date of this auditors’ report and the Annual Report, which is basis of accounting and, based on the audit evidence obtained, whether a material ¶ ;OLTL[OVKVSVN`\ZLK[VHSSVJH[LH *YLKP[ÄSLJSHZZPÄJH[PVUZ\WWVY[Z[OL expected to be made available to us after the date of this auditor’s report. The other \UJLY[HPU[`L_PZ[ZYLSH[LK[VL]LU[ZVYJVUKP[PVUZ[OH[TH`JHZ[ZPNUPÄJHU[KV\I[VU probability to each scenario is staging of relevant exposures, on a PUMVYTH[PVUKVLZUV[PUJS\KL[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZHUKV\YH\KP[VY»Z the Group’s ability to continue as a going concern. If we conclude that a material inappropriate or unsupported. sample basis. YLWVY[[OLYLVU6\YVWPUPVUVU[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZKVLZUV[JV]LY uncertainty exists, we are required to draw attention in auditor’s report to the related ¶ :PNUPÄJHU[PUJYLHZLZVYYLK\J[PVUZPU - Assessment of the ECL methodology, the other information and we do not express any form of assurance conclusion KPZJSVZ\YLZPU[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZVYPMZ\JOKPZJSVZ\YLZHYL credit risk (movements between Stage macroeconomic scenarios weightage, [OLYLVU0UJVUULJ[PVU^P[OV\YH\KP[VM[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZV\Y inadequate, to modify our opinion. Our conclusions are based on the audit evidence 1, Stage 2 and Stage 3) are not on a sample basis. YLZWVUZPIPSP[`PZ[VYLHK[OLV[OLYPUMVYTH[PVUPKLU[PÄLKHIV]LHUKPUKVPUNZV obtained up to the date of our auditor’s report. However, future events or conditions JVTWSL[LS`VYHJJ\YH[LS`PKLU[PÄLKVU consider whether the other information is materially inconsistent with the consolidated We have assessed whether the related may cause the Group to cease to continue as a going concern. a timely basis. ÄUHUJPHSZ[H[LTLU[ZVYV\YRUV^SLKNLVI[HPULKPU[OLH\KP[VYV[OLY^PZLHWWLHYZ[V disclosures of this area are adequate in be materially misstated. If, based on the work we have performed on the other ,]HS\H[L[OLV]LYHSSWYLZLU[H[PVUZ[Y\J[\YLHUKJVU[LU[VM[OLJVUZVSPKH[LKÄUHUJPHS ¶ (ZZ\TW[PVUZPUJVYWVYH[LKPU[OL,*3 accordance to the requirements of information that we obtained prior to the date of this auditor’s report, we conclude that Z[H[LTLU[ZPUJS\KPUN[OLKPZJSVZ\YLZHUK^OL[OLY[OLJVUZVSPKH[LKÄUHUJPHS model are not updated on a timely International Financial Reporting there is a material misstatement of this other information, we are required to report that statements represent the underlying transactions and events in a manner that basis. Standards and Qatar Central Bank, as fact. We have nothing to report in this regard. achieves fair presentation. Refer to the following notes of the applicable. JVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z! Responsibilities of the Board of Directors for the Consolidated Financial 6I[HPUZ\ɉJPLU[HWWYVWYPH[LH\KP[L]PKLUJLYLNHYKPUN[OLÄUHUJPHSPUMVYTH[PVUVM 5V[LJ¶:PNUPÄJHU[HJJV\U[PUN Statements the entities or business activities within the Group to express an opinion on the WVSPJPLZVUÄUHUJPHSHZZL[ZHUK The Board of Directors is responsible for the preparation and fair presentation of the JVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z>LHYLYLZWVUZPISLMVY[OLKPYLJ[PVUZ\WLY]PZPVU ÄUHUJPHSSPHIPSP[PLZ JVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZPUHJJVYKHUJL^P[O0-9:ZHUK[OLHWWSPJHISL and performance of the group audit. We remain solely responsible for our audit provisions of Qatar Central Bank regulations, and for such internal control as the Board opinion. 5V[L¶-PUHUJPHSYPZRTHUHNLTLU[ of Directors determines is necessary to enable the preparation of the consolidated We communicate with those charged with governance regarding, among other 5V[L ¶(JJV\U[PUNHUKJSHZZPÄJH[PVU ÄUHUJPHSZ[H[LTLU[Z[OH[HYLMYLLMYVTTH[LYPHSTPZZ[H[LTLU[^OL[OLYK\L[VMYH\KVY TH[[LYZ[OLWSHUULKZJVWLHUK[PTPUNVM[OLH\KP[HUKZPNUPÄJHU[H\KP[ÄUKPUNZ VMÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZ error. PUJS\KPUNHU`ZPNUPÄJHU[KLÄJPLUJPLZPUPU[LYUHSJVU[YVS[OH[^LPKLU[PM`K\YPUNV\Y 5V[L ¶*HZOHUKIHSHUJLZ^P[O 0UWYLWHYPUN[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z[OL)VHYKVM+PYLJ[VYZPZ audit. central bank responsible for assessing the Group’s ability to continue as a going concern, We also provide those charged with governance with a statement that we have 5V[L ¶+\LMYVTIHURZ disclosing, as applicable, matters related to going concern and using the going complied with relevant ethical requirements regarding independence, and concern basis of accounting unless the Board of Directors either intends to liquidate 5V[L¶3VHUZHUKHK]HUJLZ[V communicate with them all relationships and other matters that may reasonably be the Group or to cease operations, or has no realistic alternative but to do so. customers thought to bear on our independence, and where applicable, related safeguards. 5V[L¶0U]LZ[TLU[ZLJ\YP[PLZ ;OL)VHYKVM+PYLJ[VYZPZYLZWVUZPISLMVYV]LYZLLPUN[OL.YV\W»ZÄUHUJPHSYLWVY[PUN From the matters communicated with those charged with governance, we determine process. 5V[L¶6[OLYHZZL[Z [OVZLTH[[LYZ[OH[^LYLVMTVZ[ZPNUPÄJHUJLPU[OLH\KP[VM[OLJVUZVSPKH[LKÄUHUJPHS 0;Z`Z[LTZHUKJVU[YVSZV]LYÄUHUJPHSYLWVY[PUN Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements statements of the current year and are therefore the key audit matters. We describe Our objectives are to obtain reasonable assurance about whether the consolidated these matters in our auditor’s report unless law or regulation preclude public disclosure >LPKLU[PÄLK0;Z`Z[LTZHUKJVU[YVSZ Our audit approach relies on automated ÄUHUJPHSZ[H[LTLU[ZHZH^OVSLHYLMYLLMYVTTH[LYPHSTPZZ[H[LTLU[^OL[OLYK\L[V about the matter or when, in extremely rare circumstances, we determine that a matter V]LYÄUHUJPHSYLWVY[PUNHZHUHYLHVM controls and therefore procedures were fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable should not be communicated in our report because the adverse consequences of MVJ\ZILJH\ZL[OL)HUR»ZÄUHUJPHS designed to test access and control over assurance is a high level of assurance, but is not guarantee that an audit conducted in KVPUNZV^V\SKYLHZVUHIS`ILL_WLJ[LK[VV\[^LPNO[OLW\ISPJPU[LYLZ[ILULÄ[ZVM accounting and reporting systems are IT systems. Our audit procedures accordance with ISAs will always detect a material misstatement when it exists. such communication. vitally dependent on complex technology. included: Misstatements can arise from fraud or error and considered material if, individually or Report on Other Legal and Regulatory Requirements The extensive volume and variety of PU[OLHNNYLNH[L[OL`JV\SKYLHZVUHIS`ILL_WLJ[LK[VPUÅ\LUJL[OLLJVUVTPJ Consolidated Statement of Financial Position Consolidated Statement of Income Consolidated Statement of Cash Flows As at 31 December For the year ended 31 December For the year ended 31 December 2018 2017 2018 2017 2018 2017 QR ’000 QR ’000 QR ’000 QR ’000 QR ’000 QR ’000 0U[LYLZ[PUJVTL *HZOÅV^ZMYVTVWLYH[PUNHJ[P]P[PLZ ASSETS Interest expense (915,351) (765,353) *HZOHUKIHSHUJLZ^P[OJLU[YHSIHUR 7YVÄ[MVY[OL`LHY Net interest income 829,287 834,443 Adjustments for: +\LMYVTIHURZ Net impairment loss on loans and advances to customers 126,193 66,674 3VHUZHUKHK]HUJLZ[VJ\Z[VTLYZ -LLHUKJVTTPZZPVUPUJVTL 5L[PTWHPYTLU[SVZZVUPU]LZ[TLU[ZLJ\YP[PLZ ¶ 0U]LZ[TLU[ZLJ\YP[PLZ -LLHUKJVTTPZZPVUL_WLUZL +LWYLJPH[PVU Net fee and commission income 184,559 173,613 7YVWLY[`HUKLX\PWTLU[ Net (gain)/loss on disposal of property and equipment (5,310) 64 6[OLYHZZL[Z Foreign exchange gain - net 25,340 23,245 5L[NHPUVUÄUHUJPHSPU]LZ[TLU[ZHUKTHYR[VTHYRL[ TOTAL ASSETS 40,402,892 39,883,400 Income from investment securities 50,923 6,627 VM,X\P[`JSHZZPÄLKHZ-=;730-9: 6[OLYVWLYH[PUNPUJVTL LIABILITIES 3URðWEHIRUHFKDQJHVLQZRUNLQJFDSLWDO Net operating income 1,101,123 1,044,412 +\L[VIHURZHUKJLU[YHSIHUR *OHUNLPUK\LMYVTJLU[YHSIHUR :[HɈJVZ[Z *LY[PÄJH[LVMKLWVZP[ZHUKJVTTLYJPHSWHWLYZ *OHUNLPUSVHUZHUKHK]HUJLZ[VJ\Z[VTLYZ +LWYLJPH[PVU *\Z[VTLYKLWVZP[Z Net impairment loss on loans and advances to customers (126,193) (66,674) Change in other assets (79,940) (46) +LI[ZLJ\YP[PLZ 5L[PTWHPYTLU[SVZZVUPU]LZ[TLU[ZLJ\YP[PLZ ¶ *OHUNLPUK\L[VIHURZHUKJLU[YHSIHUR Other borrowings 2,497,516 2,192,233 Other expenses (112,404) (109,771) *OHUNLPUJ\Z[VTLYKLWVZP[Z 6[OLYSPHIPSP[PLZ *OHUNLPUJLY[PÄJH[LVMKLWVZP[ZHUKJVTTLYJPHSWHWLY (435,557) (404,700) Change in other liabilities 119,546 (112,934) TOTAL LIABILITIES 34,902,261 34,589,556 7YVÄ[MVY[OL`LHY Net cash generated from / (used in) operating activities 1,847,064 (1,873,630) EQUITY Earnings per share 3.16 3.04 Share capital 2,103,604 2,003,433 *HZOÅV^ZMYVTPU]LZ[PUNHJ[P]P[PLZ 3LNHSYLZLY]L 5L[WYVJLLKZMYVTZHSLW\YJOHZLVMPU]LZ[TLU[ZLJ\YP[PLZ 5L[HJX\PZP[PVUVMWYVWLY[`HUKLX\PWTLU[ 9PZRYLZLY]L Consolidated Statement of Comprehensive Income For the year ended 31 December -HPY]HS\LYLZLY]L Net cash generated from / (used in) investing activities 277,708 (552,247) 2018 2017 Retained earnings 1,121,114 1,057,036 QR ’000 QR ’000 *HZOÅV^ZMYVTÄUHUJPUNHJ[P]P[PLZ 7YVJLLKZMYVTPZZ\HUJLVMKLI[ZLJ\YP[PLZ ¶ TOTAL EQUITY 5,500,631 5,293,844 7YVÄ[MVY[OL`LHY 5L[WYVJLLKZMYVTV[OLYIVYYV^PUNZ TOTAL LIABILITIES AND EQUITY 40,402,892 39,883,400 Other comprehensive (loss)/income for the year 9LWH`TLU[VMZ\IVYKPUH[LKKLI[ ¶ 0[LTZ[OH[HYLVYTH`ILYLJSHZZPÄLK +P]PKLUKZWHPK ;OLZLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z^LYLHWWYV]LKI`[OL)VHYKVM+PYLJ[VYZVU Z\IZLX\LU[S`[VWYVÄ[VYSVZZ! 5L[JHZONLULYH[LKMYVTÄUHUJPUNHJ[P]P[PLZ 16 January 2019 and were signed on its behalf by: Movement in fair value reserve (Debt Instruments - IFRS 9): Realised during the year (196) 504 1HWLQFUHDVH GHFUHDVH LQFDVKDQGFDVKHTXLYDOHQWV Sh. Faisal Bin AbdulAziz Bin Jassem Al-Thani Mahmoud Malkawi 5L[JOHUNLPUMHPY]HS\LK\YPUN[OL`LHY ¶ *HZOHUKJHZOLX\P]HSLU[ZHZH[1HU\HY` *OHPYTHU 4HUHNPUN+PYLJ[VY (J[PUN*OPLM,_LJ\[P]L6ɉJLY 5L[JOHUNLPUMHPY]HS\LSVZZK\YPUN[OL`LHY0(: ¶ Cash and cash equivalents as at 31 December 5,527,534 3,297,822 5L[HTV\U[VMPTWHPYTLU[[YHUZMLYYLK[VWYVÄ[VYSVZZ0(: ¶ (TVY[PZLKK\YPUN[OL`LHYVUYLJSHZZPÄJH[PVU 6WLYH[PVUHSJHZOÅV^ZMYVTPU[LYLZ[HUKKP]PKLUK [VSVHUZHUKYLJLP]HISLZ0(: ¶ 0U[LYLZ[YLJLP]LK 0U[LYLZ[WHPK 0[LTZ[OH[TH`UV[ILYLJSHZZPÄLK +P]PKLUKZYLJLP]LK Z\IZLX\LU[S`[VWYVÄ[VYSVZZ! ¶5L[JOHUNLPUMHPY]HS\LVMPU]LZ[TLU[ZPULX\P[` PUZ[Y\TLU[ZKLZPNUH[LKH[-=6*00-9: ¶ Other comprehensive (loss)/income for the year (7,612) 729 Total comprehensive income for the year 657,954 640,441 Consolidated Statement of Changes in Equity For the year ended 31 December Share Legal Risk Fair value Retained Total capital reserve reserve reserve earnings equity QR ’000 QR ’000 QR ’000 QR ’000 QR ’000 QR ’000 Balance as at 1 January 2017 1,908,031 1,525,796 609,505 11,801 805,066 4,860,199 Total comprehensive income for the year 7YVÄ[MVY[OL`LHY ¶ ¶ ¶ ¶ 6[OLYJVTWYLOLUZP]LPUJVTL ¶ ¶ ¶ ¶ Total comprehensive income for the year – – – 729 639,712 640,441 ;YHUZMLY[VYPZRYLZLY]L ¶ ¶ ¶ ¶ ;YHUZMLY[VSLNHSYLZLY]L ¶ ¶ ¶ ¶ ;YHUZMLY[VZVJPHSHUKZWVY[ZM\UK ¶ ¶ ¶ ¶ Transactions with equity holders, recognised directly in equity Contributions by and distributions to equity holders: )VU\ZPZZ\L ¶ ¶ ¶ ¶ +P]PKLUKWHPK ¶ ¶ ¶ ¶ Total contributions by and distributions to equity holders 95,402 – – – (286,205) (190,803) Balance as at 31 December 2017 2,003,433 1,589,767 631,078 12,530 1,057,036 5,293,844 Balance as at 1 January 2018 2,003,433 1,589,767 631,078 12,530 1,057,036 5,293,844 (KVW[PVUVM0-9: ¶ ¶ ¶ Restated Balance as at 1 January 2018 2,003,433 1,589,767 631,078 (3,877) 839,258 5,059,659 Total comprehensive income for the year 7YVÄ[MVY[OL`LHY ¶ ¶ ¶ ¶ 6[OLYJVTWYLOLUZP]LSVZZ ¶ ¶ ¶ ¶ Total comprehensive income for the year – – – (7,612) 665,566 657,954 ;YHUZMLY[VSLNHSYLZLY]L ¶ ¶ ¶ ;YHUZMLY[VZVJPHSHUKZWVY[ZM\UK ¶ ¶ ¶ ¶ Transactions with equity holders, recognised directly in equity Contributions by and distributions to equity holders: )VU\ZPZZ\L ¶ ¶ ¶ ¶ +P]PKLUKWHPK ¶ ¶ ¶ ¶ Total contributions by and distributions to equity holders 100,171 – – – (300,514) (200,343) Balance as at 31 December 2018 2,103,604 1,656,324 631,078 (11,489) 1,121,114 5,500,631 ahlibank.com.qa 4423 2393 Invitation to the Ordinary General Assembly Meeting Greetings, The Board of Directors of Masraf Al Rayan has the honour to invite all shareholders to the annual Ordinary General Assembly Meeting that will be held at 6.00 p.m. on Monday, 25 February 2019 in Al-Majlis Ballroom, Doha Sheraton Hotel. In case the required quorum is not reached in the first meeting, a second meeting will be held on Tuesday, 5 March 2019 at the same time and venue. Financial assets might be inaccurate due to: – Assessment on whether significant increase in Message from the Chairman & Managing Director Agenda – The methodologies used to develop probability of credit risk (SICR) indicators are present for the default (PD); loss given default (LGD); and financing assets portfolio based on FAS 30 and Dear Shareholders, 1. Presentation and approval of the Board of Directors’ report on the activities of Masraf Al Rayan and (exposure at default EAD) are inappropriate. Qatar Central Banks guidance and the possible Greetings, its financial position for the fiscal year ended on 31st December 2018 and the future plan of the – Inappropriate segmentation of portfolios is used to implications on the ECL staging and expected Bank for the year 2018. develop risk parameters. provisioning. On behalf of the members of the Board of Directors, I would like to welcome you all and present to you the – The number and range of forward-looking – Assessment of the ECL methodology, financial report for the year ended 31 December 2018. 2. Presentation of Shari’ah Supervisory Board report on compliance of Masraf Al Rayan to Shari’ah scenarios are not representative of an appropriate macroeconomic scenarios weightage, model rules for fiscal year ended on 31st December 2018. validation/testing, on a sample basis. Masraf Al Rayan has concluded the year 2018 on a promising note, in line with the roadmap it had drawn range of possible outcomes. up for itself, achieving a multi-faceted growth despite the adverse circumstances the region is going 3. Discussion and approval of the External Auditors’ report on the Balance Sheet and Income – Extrapolation techniques used to project scenarios Further, we ensured that the component auditors of the Group’s significant components have performed through, especially the recent reduction in oil prices. This growth has been realized as a result of the Statement of Masraf Al Rayan as presented by the Board of Directors for the fiscal year ended on and parameters (PD, LGD, and EAD) in future periods are inappropriate. consistent audit procedures as per the above, as conservative policies the Board of Directors has adopted and the economic measures taken by the wise and 31st December 2018. – The methodology used to allocate a probability to applicable. insightful leadership of the State of Qatar. 4. Discussion and approval of the financial Statements for Masraf Al Rayan for the fiscal year ended on each scenario is inappropriate or unsupported. We have assessed whether the related disclosures of The bank has announced its financial results for the year 2018, achieving a net profit of QAR 2.130 billion 31st December 2018. – Significant increases (or reductions) in credit risk this area are adequate in accordance to the at an increase of 5.04% compared to the previous year. Profits from our banking operations have increased (movements between Stage 1, Stage 2 and Stage requirements of Financial Accounting Standards 5. Discussion and approval of the proposals of the Board of Directors regarding appropriation and cash (“FAS”) issued by Accounting and Auditing by 12.15% in comparison to last year. In the light of these exemplary results, the Board of Directors has 3) are not completely or accurately identified on a dividend of QR 2.00 per share, representing 20% of the paid-up capital for the fiscal year 2018. timely basis. Organisation for Islamic Financial Institutions recommended a cash dividend of QAR 2 per share, which amounts to 20% of the paid-up capital. We 6. Discussion and approval of the Corporate Governance Report of Masraf Al Rayan for the year 2018. – Assumptions incorporated in the ECL model are (“AAOIFI”) and applicable provision of QCB envisage that this would increase the strength and financial solvency of Masraf Al Rayan apart from being a not updated on a timely basis. regulations. handsome remuneration for our shareholders. 7. Discussion and approval of absolving the Chairman and Members of Board of Directors from all responsibilities for the fiscal year ended on 31st December 2018, fixing their remuneration for the Refer to the following notes of the consolidated Throughout the year 2018, the Board of Directors of Masraf Al Rayan has focused its attention on financial statements: year ended on 31st December 2018 and approve the new guide of rules of compensation and the maintaining its leading position among the local banks especially with regard to operational efficiency s .OTE A n .EW STANDARDS AMENDMENTS AND remuneration of the Board of Directors. (expenses/revenues), which reached a ratio of 24.06% and remains one of the best in the entire region. interpretations effective from January 1, 2018. Non-Performing Financing (NPF) ratio reached 0.83%, the lowest in the banking sector, reflecting a strong 8. Appointing the External Auditors of Masraf Al Rayan for fiscal year 2019 and approve their fees. s .OTE G n 3IGNIlCANT ACCOUNTING POLICIES ON impairment of financial assets performance of the credit risk management along with the applied policies and measures. Capital adequacy 9. Approval, confirmation and ratification of the previous two General Assembly resolutions issued on s .OTE n &INANCIAL RISK MANAGEMENT ratio, under BASEL III standards, reached 19.23%. 28/3/2011 & 2/4/2017 concerning the existing Sukuk Program and issuance of Sukuk under the s .OTE n &AIR VALUE AND CLASSIlCATION OF lNANCIAL Moody’s Investors Service (Moody’s), the renowned credit rating international agency, has reaffirmed that program for a maximum limit of US$2,000,000,000 subject to the approval of Qatar Central Bank. instruments Masraf Al Rayan’s future outlook rating is ‘stable’ and consequently, the bank’s current issuer ratings is s .OTE n $UE FROM BANKS A1/Prime-1 with a stable outlook. Notes s .OTE n &INANCING ASSETS The circumstances of 2018 necessitated that we focus on adopting policies that will enhance our operations s .OTE n )NVESTMENT SECURITIES 1. All shareholders are requested to be present at the meeting venue one hour before the start time of the in the local market. However, we will continue to seek opportunities outside Qatar and will deal with them s .OTE n /THER ASSETS meeting, to register their attendance and to receive the participation form. with all possible caution. We have made it a priority to strengthen our product and service offerings with the IT systems and controls over financial reporting 2. If you are unable to attend the meeting for any reason, please authorize another shareholder to attend assistance of most modern technologies, thereby placing enhanced emphasis on electronic banking services. We identified IT systems and controls over financial Our audit approach relies on automated controls and We will continue to focus on upgrading the competencies of our human capital especially our Qatari the meeting on your behalf, using the proxy form overleaf, duly signed by you. In case of the company, reporting as an area of focus because the Bank’s therefore procedures were designed to test access resources, who continue to benefit from our well-structured training programs. During 2018 we provided the form must be signed by the authorized person(s) and company stamp must be affixed. financial accounting and reporting systems are vitally and control over IT systems. Our audit procedures included: more than 15,650 hours of training in theoretical, practical and administrative development programs. 3. It is not permitted to grant proxy to a non-shareholder of the Bank or to a member of the Board of dependent on complex technology. The extensive volume and variety of transactions processed daily s /BTAIN THE )4 UNDERSTANDING ON APPLICATIONS As part of our corporate social responsibility, we continue to offer internship opportunities to students of Directors. The number of shares held by a proxy holder must not exceed 5% of the total Bank’s share raises a risk that automated accounting procedures relevant to financial reporting including the local universities as well as business administration and banking schools, with a view towards nurturing a (37,500,000 shares). and related internal controls are not accurately Equation - core banking system, Opics - Treasury promising generation of Qatari banking professionals. 4. A statement will be prepared containing details mentioned in Article No. 122 of Commercial designed and operating effectively. system, TI – Trade finance system, LOS – retail and A particular area of focus related to logical access corporate financing assets business and the Swift At Masraf Al Rayan we are committed towards establishing a sound framework of financial and operational Companies Law No. 11 of year 2015. These details include remuneration granted to the Chairman and messaging and the infrastructure supporting these Members of the Board of Directors in cash and in kind as well as their bonuses and the amounts spent management and segregation of duties. The monitoring that embraces transparency and fairness as its basic tenets. In this regard, we continue to adopt underlying principles are important because they applications; the best international practices as well as advanced policies and procedures with a view towards ensuring a on advertisement and donations. This statement will be made available at the Shareholders’ Affairs Unit ensure that changes to applications and data are s 4ESTING THE KEY AUTOMATED INPUT PROCESSING AND system of good governance that safeguards the interests of our shareholders and enhances the market of Masraf Al Rayan one week prior to the General Assembly Meeting. appropriate, authorised and monitored. In particular, output controls relevant to business processes. confidence. 5. This invitation shall be considered a legal invitation for all shareholders without the need of sending the incorporated relevant controls are essential to s 4ESTING THE )4 GENERAL CONTROLS RELEVANT TO limit the potential for fraud and error as a result of automated controls and computer-generated As a proactive and law abiding corporate citizen, we continue to perform our duties towards the private invitations through the mail in accordance with Law No. (11) for 2015. change to an application or underlying data. information covering access security, program environment and the society. We are fully aware of the need to preserve our environment for our coming changes, data centre and network operations; generations by ensuring that socio-cultural prosperity thrives in harmony with the environment around us. s !SSESSING ACCURACY AND COMPLETENESS OF COMPUTER Shari’a Supervisory Board Report generated information used in financial reporting; Finally, on behalf of the Board of Directors of Masraf Al Rayan, I would like to extend my sincere thanks and gratitude to His Highness Sheikh Tamim Bin Hamad Al Thani, the Amir of the State of Qatar. I would also like for the period ended on 31 December 2018 to thank His Excellency Sheikh Abdulla Bin Saoud Al Thani, the Governor of Qatar Central Bank and His All praise be to Allah, and His peace and blessings be upon His prophet, his family, his companions and Excellency Sheikh Mohammed Bin Hamad Al-Thani, the Deputy Governor of Qatar Central Bank for their those who followed him. diligent work to provide conditions conducive for maintaining liquidity and financial stability in Qatar. Masraf Al Rayan Shari’a Supervisory Board has reviewed the products and operational activities presented I also extend my thanks and appreciation to Masraf Al Rayan’s Shareholders and customers for their to it as well as the 2018 Balance Sheet and Income Statement and are of the opinion that the latter do relationship and support, and to the Executive Management and the staff who exert outstanding efforts to not contravene with Shari’a rulings. continue to achieve good results and who bear the responsibility of achieving even better results in the years May Allah grant success and accomplishment to all towards whatever he likes and pleases Him. to come. His Eminence Dr. Hussain Ali Al Abdulla Sheikh Dr. Waleed Bin Hadi Chairman & Managing Director Chairman of Shari’a Supervisory Board His Eminence His Eminence Sheikh Dr. Abdul Sattar Abu Ghuddah Sheikh Dr. Mohamed Ahmeen INDEPENDENT AUDITOR’S REPORT Shari’a Supervisory Board Member Shari’a Supervisory Board Member To the Shareholders of Masraf Al Rayan (Q.P.S.C.) Report on the Audit of the Consolidated Financial Statements There was a risk that: – Evaluated the appropriateness and testing the – judgements, assumptions and estimates, which mathematical accuracy of the ECL model applied. Opinion includes adopting a ‘default’ definition and We have audited the consolidated financial statements of Masraf Al Rayan (Q.P.S.C.) (the “Bank”) and its – Tested the IT controls related to the credit developing probability of defaults (PDs) at subsidiaries (together the “Group”), which comprise the consolidated statement of financial position as at 31 impairment process and verified the integrity of origination, lifetime-PDs, and macroeconomic December 2018, and the consolidated income statement, consolidated statement of changes in equity and data used as input to the models models with a number of scenarios and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies – evaluated system-based and manual controls over probabilities for each scenario and other and other explanatory information. the recognition and measurement of impairment post-model adjustments and management allowances. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the overlays may be inadequate; – Evaluated post model adjustments and consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance – inadequate data, as well as lack of uniformity in and its consolidated cash flows for the year then ended in accordance with Financial Accounting Standards (“FAS”) management overlays in order to assess the the data being used which makes it difficult to reasonableness of these adjustments. issued by Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) and the applicable develop models, which are sufficient for FAS 30 provisions of Qatar Central Bank regulations. impairment requirements. – Assessed the reasonableness of forward looking information incorporated into the impairment Basis for opinion Refer to the following notes of the consolidated calculations We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under financial statements: those standards are further described in the auditor’s responsibilities for the audit of the consolidated financial Further, we ensured that the component auditors of s .OTE A n .EW STANDARDS AMENDMENTS AND statements section of our report. We are independent of the Group in accordance with the International Ethics the Group’s significant components have performed interpretations effective from January 1, 2018. Standards Board for Accountants’ Codes of Ethics for Professional Accountants (IESBA Code) together with the consistent audit procedures as per the above, as ethical requirements that are relevant to our audit of the consolidated financial statements in the State of Qatar, s .OTE G n 3IGNIlCANT ACCOUNTING POLICIES ON applicable. impairment of financial assets and we have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is We have also assessed whether the related sufficient and appropriate to provide a basis for our opinion. s .OTE n &INANCIAL RISK MANAGEMENT disclosures of this area were adequate in accordance Key Audit Matters s .OTE n &AIR VALUE AND CLASSIlCATION OF lNANCIAL with the requirements of Financial Accounting Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of instruments Standards (“FAS”) issued by Accounting and Auditing the consolidated financial statements of the current period. These matters were addressed in the context of our s .OTE n $UE FROM BANKS Organisation for Islamic Financial Institutions audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not s .OTE n &INANCING ASSETS (“AAOIFI”) and applicable provision of QCB provide a separate opinion on these matters. s .OTE n )NVESTMENT SECURITIES regulations. Key Audit Matters How the matter was addressed in our audit s .OTE n /THER ASSETS Early adoption of FAS 30: Impairment, Credit losses and onerous commitments Impairment of financial assets The Group adopted FAS 30: Impairment, Credit losses We updated our understanding of the Groups’s The Group’s financial assets, both on and off balance We have assessed and tested the design and and onerous commitments from 1 January 2018, adoption of FAS 30 and identified the internal sheet, amounted to QAR 112.2 billion and QAR 115.9 operating effectiveness of the relevant controls over which resulted in changes in accounting policies and controls including entity level controls adopted by the billion as at 31 December 2018 and 2017 data governance, methodologies, inputs and adjustments to amounts previously recognised in the Group for the accounting, processes and systems respectively. In addition, the expected credit loss (ECL) assumptions used by the Group in calculating consolidated financial statements. As permitted by under the new accounting standard. provisioning recognized for the year ended December impairment allowances. In addition, IT controls with transitional provisions of FAS 30, the Group elected In addition, our work performed include the below 31, 2018 amounted to QAR 668 million. respect to the ECL model were tested. not to restate the comparative figures and recorded procedures: The Group has adopted FAS 30 from January 1, 2018, In addition, our work performed include the below an adjustment of QAR 491.1 million to the opening – Evaluated the appropriateness of key technical which is a complex accounting standard that requires procedures, among others on the Group’s FAS 30 ECL retained earnings as at 1 January 2018. decisions, judgments and accounting policy considerable judgements, which were key in the model: The changes required to processes, systems and elections made by the Group to ensure compliance development of new models to measure expected – Review and assessment of the appropriateness of controls to comply with FAS 30 were complex and with FAS 30 impairment requirements. credit losses on financial assets, including debt type data, assumptions and methodologies used within significant, as the standard requires a fundamental – Evaluated with the assistance of our specialists, the investments carried at amortized cost. There is a risk the Bank’s FAS 30 ECL model (PD, LGD, and EAD) change to the way, when Expected Credit Losses reasonableness of management’s key judgements that financial assets are impaired and adequate and customer internal rating systems and (ECL) are recognised and how these are measured. and estimates made in the ECL calculation, which impairment provisions are not provided in accordance methodology. include but not limited to the selection of to requirements of FAS 30 and the applicable methods, models, assumptions and data sources. provisions of Qatar Central Bank regulations. Consolidated Financial Statements For The Year Ended 31 December 2018 Responsibilities of the board of directors for the consolidated financial statements Financial assets might be inaccurate due to: – Assessment on whether significant increase in Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements credit risk (SICR) indicators are present for the – The methodologies used to develop probability of in accordance with FAS issued by AAOIFI, the Qatar Central Bank regulations, and for such internal control as Board financing assets portfolio based on FAS 30 and default (PD); loss given default (LGD); and of Directors determines is necessary to enable the preparation of the consolidated financial statements that are free Qatar Central Banks guidance and the possible (exposure at default EAD) are inappropriate. from material misstatement, whether due to fraud or error. – Inappropriate segmentation of portfolios is used to implications on the ECL staging and expected In preparing the consolidated financial statements, Board of Directors is responsible for assessing the Group’s develop risk parameters. provisioning. – Assessment of the ECL methodology, ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the – The number and range of forward-looking going concern basis of accounting unless Board of Directors either intends to liquidate the Group or to cease scenarios are not representative of an appropriate macroeconomic scenarios weightage, model validation/testing, on a sample basis. operations, or has no realistic alternative but to do so. Board of Directors is responsible for overseeing the Group’s range of possible outcomes. financial reporting process. – Extrapolation techniques used to project scenarios Further, we ensured that the component auditors of Auditor’s responsibilities for the audit of the consolidated financial statements and parameters (PD, LGD, and EAD) in future the Group’s significant components have performed Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole periods are inappropriate. consistent audit procedures as per the above, as applicable. are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes – The methodology used to allocate a probability to our opinion. Reasonable assurance is a high level of assurance, but is not guarantee that an audit conducted in each scenario is inappropriate or unsupported. We have assessed whether the related disclosures of accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud – Significant increases (or reductions) in credit risk this area are adequate in accordance to the or error and considered material if, individually or in the aggregate, they could reasonably be expected to influence (movements between Stage 1, Stage 2 and Stage requirements of Financial Accounting Standards the economic decisions of user taken on the basis of these consolidated financial statements. 3) are not completely or accurately identified on a (“FAS”) issued by Accounting and Auditing As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional timely basis. Organisation for Islamic Financial Institutions skepticism throughout the audit. We also: – Assumptions incorporated in the ECL model are (“AAOIFI”) and applicable provision of QCB s )DENTIFY AND ASSESS THE RISK OF MATERIAL MISSTATEMENT OF THE CONSOLIDATED lNANCIAL STATEMENTS WHETHER DUE TO not updated on a timely basis. regulations. fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is Refer to the following notes of the consolidated sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement financial statements: resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, s .OTE A n .EW STANDARDS AMENDMENTS AND intentional omissions, misrepresentations, or the override of internal control. interpretations effective from January 1, 2018. s /BTAIN AN UNDERSTANDING OF INTERNAL CONTROL RELEVANT TO THE AUDIT IN ORDER TO DESIGN AUDIT PROCEDURES THAT ARE s .OTE G n 3IGNIlCANT ACCOUNTING POLICIES ON appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the impairment of financial assets Group’s internal control. s .OTE n &INANCIAL RISK MANAGEMENT s %VALUATE THE APPROPRIATENESS OF ACCOUNTING POLICIES USED AND REASONABLENESS OF ACCOUNTING ESTIMATES AND s .OTE n &AIR VALUE AND CLASSIlCATION OF lNANCIAL related disclosures made by management. instruments s #ONCLUDE ON THE APPROPRIATENESS OF "OARD OF $IRECTORS USE OF THE GOING CONCERN BASIS OF ACCOUNTING AND BASED s .OTE n $UE FROM BANKS on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may s .OTE n &INANCING ASSETS cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material s .OTE n )NVESTMENT SECURITIES uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the s .OTE n /THER ASSETS consolidated financial statements or, if such disclosure is inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or IT systems and controls over financial reporting conditions may cause the Group to cease to continue as a going concern. We identified IT systems and controls over financial Our audit approach relies on automated controls and s %VALUATE THE OVERALL PRESENTATION STRUCTURE AND CONTENT OF THE CONSOLIDATED lNANCIAL STATEMENTS INCLUDING THE reporting as an area of focus because the Bank’s therefore procedures were designed to test access disclosures, and whether the consolidated financial statements represent the underlying transactions and financial accounting and reporting systems are vitally and control over IT systems. Our audit procedures events in a manner that achieves fair presentation. dependent on complex technology. The extensive included: volume and variety of transactions processed daily s /BTAIN THE )4 UNDERSTANDING ON APPLICATIONS s /BTAIN SUFlCIENT APPROPRIATE AUDIT EVIDENCE REGARDING THE lNANCIAL INFORMATION OF THE ENTITIES OR BUSINESS raises a risk that automated accounting procedures relevant to financial reporting including the activities within the Group to express an opinion on the consolidated financial statements. We are responsible and related internal controls are not accurately Equation - core banking system, Opics - Treasury for the direction, supervision and performance of the group audit. We remain solely responsible for our audit designed and operating effectively. system, TI – Trade finance system, LOS – retail and opinion. A particular area of focus related to logical access corporate financing assets business and the Swift We communicate with those charged with governance regarding, among other matters, the planned scope and management and segregation of duties. The messaging and the infrastructure supporting these timing of the audit and significant audit findings, including any significant deficiencies in internal control that we underlying principles are important because they applications; identify during our audit. ensure that changes to applications and data are s 4ESTING THE KEY AUTOMATED INPUT PROCESSING AND We also provide those charged with governance with a statement that we have complied with relevant ethical appropriate, authorised and monitored. In particular, output controls relevant to business processes. requirements regarding independence, and communicate with them all relationships and other matters that may the incorporated relevant controls are essential to s 4ESTING THE )4 GENERAL CONTROLS RELEVANT TO reasonably be thought to bear on our independence, and where applicable, related safeguards. limit the potential for fraud and error as a result of automated controls and computer-generated From the matters communicated with those charged with governance, we determine those matters that were of change to an application or underlying data. information covering access security, program most significance in the audit of the financial statements of the current period and are therefore the key audit changes, data centre and network operations; matters. We describe these matters in our auditor’s report unless law and regulations preclude public disclosure s !SSESSING ACCURACY AND COMPLETENESS OF COMPUTER about the matter or when, in extremely rare circumstances, we determine that a matter should not be generated information used in financial reporting; communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other matter Report on other legal and regulatory requirements The consolidated financial statements of the Group for the year ended 31 December 2017, were audited by We are also of the opinion that proper books of account were maintained by the Group. We have obtained all the another auditor who expressed an unmodified opinion on those statements on 16 January 2018. information and explanations which we considered necessary for the purpose of our audit. We further confirm that the consolidated financial information included in the Board of Directors’ report addressed to the General Other information Assembly is in agreement with the books and records of the Group. To the best of our knowledge and belief and Board of Directors is responsible for the other information. The other information comprises the Board of Directors according to the information given to us, no contraventions of the applicable provisions of Qatar Central Bank Law, Report which we obtained prior to the date of this auditor’s report and other information included in the Annual Qatar Commercial Companies Law and the Bank’s Articles of Association were committed during the year which Report, which is expected to be made available to us after the date of this auditor’s report. The other information would materially affect the Group’s financial position or its financial performance. does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance or conclusion thereon. In connection with our audit of the consolidated financial statements, our For Deloitte & Touche responsibility is to read the other information identified above and, in doing so, consider whether the other Qatar Branch information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the Walid Slim audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other Partner information that we obtained prior to the date of this auditor’s report, we conclude that there is a material 5 February 2019 License No. 319 misstatement of this other information, we are required to report that fact. We have nothing to report in this Doha, Qatar QFMA Auditor License No. 120156 regard. There was a risk that: – Evaluated the appropriateness and testing the – judgements, assumptions and estimates, which mathematical accuracy of the ECL model applied. includes adopting a ‘default’ definition and – Tested the IT controls related to the credit CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED INCOME STATEMENT developing probability of defaults (PDs) at impairment process and verified the integrity of origination, lifetime-PDs, and macroeconomic data used as input to the models As at 31 December For the year ended 31 December models with a number of scenarios and 2018 2017 2018 2017 – evaluated system-based and manual controls over QAR ’000 QAR ’000 QAR ’000 QAR ’000 probabilities for each scenario and other the recognition and measurement of impairment post-model adjustments and management allowances. ASSETS Income from financing activities 3,538,629 3,100,667 overlays may be inadequate; Cash and balances with Qatar Central Bank 3,026,994 2,799,819 – Evaluated post model adjustments and Income from investing activities 838,228 792,002 Due from banks 1,496,296 3,311,900 – inadequate data, as well as lack of uniformity in management overlays in order to assess the Total income from financing and investing activities 4,376,857 3,892,669 Financing assets 72,163,836 72,097,080 the data being used which makes it difficult to reasonableness of these adjustments. develop models, which are sufficient for FAS 30 Investment securities 19,005,273 23,423,469 Fee and commission income 318,734 278,647 impairment requirements. – Assessed the reasonableness of forward looking Investment in associates 525,859 520,287 Fee and commission expense (3,596) (4,913) information incorporated into the impairment Fixed assets 188,979 159,951 Refer to the following notes of the consolidated Net fee and commission income 315,138 273,734 calculations Other assets 886,976 636,466 financial statements: Foreign exchange gain (net) 152,479 142,527 Further, we ensured that the component auditors of TOTAL ASSETS 97,294,213 102,948,972 s .OTE A n .EW STANDARDS AMENDMENTS AND the Group’s significant components have performed Share of results of associates 21,904 28,203 LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND EQUITY interpretations effective from January 1, 2018. consistent audit procedures as per the above, as Other income 7,900 9,164 LIABILITIES s .OTE G n 3IGNIlCANT ACCOUNTING POLICIES ON applicable. TOTAL INCOME 4,874,278 4,346,297 impairment of financial assets Due to banks 16,483,776 25,123,319 We have also assessed whether the related Customer current accounts 7,268,816 6,620,840 Staff costs (374,583) (327,698) s .OTE n &INANCIAL RISK MANAGEMENT disclosures of this area were adequate in accordance Sukuk financing 1,717,832 – Depreciation (14,589) (16,865) s .OTE n &AIR VALUE AND CLASSIlCATION OF lNANCIAL with the requirements of Financial Accounting Other borrowings 2,042,938 – Other expenses (279,251) (232,621) instruments Standards (“FAS”) issued by Accounting and Auditing Other liabilities 2,007,017 1,904,529 Finance expense (759,856) (494,812) Organisation for Islamic Financial Institutions s .OTE n $UE FROM BANKS TOTAL LIABILITIES 29,520,379 33,648,688 TOTAL EXPENSES (1,428,279) (1,071,996) s .OTE n &INANCING ASSETS (“AAOIFI”) and applicable provision of QCB EQUITY OF INVESTMENT ACCOUNT HOLDERS 54,300,051 55,910,346 Net reversals on due from banks 387 – s .OTE n )NVESTMENT SECURITIES regulations. EQUITY Net recoveries and reversals / (impairment losses) on financing assets 14,591 (107,818) Key Audit Matters How the matter was addressed in our audit s .OTE n /THER ASSETS Share capital 7,500,000 7,500,000 Net impairment losses on investment securities (9,014) (5,621) Impairment of financial assets Legal reserve 2,278,783 2,065,741 Net reversals on off balance sheet exposures subject to credit risk 16,092 – Risk reserve 1,574,695 1,507,567 The Group adopted FAS 30: Impairment, Credit losses We updated our understanding of the Groups’s We have assessed and tested the design and PROFIT FOR THE YEAR BEFORE RETURN TO The Group’s financial assets, both on and off balance Fair value reserves 9,768 3,074 and onerous commitments from 1 January 2018, adoption of FAS 30 and identified the internal operating effectiveness of the relevant controls over INVESTMENT ACCOUNT HOLDERS 3,468,055 3,160,862 sheet, amounted to QAR 112.2 billion and QAR 115.9 Foreign currency translation reserve (13,809) (7,519) which resulted in changes in accounting policies and controls including entity level controls adopted by the data governance, methodologies, inputs and Less: Return to investment account holders (1,326,114) (1,115,406) billion as at 31 December 2018 and 2017 Other reserves 118,910 113,001 adjustments to amounts previously recognised in the Group for the accounting, processes and systems assumptions used by the Group in calculating respectively. In addition, the expected credit loss (ECL) Retained earnings 1,808,968 2,009,007 PROFIT BEFORE TAX FOR THE YEAR 2,141,941 2,045,456 consolidated financial statements. As permitted by under the new accounting standard. provisioning recognized for the year ended December impairment allowances. In addition, IT controls with Tax expense (2,432) (4,719) 13,190,871 transitional provisions of FAS 30, the Group elected In addition, our work performed include the below 31, 2018 amounted to QAR 668 million. respect to the ECL model were tested. TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK 13,277,315 Non-controlling interest 196,468 199,067 NET PROFIT FOR THE YEAR 2,139,509 2,040,737 not to restate the comparative figures and recorded procedures: In addition, our work performed include the below The Group has adopted FAS 30 from January 1, 2018, Net profit for the year attributable to: an adjustment of QAR 491.1 million to the opening – Evaluated the appropriateness of key technical procedures, among others on the Group’s FAS 30 ECL TOTAL EQUITY 13,473,783 13,389,938 which is a complex accounting standard that requires Equity holders of the Bank 2,130,415 2,028,145 retained earnings as at 1 January 2018. decisions, judgments and accounting policy model: TOTAL LIABILITIES, EQUITY OF INVESTMENT considerable judgements, which were key in the Non-controlling interest 9,094 12,592 The changes required to processes, systems and elections made by the Group to ensure compliance development of new models to measure expected – Review and assessment of the appropriateness of ACCOUNT HOLDERS AND EQUITY 97,294,213 102,948,972 controls to comply with FAS 30 were complex and with FAS 30 impairment requirements. credit losses on financial assets, including debt type data, assumptions and methodologies used within 2,139,509 2,040,737 significant, as the standard requires a fundamental – Evaluated with the assistance of our specialists, the investments carried at amortized cost. There is a risk the Bank’s FAS 30 ECL model (PD, LGD, and EAD) These consolidated financial statements were approved by the Board of Directors on 21 January 2019 and were BASIC AND DILUTED EARNINGS PER SHARE (QAR) 2.841 2.704 change to the way, when Expected Credit Losses reasonableness of management’s key judgements that financial assets are impaired and adequate and customer internal rating systems and signed on its behalf by: (ECL) are recognised and how these are measured. and estimates made in the ECL calculation, which impairment provisions are not provided in accordance methodology. Dr. Hussain Ali Al Abdulla Adel Mustafawi include but not limited to the selection of to requirements of FAS 30 and the applicable Chairman and Managing Director Group Chief Executive Officer methods, models, assumptions and data sources. provisions of Qatar Central Bank regulations. Gulf Times 6 Sunday, February 10, 2019 BUSINESS Small town near Hamburg said to be likely choice for German LNG plant Bloomberg said two people familiar with the The government may announce a overshadowed by delays in gaining Germany needs LNG capacity fast, handle as much as 15% of Germany’s Berlin/ Frankfurt/London government’s thinking. winner for aid as early as February 12, approval from Bnetza, the power according to federal lawmakers gas imports. Merkel is under pressure to give according to the people, who asked not regulator, to build a pipeline from including Oliver Grundmann from Wilhelmshaven, a German Navy port, concrete support and finance for to be named because the discussions the LNG terminals to Germany’s gas Merkel’s Christian Democrats. is backed by Uniper SE. That utility A small port city near Hamburg is the a terminal that would serve as an remain confidential. They noted talks pipeline grid. He cited the need for shipping signed a preliminary agreement with leading choice of Angela Merkel’s alternative to bringing natural gas that day in Berlin between Economy Brunsbuettel’s bid is being led by a to switch from dirtier fuels after Exxon Mobil Corp last month for a long- government for the first liquefied into Europe by pipeline from Russia. and Energy Minister Peter Altmaier, joint venture of gas infrastructure 2020, when International Maritime term booking of a “substantial” share of natural gas terminal in Germany, President Donald Trump has criticised US Deputy Secretary of Energy Dan company NV Nederlandse Gasunie, Organisation limits on sulphur regasification capacity at the German according to people familiar with the Germany for being too reliant on Brouillette and International Energy Vopak LNG Holding BV and Oiltanking emissions kick in. utility’s planned floating LNG terminal. thinking of senior ministers. Russian gas and urged the country to Agency Executive Director Fatih Birol. GmbH, bundled together as “German Grundmann is backing the bid from Supplies of pipeline gas to Germany The town on the Elbe River, buy LNG from the US instead. Executives from US and German LNG Terminal.” It’s sited at the North Stade, which is in his constituency. from the rest of Europe are drying Brunsbuettel, is competing with rival Brunsbuettel, Stade and gas companies will also attend that Sea end of Germany’s “Ostsee Kanal” The blueprint to build a LNG terminal up, boosting Russia’s position as the bids from the city of Stade and the Wilhelmshaven have lobbied hard to meeting. channel, giving it shipping access to in the town’s harbour is led by LNG primary source for heating, industry North Sea port of Wilhelmshaven for win federal backing, which is essential Backed by the state government of the Baltic. It’s also close to Germany Stade GmbH, which is counting on and power plants. Russia accounted federal aid that’s key to unlocking to secure private investment for the Schleswig-Holstein, Brunsbuettel second-biggest city, Hamburg. financing from the Macquarie Group for about 45% of Germany’s imports investment in the terminal. The facility that is likely to cost hundreds of started in 2017 to lobby the RWE AG and German LNG Terminal Ltd and China Harbour Engineering Co in 2017, an increase of almost 4 Economy and Energy Ministry in Berlin millions of dollars. government over its advantages GmbH last year brokered a deal to and would cost as much as €500mn percentage points from the previous is backing the bid of Brunsbuettel The Economy and Energy Ministry as a LNG port – a year before Stade secure a “substantial annual capacity” ($567mn). The company said a Stade year, according to data from McKinsey partly due to its proximity to Hamburg, declined to comment. put its case. The bids have been of potential imports. terminal would eventually be able to & Co. Oil doubters Europe LNG wave has traders mount a comeback as weigh end of Asia premium rally stalls on Bloomberg global worries Frankfurt Bloomberg he premium that Asia tradi- New York tionally has paid for liquefi ed Tnatural gas has tumbled as a mild winter damps demand, boosting edge funds reversed course supply in Europe to records and erod- on oil just in time, plowing ing prices there. Hback into bearish bets as crude The trend is a threat to Rus- skidded into a wall of economic wor- sia and its dominant gas company, ries. Gazprom PJSC, and a boost to utili- In a shift from four weeks of retreat, ties burning the fuel to generate short-sellers boosted by 28% their electricity. Mild winter weather wagers that Brent prices would fall in across Asia along with stockpiling the week ended February 5, according earlier in the season by buyers anx- to data released on Friday. That over- ious to avoid last year’s crunch sent shadowed the belief in rising prices, as the benchmark Japan/Korea Marker investors weighed an Opec supply cut to a 17-month low. against signs of weakening demand Cargoes of LNG that usually would growth. have gone to Asia now are landing in Brent’s rally has fi zzled this month Europe, which at least for the moment after the global benchmark gained 15% is absorbing the excess. The sheer in January. Record US shale drilling is volume of fuel arriving into northwest threatening to off set the output cuts European markets has pushed down by top oil exporters. The economic prices there too and is a “big surprise” picture also grew dimmer this week, not anticipated by many market par- with American and Chinese nego- ticipants, according to Bart Riemens, tiators looking far apart on trade talks head of gas trading at Axpo Holding and disappointing data from Germany AG. to Australia to the US. “People will start realising how “It seems like the momentum we much gas we are swimming in,” he had has kind of trickled away,” said said. Cailin Birch, a global economist at the On top of that, new production fa- Economist Intelligence Unit in Lon- cilities, including in the US and Rus- don. “The market is primed to react to sia, have added to the amount of LNG bad news right now.” looking for buyers in the market. Brent slipped 1% this week, losing Those fl ows have more than off set ground for the second time in three record-high purchases by China. weeks. In the US, West Texas Interme- The benchmark next-month gas diate fell even farther, ending the week contract in the Netherlands, Europe’s down almost 5% after it had recorded biggest market, has lost 30% since the its biggest January gains on record. winter season started on October 1, “The sentiment was pretty bullish trading near €19 per megawatt-hour coming off some pretty low oil prices on Thursday. It may drop another €1 at the end of last year,” said Brian Kes- or €2 over the next month or two, if sens, who manages $16bn in energy other commodities and temperatures An LNG tanker is seen at the new liquefied natural gas terminal owned by Chinese energy company ENN Group, in Zhoushan, Zhejiang province (file). Cargoes of investments for Kansas-based money remain at current levels, Riemens LNG that usually would have gone to Asia now are landing in Europe, which at least for the moment is absorbing the excess. manager Tortoise. “And I think expec- said. tations are just becoming a little more “There may be of course times will pay more for its fuel soon. The LNG. So it is potentially very short- Asia that there’s little incentive to the winter hasn’t been cold enough realistic.” when this may not be the case, but Norwegian energy company Equinor lived.” ship more cargoes there. The arbitrage there to absorb all the gas. Net-longs – the diff erence be- going forward, historical spreads JKM ASA acknowledges that a long-antic- There will still be imbalances and between Europe and Asia is expected That’s added to a supply boom in tween wagers on a Brent increase and versus Europe are not likely,” Riemens ipated wave of LNG has fi nally hit but periods when either Europe or Asia to remain closed throughout the year, Europe. Russia has been shipping gas bets on a decline – nudged up by less said by telephone. “This is what we doesn’t expect it to last. become the best market for LNG, according to analysis by Bloomb- into Europe at near record rates by than 1% to 233,995 options and fu- are already seeing now, and we will see “This is the fi rst year when we will Peder Bjorland, vice president for ergNEF. pipeline, and more LNG cargoes are tures contracts, according to Friday’s more fl attening of the spread, if not see this wave of LNG we had expected marketing and trading natural gas at China is a big part of the shift. It arriving than in the summer. Axpo report from the ICE Futures Europe complete convergence for the major- to see,” Tor Martin Anfi nnsen, senior Equinor, said in the same interview. built up its storage levels through the anticipates additional demand for gas exchange. ity of times.” vice president at Equinor, said in an in- “There will still be cargo movement summer, lifting the gas price world- in power generation in Europe and in- Short-selling bets climbed by the Some in the market believe the cur- terview in Essen, Germany. “But 2020 from one region to another,” he said. wide, then slacked off when the heat- creased competition between pipeline most since late October, while longs, rent situation is temporary and Asia is the last year of the current fl eet of For now, prices are low enough in ing season started in October. So far, gas and LNG. predicting higher prices, rose by 5.2%. FBI joins Brazil probe into alleged bribery by top oil traders No sleep, frantic calls: PDVSA Bloomberg took place in Texas, Pace said. Brazil isn’t asking Rio de Janeiro the US to share details about the focus of its investigation. US involvement in the probe was scrambles to survive US ban reported earlier by Reuters, citing unidentified US authorities have joined Brazil’s investigation people familiar. into alleged bribery involving Petrobras and “We are sharing information and we want who- Bloomberg An exodus of PDVSA employ- traders take advantage and ben- played the problem, saying it has some of the world’s largest trading companies, ever is proved to have committed a crime to be Houston ees in key areas such as com- efit from. PDVSA will have to of- already managed to fi nd replace- according to the Brazilian law enforcement of- prosecuted, in Brazil or in the US,” said Pace. merce and supply has only added fer discounts in order to sell its ment markets to sell and buy crude ficer in charge of the probe. Ex-Trafigura executive Mariano Marcondes Fer- to the confusion, according to the crude and pay way more for im- products from. The US Justice Department and Federal Bureau raz is cooperating with Brazilian authorities as t Venezuela’s state oil people. PDVSA has even reached ports.” Already, the sanctions have of Investigation have also started working on he seeks to close a plea bargain deal in Curitiba, company, desperation and out to ex-employees to ask them Whether PDVSA’s eff orts suc- sliced Venezuela oil exports to a the investigation, first announced by Brazilian Pace said. Luiz Eduardo Loureiro Andrade, who Achaos are setting in one for traders’ phone numbers. The ceed will go a long way in deter- 10-month low. Last year, Ven- authorities in December, that includes trading was briefly detained in Florida on December 20, week after the US imposed a de lack of experienced employees mining the fate of the embattled ezuela loaded one vessel a day for companies Trafigura Group Ltd, Vitol Group has been accused of working as an intermedi- facto ban on the country’s crude has complicated what would be leader Nicolas Maduro. President US refi ners. After the US ratch- and Glencore Plc, said Filipe Pace, head of the ary for trading companies to bribe Petrobras products. in normal circumstances a fairly Donald Trump imposed the ban eted up sanctions on January 28, so-called Carwash probe. off icials and is cooperating in the US, according Working around the clock, em- straightforward job making deals on Venezuelan oil as part of the US only one vessel has loaded over a The Justice Department declined to comment to Pace. Marcondes and Loureiro couldn’t imme- ployees are calling dozens of trad- with traders to buy shipments push to get Maduro to cede power 10-day period. That has turned oil on Thursday. diately be reached for comment. ers, some little known, in a search of oil that equal less than half of to an interim government led by tankers into fl oating storage facili- Brazilian prosecutors have accused at least Vitol and Glencore have previously said they are for new markets for its crude, ac- one% of the global market. (The Juan Guaido, the lawmaker who ties. seven former employees of Petroleo Brasileiro co-operating with Brazil’s probe, and Trafigura cording to people describing the US typically purchased 400,000 claims he’s the nation’s rightful There are about 8.28mn barrels SA of taking more than $31mn in bribes from has directed prior questions to a statement atmosphere at Petroleos de Vene- bpd from Venezuela.) At the same leader. By choking off the Maduro of Venezuelan crude idling all over intermediaries linked to the world’s biggest where it denied management had any knowl- zuela SA. Some are barely sleeping. time, the sanctions have narrowed regime’s fi nances, the Trump ad- the Gulf of Mexico in an area that commodity-trading firms in exchange for edge of the alleged bribery. One meeting to fi nd new partners options for making and receiving ministration hopes to convince stretches from US coast to the Yu- fuel-oil contracts or better fuel-oil contract Among the Petrobras employees named by in- started at 11pm, one person said. payments. Venezuela’s military brass to catan Peninsula in Mexico, accord- terms with the traders. The investigation is an vestigators is 39 year-old fuel oil trader Rodrigo PDVSA employees are also work- “PDVSA is desperately scram- abandon the autocratic leader and ing to cargo-tracking and market outgrowth of the long-running Carwash bribery Berkowitz, who worked in the Petrobras off ice ing furiously to entice vendors to bling to find, through traders accelerate his exit. But the tack intelligence company Kpler. Some scandal in Brazil, which has so far ensnared in Houston until December 5. Berkowitz, who sell them refi ned products such as suppliers and clients, gasoline comes with great risk: The oil in- of these vessels, like the Monterey, scores of business leaders, including several didn’t respond to a phone call seeking comment naphtha that are critical to keeping and naphtha to import, and also dustry is essentially Venezuela’s loaded with 400,000 barrels of Petrobras executives, and politicians including on Thursday, is currently on an Interpol list its ailing industry working. As the outlets for its crude,” said Fran- lone source of hard currency, and crude for the Chevron Pascagoula former President Luiz Inacio Lula da Silva. of wanted people. Petrobras fired him on the supply of those products falls un- cisco Monaldi, an expert on Latin the sanctions could wind up exac- refi nery in Mississippi, have been Brazil is voluntarily sharing information with US same day the Brazilian police operation was der the sanctions, early signs of a American energy policy at Rice erbating the humanitarian crisis in fl oating for almost 40 days now, authorities, since some of the alleged activity announced. gasoline shortage have surfaced in University in Houston. “These the country. according to ship-tracking data the countryside. are the kind of situations where A PDVSA press offi cial down- compiled by Bloomberg. Gulf Times Sunday, February 10, 2019 7 BUSINESS Two titans of central banking will bequeath future to mere mortals Mario Draghi and Mark Carney Goldman Sachs and finance ministries, have less than a year left; ECB and and eventually rose to the top of the BoE chiefs are again facing diff icult central banks in Canada and Italy – outlooks before going further still. Each has chaired the Financial Stability Board, set Bloomberg up after the crisis to aid international Frankfurt/London banking regulation. They both know how to make an entrance. Mario Draghi and Mark Carney, soon Within six weeks of starting his job in to give up their posts, will cast a long Frankfurt’s Eurotower in November shadow over central banking for many 2011, Draghi reversed two interest-rate years to come. increases engineered by Jean-Claude Draghi, who leaves the European Trichet – very much like Carney, who Central Bank in October, gets credit slashed borrowing costs some four for almost single-handedly restoring and a half weeks into his term. At confidence in the euro in the sovereign the Bank of Canada he popularised debt crisis. Carney, the first foreign- forward guidance, a tool central born governor of the Bank of England, banks adopted widely after they had was left to reassure Britons in the exhausting interest rates and asset power vacuum that emerged after they purchases. voted to leave the European Union. Language is also Draghi’s legacy. The two face similar challenges in their “Whatever it takes.” Three words that final months in off ice. Eff orts to escape put a stop to speculation against the the emergency stimulus measures euro in 2012. The pledge caught most put in place in the financial crisis are of his ECB peers by surprise because running into particularly uncertain no plan was in place to underpin its outlooks – Carney warns of “the fog of credibility. Brexit” and Draghi has to cope with a Both men drew praise for their politically induced slowdown. responses to crisis, and Carney’s role “The responsibilities of the ECB and in preventing a recession in Canada the BoE are likely to remain quite earned him the move to Britain in challenging going forward – I don’t July 2013. As Draghi defended his think these jobs are going to be by any bond purchase program against means less demanding in the future,” governments, academia and the said Federal Reserve governor Lael public, the Canadian was in charge of Brainard in an interview. She praised expanding the BoE’s role in financial Draghi and Carney’s acumen in stability. He upped its staff considerably, navigating the crisis, building support while also navigating the Scottish for their policies and making their and EU referendums and two general organisations more accountable. elections. The big question now is who will fill “Draghi and Carney are extraordinary wandered in and out of the political For his part, Carney faced repeated hands by making announcements voted to cut interest rates. With their shoes. The UK says it will look technocrats who deeply understand fray. criticism for his role in the debate on without consulting them. The ECB’s Brexit, the BoE’s star may now be at candidates both at home and the theory and process of central Draghi has been actively involved the EU referendum, warning before the quantitative-easing programme waning while the ECB will be growing abroad, though it’s unclear who might banking,’’ said Nathan Sheets, former in shaping Europe’s response in the vote that a disruptive exit could spark a came about after Draghi made public as new countries join. be in mind. The ECB president will undersecretary for international aff airs worst moments of the crisis. But recession. comments that left no room for “The ECB just by nature of its size and be decided in horse-trading among at the US Treasury. They both have when Greece threatened to crash “It would be a good thing if the next alternatives. centrality will continue to be a major European nations, with two Frenchmen, “a sixth sense as to how monetary out of the euro 2015, he stayed in the governor wasn’t put in a position Just after the 2016 referendum, player,’’ said former BOE policy maker two Finns and a German among the policy fits into the broader political background, stretching the rules of his where they were drawn into politics as Carney hinted at a loosening in Adam Posen. “Any form of Brexit at potential contenders. environment” that “really sets them own institution to keep money flowing much,” said David Miles, a former BoE monetary policy before meeting the all will reduce” the UK central bank’s Carney and Draghi both started in apart.” to ensure it was governments’ decision policymaker. rest of the committee. Two months status. “Its role is going to shrink academia, built their resumes at Throughout their terms, they’ve whether or not to pull the plug. Both chiefs forced their colleagues’ later, policymakers unanimously hugely.” Bloomberg QuickTake Central bank independence By Christopher Condon central bank. Trump has blamed the Fed Washington for stock market declines and in November said that he was “not even a little bit happy” with his choice of Jerome Powell to head After inflation ran amok in the 1960s and 1970s, the bank. In Turkey, President Recep Tayyip many central bankers fought for, and won, Erdogan, who holds the unorthodox belief more freedom to control interest rates and that high interest rates cause rather than set other monetary policy decisions without curb inflation, has repeatedly called for political interference. Their shields began to restraining borrowing costs. Central banks crack after the 2008 financial crisis. In the in Pakistan, Russia, Nigeria, South Africa years since the bankers deployed trillions of and Thailand have also been pressured by dollars to save the global financial system, the politicians in recent years. public’s faith in their work has been fading. The Background Critics say independent central banks are too secretive and put commercial banks’ interests The modern notion of central bank before taxpayers’, so it’s time for more public independence evolved over time. Following control. Central bank off icials counter that they the Great Depression, the US Congress need to be free from political pressures to do gave the Fed more power to set monetary their job of containing inflation, promoting full policy. Still, it wasn’t free from political arm- employment and maintaining financial stability. twisting: Both Presidents Lyndon Johnson But the “trust us” mantra is increasingly a and Richard Nixon pressured Fed chairs tough sell. to keep interest rates low. In the 1970s, The Situation Congress clarified the Fed’s mandate — to strive for maximum employment, stable independence gained ground elsewhere. The to coordinate policy with the government, a of the current arrangements add that the Fed’s Central banks everywhere are struggling prices and moderate long-term interest Bank of England was granted operational move some called an alarming attack on its reports to Congress and financial audits by the to stay above politics. In December, the rates. Fed chairman Paul Volcker’s drastic independence in 1997. And the European independence. US Government Accountability Off ice provide governor of the Reserve Bank of India efforts to curb high inflation helped cause Central Bank, which oversees interest rates The Argument oversight. Nobel laureate Joseph Stiglitz has resigned just weeks after the government the recession of 1981-82 and attracted fierce for all countries sharing the common euro argued that economies with independent moved to exert more control over the RBI’s criticism and even, as he reveals in his book, currency, was independent starting from its A widely cited 1993 paper by Alberto Alesina central banks don’t always do better in regulatory powers and how to use its excess an order from Ronald Reagan’s chief of staff creation in 1998. But in recent years there’s and former US Treasury Secretary Lawrence financial crises. As central bankers have turned capital. In July, US President Donald Trump not to raise rates ahead of the 1984 election. been movement in the opposite direction. Summers concluded that independent central to new tools such as bond-buying to juice their began criticising the Federal Reserve’s (Volcker left that meeting without saying In the US, the Fed has been blamed for banks are better at controlling inflation than economies, they’ve taken on more of the roles interest-rate increases, breaking with more a word.) Volcker’s efforts were ultimately failing to foresee and prevent the financial central banks under political control. Shielded that normally have fallen to lawmakers and than two decades of White House tradition credited with bringing prices under control crisis and for bailing out some of the very from pressures of day-to-day politics, the paper government spending. The broader their tasks of avoiding comments on monetary policy and setting the scene for steady economic financial institutions that contributed to the noted, they can take a longer view and make and the wider the eff ects, the more politics is out of respect for the independence of the growth. As a result, the case for central bank disaster. The Bank of Japan agreed in 2013 unpopular decisions to get there. Supporters bound to intrude. Gulf Times 8 Sunday, February 10, 2019 BUSINESS Jaguar Land Rover to shun bonds as China prompts shock writedown Bloomberg One major problem facing JLR in China London is an ineff ective dealer network, according to a presentation from the UK business. Only 18% of outlets are in so-called tier- Jaguar Land Rover, reeling from a $4bn one cities like Shanghai and Beijing, and writedown, a slump in China sales and more than one-third have been open for uncertainty around Brexit, said conditions three years or less. aren’t right for it to borrow from the bond The company now plans to overhaul market and that it’s seeking alternative the operation, cutting back on deliveries funding. to reduce stock and investing in measures The luxury automaker needs to raise to boost its brand, logo and slogans. $1bn within 14 months to replace matur- Executives said on a conference call ing bonds, while feeding an investment with investors that it’s not possible to programme for electric cars that’s burn- predict when China volumes will begin to ing through cash. recover, highlighting international trade To support its needs, JLR could tensions and how much stimulus the increase a receivables facility or turn to state chooses to provide as determining other bank financing, with further options factors. including leasing assets and tapping ex- JLR says it can still grow global sales in port credit, Treasurer Ben Birgbauer said fiscal 2020 with the help of other markets in an interview. and the launch of revamped Range Rover JLR’s owner Tata Motors Ltd shocked Evoque. investors Thursday when it revealed the Prior to this week concerns about JLR’s extent of the problems its UK arm is hav- performance had centred on the impact ing in China. of Brexit and a government clampdown Sales of Jaguar sports cars and Land on diesel-powered vehicles in depressing Rover SUVs dropped 35% in the world’s UK car sales. biggest auto market in the nine months Royal London Asset Management had to December 31, sending the unit to a already reduced its exposure to JLR in £273mn ($354mn) loss and knocking as response to “Brexit-specific risks and their much as 30% off Tata stock. ability to maintain access to the financial “Market conditions presently are less markets,” said head of global high yield favourable in general and our bonds are Azhar Hussain. trading below par, reflecting our recent Jaguar Land Rover, reeling from a $4bn writedown, a slump in China sales and uncertainty around Brexit, said conditions aren’t right for it to borrow from the bond Appetite among investors for riskier financial performance,” Birgbauer said market and that it’s seeking alternative funding. The luxury automaker needs to raise $1bn within 14 months to replace maturing bonds, while feeding an European debt has yet to bounce back by telephone. “We have always said we investment programme for electric cars that’s burning through cash. after volatility swept through the market monitor the debt market and look to issue at the end of last year. debt when market conditions are more force, as it responds to slowing sales. charge of £200mn in the current quarter. 8.9%, according to prices compiled by Birgbauer said. Remaining resources in- There’s been very few sales of junk favourable.” That’s on top of the 1,500 people who JLR’s 4.5% bonds maturing January Bloomberg. clude a £1.9bn undrawn credit facility and debt in Europe this year and high-yield Britain’s biggest carmaker is slashing left the company in 2018. 2026 have dropped to a low of 77 cents The company is not planning to change £2.5bn of cash, based on the quarterly spreads remain much wider than prior to 4,500 jobs, or about 10 % of the work- The measures will trigger a one-off on the euro, equivalent to a yield of about its preference for unsecured financing, numbers published by Tata. their fourth-quarter blowout. Pakistan lowers US-China trade talks to focus economic growth on intellectual property estimate Reuters Washington/Beijing Reuters Islamabad S negotiators are preparing to press China next week on long- Ustanding demands that it reform akistan has revised its eco- how it treats American companies’ nomic growth fi gures for intellectual property in order to seal Pthe last fi nancial year to a trade deal that could prevent tariff s 5.2% from a previously reported from rising on Chinese imports. fi gure of 5.8%, after a sharp cut in A new round of trade talks begins in the fi gure for large-scale manu- Beijing tomorrow, after the most recent facturing, the statistics offi ce said. set of negotiations concluded in Wash- The revision of fi gures report- ington last week without a deal and ed by the previous government with the top US negotiator declaring underlines the economic head- that a lot more work needed to be done. winds facing Pakistan which is A White House offi cial said on Fri- holding discussions over a possi- day that preparations were under way ble bailout from the International and the talks would continue to focus Monetary Fund. on pressing Beijing to make structural When the original estimate reforms. was reported in April by the gov- The White House announced a time- ernment of then Prime Minister frame for the Beijing talks in a state- Shahid Khaqan Abbasi, it was ment. hailed as the strongest growth in It said lower-level offi cials will kick 13 years. The offi ce, in a statement off the meetings tomorrow, led on the issued after a meeting of the na- American side by Deputy US Trade tional accounts committee late on Representative Jeff rey Gerrish. Friday, said gross domestic prod- Higher principal-level talks will take uct in the 2017-18 fi nancial year to place Thursday and Friday with US June rose 5.22% compared with a Trade Representative Robert Light- US President Donald Trump, US Secretary of State Mike Pompeo, Trump’s national security adviser John Bolton and Chinese President Xi Jinping attend a working dinner previously reported 5.79%. hizer and Treasury Secretary Steven after the G20 leaders summit in Buenos Aires (file). US negotiators are preparing to press China next week on longstanding demands that it reform how it treats American Growth in the industrial sec- Mnuchin. Lighthizer, named by Trump companies’ intellectual property in order to seal a trade deal that could prevent tariff s from rising on Chinese imports. tor was revised to 5.01% from a to spearhead the process after agreeing previously reported 5.8% in the a 90-day truce in the trade war with Lighthizer said last week after talks at at the last round of talks in Washington. plan to meet with Chinese President side is expecting a draft of something provisional estimate. The biggest Beijing, has been a strong proponent the White House. It gave no details. Xi Jinping before that deadline, damp- next week.” change came in the large-scale of pushing China to make such reforms “I’m by no means predicting suc- China’s ambassador to the United ening hopes that a trade pact could be Another source who had been briefed manufacturing segment, which and end what the United States views as cess; there is a lot of work that has to be States, Cui Tiankai, said in Michigan on reached quickly. on the talks said a lot of work also need- saw growth revised to 5.01% from unfair trade practices including steal- done,” he said. Friday that a “zero-sum game” mind- “We are hearing the list of issues the ed to be done on an enforcement mech- 6.13% previously. ing intellectual property and forcing The two sides are trying to hammer set was destructive to China-US ties, two presidents will ultimately have to anism for a potential deal. In the agriculture sector, US companies to share their technology out a deal ahead of the March 1 dead- the state-run news agency Xinhua re- make decisions on is being narrowed, so “If there’s some indication that growth was revised to 3.7%, from with Chinese fi rms. line when US tariff s on $200bn worth ported. that’s an indication that things are be- they’re making progress on subsidies, a previous 3.81%, while in serv- China has denied it engages in such of Chinese imports are scheduled to in- Chinese and US companies should ing addressed. forced tech transfer and the constella- ices, growth was revised to 5.78% practices. crease to 25% from 10%. compete as well as cooperate with each But we’re also hearing that there’s a tion of issues there and an enforcement from 6.43% previously. “The United States is a great produc- China’s Commerce Ministry said in a other, Cui said. lot of work to be done,” said Erin Ennis, mechanism, that would be interesting. Growth in the current year is er of technology, and innovation, and statement yesterday that the two coun- “The real story in business is not that senior vice president of the US-China The word coming out of this last expected to slow further to 4% know-how, and trade secrets. tries would have a “further deep dis- black and white,” the report quoted him Business Council, who says she has round was that there was very limited, this year, according to an IMF And we have to operate in an environ- cussion on issues of mutual concern” as saying. spoken with offi cials in both the United measly progress on those issues,” the forecast from November. ment where those things are protected,” on the basis of what they talked about Trump said on Thursday he did not States and China. “I don’t think either source said. Pakistanis having offshore accounts can invest in diaspora bonds Internews The decision may promote dollarisation individuals having Computerised that were not already in the Pakistani channelling their money due to the legal one year, according to the off icial data. Islamabad of the economy as resident Pakistanis, National Identity Cards” are eligible to system. protection available under the Foreign The huge foreign swap exposure has who would opt to invest in Pakistan invest in the bonds. According to information shared by the Currency Protection Ordinance of 2001. turned the central bank’s reserves Banao Certificates, will be paid up to State Bank of Pakistan chief spokesman Organisation for Economic Cooperation “No person holding a foreign currency negative. The government of Pakistan has 6.75% return in dollars. Abid Qamar confirmed that the and Development (OECD) with the account shall be deprived of his right to In addition to the $7.55bn swap permitted resident Pakistanis, having It will also help meet the core objective resident Pakistanis having bank Federal Board of Revenue (FBR), there hold or operate such an account or in exposure, the SBP owes $3bn to China, off shore bank accounts, to invest in of attracting dollars from those sources accounts outside Pakistan could invest are 152,000 off shore accounts of any manner be restricted temporarily or $3bn to Saudi Arabia, $1bn to the UAE diaspora bonds, which may allow that are already not part of the central in Pakistan Banao Certificates. Pakistani citizens. permanently to lawfully sell, withdraw, and $700mn to other sources, according people to channel their money from bank’s reserves. He said the remittance for investment The government has not inserted any remit, transfer, use as security or take to the sources. off shore tax havens and foreign The Pakistan Tehreek-e-Insaf (PTI) in the certificates would originate from safety clause into these rules, which out foreign currency there from within This has resulted in negative $7bn net currency accounts maintained with government had hoped that overseas the investor’s own account outside could stop people from investing black or outside Pakistan,” says Section 3 of foreign currency reserves of the SBP. local banks. Pakistanis would help in a big way Pakistan. money in Pakistan Banao Certificates. the ordinance. The government has launched the Pakistanis have nearly $7.5bn in foreign to overcome the external-sector Instead of only inviting overseas The accounts maintained by resident The central bank has already used diaspora bonds to raise funds for currency accounts but domestic problems. Pakistanis, now resident Pakistanis Pakistanis can be used to invest in these FE25 accounts to meet its balance of external financing needs. commercial banks pay less than 1% But it seems that the PTI has lost hope can also invest in the three-year paper certificates, according to legal experts payments needs. But up to 6.75% return is higher than the interest on these deposits. and has decided to allow resident at 6.25% interest rate and in five-year and banking industry people. As of December 2018, the central bank price at which Pakistan issued the last The government’s decision to allow Pakistanis to invest in Pakistan Banao bonds at 6.75% return. Similarly, the money parked in foreign borrowed $7.55bn from commercial two bonds of the same tenor. resident Pakistanis to invest in diaspora Certificates. The minimum investment size is $5,000 currency accounts opened with banks under the forward and currency The bonds have been launched to bonds has off ered an opportunity In the past, resident Pakistanis were not with no upper limit. commercial banks under the State Bank swap arrangements, according to the raise funds for current account deficit to these people to take their money allowed to invest in dollar-denominated The lucrative rates may also fetch a of Pakistan (SBP) Circular FE25 can also SBP data. financing as gross off icial foreign abroad and bring it back through an euro and sukuk bonds. portion of remittances and export be channelled by local Pakistanis to earn The central bank was required to return currency reserves of the central bank off shore account to earn up to 6.75% But Rule 6 (a) of Pakistan Banao receipts, which would partially aff ect the hefty profits. $1.76bn within one month, $3.32bn in stood at $8.2bn, which are not enough interest. Certificates’ rules says, “Pakistani primary objective of attracting dollars The SBP cannot bar these people from two months and remaining $2.5bn in for even seven weeks of imports. Gulf Times Sunday, February 10, 2019 9 BUSINESS American dominance in tech wealth creation upended by Asian wave Bloomberg into technology giants and it’s cre- qualify are TAL Education Group Melbourne ated a lot of wealth for the found- founder Zhang Bangxin ($5.5bn), ers.” drone-maker Frank Wang ($5.2bn) When the Bloomberg Billion- and Bitmain Technologies co- shift is underway among aires Index began in 2012 with a founder Micree Zhan ($5.2bn). the world’s richest young list of the world’s 40 richest peo- Another Chinese technology A entrepreneurs. ple, three were self-made and un- entrepreneur, Meituan Dianping Six of the world’s 10 wealthiest der the age of 40: Google founders co-founder Wang Xing, sits just self-made billionaires age 40 and Sergey Brin and Larry Page and Fa- outside the Top 10 with a $4bn under are from the Asia-Pacifi c cebook Inc’s Mark Zuckerberg. fortune. region, according to the Bloomb- Brin and Page are too old now, Mike Cannon-Brookes and erg Billionaires Index. but Zuckerberg tops the list of the Scott Farquhar, the Australian Four are Chinese and two are world’s richest self-made young- co-founders of US-listed soft- Australian. sters with a $65.5bn fortune. ware company Atlassian Corp, are Just three are from the US, which Joining him are Shanghai resi- worth $6.7bn each. used to dominate the list. dent and e-commerce entrepre- This diversifi cation of the “From a technology perspec- neur Colin Huang ($13.7bn), who world’s youngest billionaires is tive, in the past fi ve years China rose to second from third in 2018, a leading indicator of the shift in has come on in leaps and bounds,” as well as Facebook co-founders global wealth toward Asia. said Allan Chu, head of technolo- Dustin Moskovitz ($11.8bn) and Of the 500 people on the gy, media and telecom for China at Eduardo Saverin, a Brazilian living Bloomberg Billionaires Index to- Credit Suisse Group AG. “You’ve in Singapore ($9bn). day, 41 are from China compared seen startup companies develop The other Chinese billionaires to with 31 at the end of 2016. Garuda Indonesia and Go-Jek Trump’s focus on cars ignores team up for e-commerce a large slice of Japan economy logistics Bloomberg Jakarta Bloomberg Tokyo PT Garuda Indonesia is in discus- sions with ride-hailing and e-com- t’s a safe bet you won’t hear Presi- merce app PT Go-Jek Indonesia dent Donald Trump talk much about to off er logistics support, chief Iservices as the US and Japan prepare executive off icer I Gusti Ngurah for upcoming trade talks. Askhara Danadiputra said. For him, it’s all about cars, and to a Talks on a partnership will lesser extent farm products such as beef conclude by March, he said in a – old-school trade goods that will be text message. the US focus during the talks. The two companies are work- Trump has threatened tariff s on auto ing to create a new business imports while insisting on greater ac- model amid the boom in online cess to Japan for US carmakers. shopping, he said. What gets little mention by the White The news was reported earlier House is that the US has quietly dou- by Reuters. bled its surplus in services trade with The partnership would enable Japan over the past decade as American goods ordered via Go-Jek’s app companies such as insurers and tele- to be delivered across cities in communications fi rms grew their busi- Southeast Asia’s biggest economy nesses in Japan. using Garuda’s fleet. A greater focus on those opportuni- “Garuda, Go-Jek plan to partner ties would make sense, given that man- in a new way of integrated logis- ufacturing accounts for only 11% of the tics business,” Danadiputra said in US economy. his text message. Digital economy companies includ- A collaboration with ing Google and Facebook have also done state-owned Telekomunikasi well in Japan over the past decade, said Indonesia’s managed e-payment Christopher Lafl eur, chairman of the system LinkAja will be part of the American Chamber of Commerce in new business model, he added. Japan. “This will be a huge new business The importance of delivering servic- in integrated logistics in Indonesia es, including in the Internet space, will and regional.” continue to grow even as Japan’s popu- Garuda is also in talks with state lation slowly declines, he said. airport operator PT Angkasa Pura Last year the ACCJ submitted a set of II to start building a cargo village objectives to the US Trade Representa- at Jakarta’s main Soekarno-Hatta tive that included greater access in sec- International Airport in June to tors such as fi nancial services and elec- improve the country’s logistics tronic payment services, Lafl eur said. eff iciency, the CEO said. For now, though, the US’s focus re- The talks come after Garuda mains on cars and agricultural products. agreed in November to take over Helping fi nancial companies expand the operations of PT Sriwijaya Air, their market share in Japan wouldn’t giving the national carrier control have as much impact in US “rust belt” sushi Takeda, chief economist at Itochu Yet the realities of employment in the ance was the dominant employer in 34 ices defi cit might help it blunt the US of 51% of Indonesia’s airline mar- states on election day as wrenching Ja- Corp. “Trying to strengthen that part of US also argue for a stronger interest in states, according to the US Bureau of push on goods. ket – the fifth largest in the world. pan’s car market open a bit wider. US trade would probably never occur to expanding services exports. Labour Statistics. So could Japan’s narrowing goods Garuda and Lion Air Group, “If you look at how the service sec- him.” Back in 1990, manufacturing was the There is no start date for US-Japan trade surplus with the US, which de- which lost one of its planes in a tor has performed, it’s more logical for Of course, the latest services surplus leading employer in most US states, fol- trade talks, as the US remains preoccu- clined by 8.1% in 2018, thanks to weaker crash late last year, dominate that the US to focus on that, but that’s not with Japan is only around a third of the lowed by retail trade. pied with its talks with China. exports of cars and auto parts to Ameri- market. the president’s support base,” said At- size of the goods defi cit. By 2013, health care and social assist- For Japan, its growing bilateral serv- ca and rising imports of aircraft and oil. India’s forex reserves reclaim $400bn-mark Reliance Group companies taking IANS Mumbai legal action to protect stakeholders India’s foreign exchange (forex) reserves has again crossed the $400bn-mark after a period of around five IANS cessive, and against the process and on invocation of pledge or otherwise. months. Mumbai requirements of the respective bor- The statement said group company “Reserves crossing the $400bn-mark after 5 months is rowings’ documentation. Reliance Communications (RCOM) an indication that RBI is building up the reserves. “The illegal, motivated and whol- has announced plans for debt resolu- It seems they are buying US dollars to augment nil Ambani-led Reliance ly unjustifi ed action by the above tion through the National Company reserves,” Anindya Banerjee, deputy vice president for Group companies yesterday two groups has precipitated a fall of Law Tribunal (NCLT) and there was currency and interest rates with Kotak Securities, told Asaid they will take all appro- Rs130,000mn, an unprecedented no adverse impact of this unrelated IANS. priate legal steps against L&T Finance nearly 55%, in market capitalisa- RCOM proposal on Reliance Capital “Till recently, the RBI was engaged in defending the to protect and enhance the value of tion of Reliance Group over just Ltd, Reliance Infrastructure Ltd and rupee and arresting the currency’s fall.” their respective stakeholders. these four days, causing substantial Reliance Power Ltd. According to the Reserve Bank of India (RBI)’s The group companies which have losses to 7.2mn institutional and re- As per the statement, Reliance weekly statistical supplement released on Friday, decided to take independent legal tail shareholders, and harming the Capital Ltd, Reliance Infrastructure the reserves rose $2.06bn during the week ended recourse include Reliance Infrastruc- interests of all stakeholders,” the Ltd and Reliance Power Ltd (and their February 1. ture, Reliance Capital and Reliance statement said. various subsidiaries) are performing The overall forex reserves increased to $400.24bn Power. According to Reliance Group, satisfactorily on all operating param- from $398.17bn reported for the week ended January The development comes a day af- the manner of conduct of the above eters, and there is no change what- 25. ter Reliance Group said a few NBFCs, open market sales, without any or- soever on any aspect as compared to India’s forex reserves comprise Foreign Currency substantially L&T Finance and cer- derly market disposal through a the position prevailing prior to these Assets (FCAs), gold reserves, Special Drawing Rights tain entities of Edelweiss Group, bid or structured process for shares sales. (SDRs) and India’s position with the International have invoked pledge of listed shares comprising the holding of the pro- On its part L&T Finance on Friday Monetary Fund (IMF).On a weekly basis, FCAs, the of Reliance Group and made open moter group, is also illegal on sev- refuted and denied allegations it had largest component of the forex reserves, edged market sales of the value of approxi- eral counts like price manipulation, granted loans against pledge of shares higher by $1.28bn to $373.43bn during the week ended mately Rs4,000mn from 4.2.2019 to insider trading, front running and to Reliance Group companies. February 1. 7.2.2019. market abuse. “As per loan and pledge agree- Besides the US dollar, FCAs consist of 20-30 per cent of The market capitalisation of the The Reliance Group claimed the ments, borrower did not cure various other major global currencies. three companies were badly impact- sale by L&T Finance and others is in events of defaults including provid- The RBI’s weekly data showed that the value of the ed due to the open market sales. violation of various regulatory provi- ing margin for shortfall in the stipu- country’s gold reserves rose by $764.9mn to $22.68bn. The three companies together have sions, including the SEBI (Prohibition lated security cover. The SDR value inched up by $6.2mn to $1.47bn, while Anil Ambani-led Reliance Group companies yesterday said around 4.675mn shareholders. of Fraudulent and Unfair Trade Prac- Despite various notices in the the country’s reserve position with the IMF rose by they will take all appropriate legal steps against L&T Finance On Friday, Reliance Group said: tices) Regulations, which are applica- past few months, events of defaults $11.2mn to $2.65bn. to protect and enhance the value of their respective “The purported exercise of rights to ble to all persons (including NBFCs) continued,” L&T Finance said in a stakeholders. enforce the security is illegal and ex- dealing in listed securities, whether statement. Gulf Times 10 Sunday, February 10, 2019 BUSINESS Brexit Britain is a foreign country to world looking on bemused Bloomberg city of Sunderland is now the country’s to proximity and ease of access to the EU Tokyo largest. market. Some 1,000 Japanese firms now oper- The draws included the English- ate in the UK, from Hitachi Ltd to Toyota speaking environment and schools, and As ambassador to the UK, Yoshiji Nogami Motor Corp, employing about 160,000 the financial infrastructure of the City of helped arrange some key Japanese people. London. investments and grew to see the British Yet manufacturing ties may end up There are, however, plenty of signs people as pragmatic and practical. in tatters if the UK suddenly leaves the that risk-averse Japanese companies are That was until the Brexit vote. European customs union, cutting off the unwilling to bear more uncertainty. “Are you out of your minds?” was the lifeblood of supply chains that allows the Hitachi and Toshiba have both dropped former diplomat’s reaction when he heard likes of Nissan to operate. plans to build nuclear plants in the UK the result of the 2016 referendum. “I knew Nogami, who was Japan’s ambassador over the past few months. at the time there would be a mess,” he to the UK from 2004 to 2008 and now Electronics maker Panasonic has recalled. works as an adviser to Mizuho Bank, said moved its European headquarters from Nissan Motor Co’s decision to scrap that he finds the attitude of places like near London to Amsterdam, while com- plans to build the X-Trail SUV model at its Sunderland “incomprehensible.” petitor Sony is set to follow suit. plant in northeast England is one example The city voted emphatically to leave On Monday, Business Secretary Greg of the fallout from the vote to leave the the EU even after being warned of the Clark warned Parliament’s failure to agree European Union. potential consequences. on Brexit is holding back investment in With no deal yet agreed with the EU Yet Japan’s industrial presence in the the UK. “Japanese companies’ UK subsidi- – the destination for most of the output UK, including car factories that produce aries will undoubtedly encounter all sorts from Japan’s flagship firms in Britain – the half the vehicles manufactured, has done of problems as a result of the UK leaving threat of more blows is real and growing. remarkably little to sway the course of the EU,” said Kiyohiko Toyama, a lower The feeling of incredulity at the UK’s Brexit decision-making. house member of the ruling coalition Ko- self-inflicted predicament is reflected Both Prime Minister Shinzo Abe’s meito party and a director of the foreign across the globe as the world watches appeal for Britons to vote to remain in aff airs committee. the country convulse over how to follow the EU in 2016 and his public backing of Toyama, who graduated from a doctor- through on Brexit. Theresa May’s Brexit plan during a visit to ate programme at Bradford University in Prime Minister Theresa May insisted London last month went unheeded. the UK, has urged the Japanese govern- as recently as Thursday that she will Abe and German Chancellor Angela ment to take steps to support these firms. deliver Brexit on time, but interviews with Merkel agreed in Tokyo this week that a Still, Toyama and others welcome pollsters, trade and government off icials Brexit without a UK-EU agreement must UK attempts to repair its profile in Asia from partner countries outside Europe be avoided as the clock ticks down to the through a more continuous military pres- show they regard an EU divorce as less The Panasonic logo is seen atop the Panasonic Centre Tokyo showroom. The Japanese electronics maker has moved its March 29 deadline. ence, and its eagerness to join a Pacific than optimal. European headquarters from London to Amsterdam. With still no sign of an accord that can regional trade deal. From Australia to Canada, the well of bridge the schism in the UK Parliament, The presence of the UK could even goodwill toward the UK is tangible. has more pressing matters than the fate on for so long that frankly everybody has she conceded that “there’s still a lot of some in Japan are still holding out for a eventually help attract the US back to the Yet it is more than matched by bemuse- of its former colonial master more than 70 had enough,” said David Dawson, chief people who just find it very diff icult to way to be found to reverse Britain’s depar- Trans Pacific Partnership, Toyama said. ment at the notion that a more “global years after independence, according to a executive off icer of the British Chamber of comprehend how we got to that point” ture from the bloc. That, though, is not the view in Aus- Britain’’ can be more successful outside ruling party off icial. Business in South Africa. of leaving the EU, she added: “We are, if “Hopefully Brexit will never take place,” tralia. the EU than it was as a leading member Indeed, Indians would be unlikely to In Canada, however, there are signs anything, opening up to new trade op- said Yorizumi Watanabe, a former Foreign Trade Minister Simon Birmingham of the richest trading organisation on the name Britain among the five most impor- of a bright spot, with the UK adding staff portunities.” Ministry trade negotiator who is now a rubbished Britain’s aspirations to join the planet. tant countries to them, said Sanjay Kumar, to its mission to take advantage of what Japan recognised the opportunities of professor at Keio University. “A no-deal TPP trade group after Brexit, saying the The widespread lack of understanding a polling expert and director of the Centre UK High Commissioner Susan le Jeune Britain’s EU membership more than three Brexit would be catastrophic” for Japa- group’s 11 members had other priorities, for the UK’s chosen path suggests that for the Study of Developing Societies in d’Allegeershecque said was huge interest decades ago; it can claim to have rescued nese manufacturers with UK factories, he according to the Sydney Morning Herald. trade deals may be harder to strike than New Delhi. in Brexit from Canadian firms. a dying UK car industry through invest- added. The UK, he said last month, is “some May’s government is currently promising. “This thing – whether you are in the UK “We will not be closing in on ourselves,” ment beginning in the 1980s. Japanese firms began investing in the distance from the Pacific, the last time I In India, for example, the government or in South Africa – has been dragging she said in an interview last month. While The Nissan car plant in the northeast UK for a variety of reasons, not all related checked.” RBI accepts getting Power struggle at SoftBank infl ation forecasts wrong puts Son’s vision in question Bloomberg his behalf. But what he really did was “There is a whole process to growing Tokyo put two peers of equal stature in con- these companies from startups to cor- Bloomberg fl ict.” Son already oversees a vast empire porations, and Marcelo has a lot of ex- Mumbai with dozens of stakes in startups in- perience to manage that transition.” asayoshi Son’s grand vision for volved in ride-hailing, satellites, indoor Inserting himself into the Vision SoftBank Group Corp has been farming, construction, dog-walking Fund’s operations proved to be a chal- ndia’s central bank said its in- Mdealt a setback by an internal and cancer detection. lenge. Early on, his attempts to join con- fl ation projection model isn’t power struggle between two of his clos- He has said he plans to raise a new ference calls to discuss deals in process Iperfect and it’s working to im- est lieutenants. $100bn fund every two or three years. were stymied by scheduling – they took prove it. Marcelo Claure was named chief op- Yet he has struggled to persuade in- place in the middle of the night Claure’s That admission came from Vi- erating offi cer in May with the goal of vestors of the potential in this push. time. ral Acharya, the Reserve Bank of improving operations across SoftBank SoftBank Group shares trade at a dis- A source close to the Vision Fund said India’s deputy governor in-charge portfolio companies and getting start- count to the value of its stakes in Aliba- there was no attempt to keep Claure out of monetary policy, in response to ups such as Uber Technologies Inc and ba Group Holding Ltd and other public and it was simply the best possible time criticism about how the central WeWork Cos Inc to work together. companies, despite a buyback-fuelled for the fund’s teams, split between Lon- bank largely overstates infl ation. Yet he clashed from the start with jump in his shares this week. don and San Carlos, California. The central bank has repeatedly Rajeev Misra, who oversees SoftBank’s Claure was supposed to lead the way Claure convinced Son to hold a week- revised its projections for headline $100bn Vision Fund and many of Son’s in closing that gap. ly strategy call with himself, Misra and infl ation, with the latest forecast most important investments, according Son fi rst teamed up with the Bolivi- Katsunori Sago, a Japanese banker who at 2.8% for the fourth quarter of to people familiar with the matter. an-American in 2013 when the Japanese was named chief strategy offi cer in June. the current fi nancial year and to After months of disagreements, Mis- company acquired a majority stake in At fi rst, Claure would lay out his ide- 3.2% to 3.4% in the fi rst half of the ra won an important dispute. Brightstar, a phone distribution busi- as, backed up by detailed presentations, year beginning April. The staff Claure has been hiring to ness Claure founded. only to fi nd that Misra mostly spoke off In December, the RBI had fore- improve operations were shifted over Masayoshi Son, chairman and chief executive off icer of SoftBank Group, gestures Son elevated him the next year to run the cuff . cast infl ation in a range of 2.7% to work for Misra at the Vision Fund in- as he speaks during a news conference in Tokyo. Son’s grand vision for SoftBank Sprint, where he led a turnaround of the Claure took it as a sign that Misra was to 3.2% for the second half of the stead, said the people, asking not to be Group Corp has been dealt a setback by an internal power struggle between two of wireless operator and ultimately agreed not making an eff ort to collaborate. year to March 31, and 3.8%-4.2% named because the matter is private. his closest lieutenants. to sell the business to rival T-Mobile US Even as the tension between the two in the fi rst half of fi scal 2020, The employees, numbering about Inc. He was named SoftBank COO last men mounted, they maintained an ami- with risks “tilted to the upside.” 40, were notifi ed by e-mail on Febru- Tokyo with his family, he is considering unprecedented push into technology year, then moved to Japan in December. cable public relationship. The central bank aims to keep in- ary 1, including some who were hired so moving back to Miami. investments as a strategy for getting the The entrepreneur’s experience made At a Vision Fund off site meeting in fl ation at or around 4% over the recently they hadn’t even started work Claure and Misra, in a joint interview, world’s best startups to co-operate. him the perfect candidate to execute Miami late last year, Claure and Misra medium term. yet. downplayed any confl ict and said they He dubbed this his “Cluster of No 1s” Son’s vision. heaped praise on each other in their Acharya, who voted against The push for synergies at the Vision are working together eff ectively. strategy, which in Masa-speak means Claure set out to create a team of ex- keynote speeches. cutting rates Thursday, cited the Fund will happen under Misra’s watch, “Our shared passion for our work that one plus one would add up to more ecutives versed in building companies, An employee at the Vision Fund said unpredictably of food prices as not Claure’s. The COO now has a re- should not be misread as tension,” than two. improving performance and managing the two were always kind and respectful reason for the forecast going awry. duced mandate. His portfolio will in- Claure said. “We will continue to col- Now it’s uncertain that his portfo- key support tasks like government rela- in public. Food makes up over 45% of clude WeWork, chip-design fi rm ARM laborate – as we do everyday – on ex- lio companies will get along any better tions. However in private, their exchanges India’s consumer price index Holdings Plc and asset-manager For- ecuting and realising SoftBank’s bold than his lieutenants. The so-called SoftBank Operating sometimes escalated into shouting basket and recent disinfl ation in tress Investment Group LLC, according mission for the future. “Masa probably fi nds this whole Group was slated to have as many as matches, some of the people said. a number of items has dragged to the e-mail. The changes were made because they thing frustrating,’’ said Chris Lane, an 200 to 500 people, the people said. Others characterised it as two out- the headline number down to an He will mainly focus on a Latin were the right thing to do for our busi- analyst at Sanford C Bernstein & Co. “The Vision Fund businesses are spoken people disagreeing vigorously. 18-month low. America investment fund that SoftBank ness.” While the shift is a setback for “He should be able to go and meddle late-stage investments from the ven- Behind the scenes, Son worked to en- “RBI’s study shows that once plans to create. Claure, the real loser may be Son him- everywhere, but he doesn’t have time ture capital perspective, but they are sure that Claure had a company-wide you control for the fact that the Less than two months after moving to self. The Japanese billionaire pitched his for that and wants Marcelo to do it on still very young companies,” Lane said. mandate. Indian food basket is very volatile, the relative errors that the central bank makes are not very large,” Acharya said. “Internally we are quite introspective about this la- Soft Bank’s Son transforms $5.5bn to $15bn in one day ment we keep hearing on a per- sistent basis.” Bloomberg value of its business and investments, a gap he’s been telecom unit in December, which was marketed to The shares of SoftBank closed at ¥9,962 on Thurs- The modelling team, he said, is Tokyo trying to close for years. Even after the boost and the individuals. day, still a 50% discount to Son’s sum-of-the-parts trying to get an early sense of the stock rising as much as 3.1% on Friday, SoftBank’s total While SoftBank Group’s shares have gained 36% calculation that puts shareholder value at ¥20,055 a numbers released by the central value is a long way from Son’s goal. this year through Thursday, the telecommunications share. statistics agency. He hoped the Call it the Masayoshi Son mathematical distortion Here’s what’s at play. unit is trading about 13% below its IPO price of ¥1,500. What could help close the gap? RBI would get better over time. field. How big is the buyback? Even so, it’s worth remembering that SoftBank’s Last year, Ravindra Dholakia, a The founder of SoftBank Group Corp added about shares retreated after they doubled following a share Most of SoftBank’s assets are in mature companies dovish member on the six-mem- ¥1.65tn ($15bn) to the market value of his company It’s the biggest ever for SoftBank. buyback in 2016. like Alibaba, Sprint and Yahoo Japan. ber monetary policy panel, said on Thursday – by unveiling a plan to buy back shares The company plans to buy back as much as Son also said that he would spend about ¥700bn That’s why Son has been focusing more on the there’s an urgent need to modern- worth about a third of that amount. ¥600bn starting today through the end of January from the telecom IPO to pay down SoftBank Group $100bn Vision Fund and its portfolio of private com- ise the way changes to prices are The value of Son’s stock in SoftBank rose by about next year, and the stock will be retired. debt. panies that includes the world’s biggest ride-hailing being calculated by the govern- $4bn on Thursday. SoftBank’s shares jumped by their daily limit, gain- The company said Thursday it has already com- company Uber Technologies Inc and co-working giant ment as well as the way infl ation His fortune rose about $2.6bn after the rally, ac- ing 18% in Tokyo on Thursday, the most in a decade. pleted that debt repayment. WeWork Cos. expectations being surveyed by cording to the Bloomberg Billionaires Index, which ex- Son has had success with buybacks in the past. How much is Soft Bank Group worth? Thanks to valuation gains, profits from the Vision the RBI. cludes pledged shares from the net worth calculation. In 2016, he announced the Tokyo-based company Fund and SoftBank’s own Delta Fund more than tri- The RBI’s latest survey on infl a- The billionaire is no stranger to funny math. would buy as much as ¥500bn, which sent shares up According to Son, at least ¥21tn net of debt. pled to 176bn yen in the quarter ended December 31. tion expectations of households Yesterday, he opened his earnings presentation with a by the limit the next day. The price doubled over the That includes a ¥12.5tn stake in Alibaba Group The Vision Fund has emerged as a major contribu- showed the outlook for the three- riddle: “25 — 4 = 9?” next year. Holding Ltd, ¥2.4tn telecoms unit, ¥2.6tn US carrier tor to earnings over the past year. months ahead horizon softened The formula is the ¥25tn value of SoftBank’s assets How is he paying for this? Sprint Corp, ¥2.7tn each in the Vision Fund and While the returns can be diff icult to predict, Son has by 80 basis points and that for minus ¥4tn in debt, far from being equal to its market chipmaker Arm Holdings Plc, and ¥600bn in Yahoo promised several exits annually. 12-months by 130 basis points. capitalisation of ¥9tn. With money from mom-and-pop investors in Japan. Japan Corp. This year, investors could look forward to a windfall That refl ects prospects of a It was designed to capture Son’s longstanding ar- The buyback will be funded by the proceeds from SoftBank’s market cap was closing in on ¥11tn on from the planned listings of Slack Technologies Inc continued decline in food and fuel gument that SoftBank’s share price doesn’t reflect the the ¥2.4tn initial public off ering of the company’s Thursday. and Uber. prices. Gulf Times Sunday, February 10, 2019 21 BUSINESS he Qatar Stock Exchange (QSE) counting for 32.5% of the total trading QSE Index and Volume index declined by 215.12 points, value. The industrials sector was the Tor 2.0%, during the trading week second biggest contributor to the over- to close at 10,505.19. Market capitali- all trading value, accounting for 22.9% sation receded by 1.9% to QR604.3bn of the total. QNBK was the top value versus QR615.9bn the previous trad- traded stock during the week with total ing week. Of the 46 listed companies, traded value of QR120.1mn. 15 companies ended the week higher, Trading volume decreased by 10.1% while 29 declined and two remained to reach 38.3mn shares versus 42.6mn unchanged. Qatar German Co for Medi- shares in the prior week. The number of cal Devices (QGMD) was the best per- transactions declined by 16.8% to 24,192 forming stock for the week with a gain transactions versus 29,083 transactions Weekly Market Report of 9.9% on a trading volume of 872,620 in the prior week. The industrials sector shares. On the other hand, Qatar Gen- led the trading volume, accounting for eral Insurance & Reinsurance Co (QGRI) 30.8%, followed by the banks and finan- was the worst performing stock for the cial services sector, which accounted week with a decline of 9.6% on merely for 22.0% of the overall trading volume. Source: Qatar Exchange (QE) 13,607 shares traded. United Development Co (UDCD) was the QNB Group (QNBK), Qatar Insurance top volume traded stock during the week Co (QATI) and Commercial Bank of with 5.3mn shares. Weekly Index Performance Qatar (CBQK) were the primary con- Foreign institutions remained bull- tributors to the weekly index decline. ish with net buying of QR118.2mn ver- QNBK was the biggest contributor to sus net buying of QR383.8mn in the Source: Qatar Exchange (QE) the index’s weekly decline, deleting prior week. Qatari institutions turned 58.2 points from the index. QATI was positive with net buying of QR33.1mn the second biggest contributor to the versus net selling of QR2.2mn in the mentioned loss, removing 27.6 points week before. Foreign retail inves- from the index. Moreover, CBQK erased tors remained bearish with net sell- 22.0 points from the index. On the oth- ing of QR8.8mn versus net selling of er hand, Doha Bank (DHBK) added 4.7 QR14.5mn in the prior week. Qatari re- points to the index. tail investors remained bearish with net Trading value during the week de- selling of QR142.6mn versus net selling creased by 22.4% to QR1.0bn versus of QR367.1mn the week before. QR1.4bn in the prior week. The banks Foreign institutions have bought (net and financial services sector led the basis) $328.4mn worth of Qatari equi- Source: Bloomberg trading value during the week, ac- ties in 2019. Source: Qatar Exchange (QE) DISCLAIMER This report expresses the views and opinions of Qatar National Bank Financial Services SPC (“QNBFS”) at a given time only. It is not an off er, promotion or recommendation to buy or sell securities or other investments, nor is it intended to constitute legal, tax, accounting, or financial advice. We therefore strongly advise potential investors to seek independent professional advice before making any investment decision. Although the information in this report has been obtained from sources that QNBFS believes to be reliable, we have not independently verified such information and it may not be accurate or complete. Gulf Times and QNBFS hereby disclaim any responsibility or any direct or indirect claim resulting from using this report. Qatar Stock Exchange Top Five Gainers Top Five Decliners Most Active Shares by Value (QR Million) Most Active Shares by Volume (Million) Investor Trading Percentage to Total Value Traded Net Traded Value by Nationality (QR Million) Source: Bloomberg Technical analysis of the QSE index he general index closed price formation would become lower by 2.0% from an issue if it is breached down- T last week and closed at wards. We maintain our ex- 10,505.19 points. It has been pected weekly support level to moving towards the 11,000 re- 10,260 points, and the resistance sistance level. The rising-wedge at the 11,000 level. Definitions of key terms used in technical analysis andlestick chart – A candle- stick represents one trading day) stick chart is a price chart in our analysis. Cthat displays the high, low, Doji candlestick pattern – A open, and close for a security. The Doji candlestick is formed when ‘body’ of the chart is portion be- a security’s open and close are tween the open and close price, practically equal. The pattern while the high and low intraday indicates indecisiveness, and movements form the ‘shadow’. based on preceding price actions The candlestick may represent and future confirmation, may in- any time frame. We use a one-day dicate a bullish or bearish trend candlestick chart (every candle- reversal. Gulf Times 22 Sunday, February 10, 2019 BUSINESS Stock pickers are fi red up as passive funds shed $16bn Bloomberg ous versus more-dynamic strategies markets addedtns in value, according to this trend to reverse thanks to encour- pect the link between individual shares dividual equities as opposed to factors London that hedge risk-on, risk-off markets, data compiled by Bloomberg. aging US data. will fall to the lowest since at least 2011. like quality as Brexit risks vex tradi- the theory goes. It all helps to explain On the fl ipside: Investors on Bank And the rotation is just a drop in the “We’d expect active managers to be tional revenue projections, according why in a watershed year when US pas- of America Corp’s platform this year ocean compared to the decade-long able to outperform in this kind of en- to Sanford C Bernstein. or stock pickers, it’s the dream sive funds are projected to manage half have bought about $4.8bn in shares preference for ETFs over single stocks. vironment as correlations fall relative Still, the call to active investing has that will never die: An ageing bull of all assets, the likes of Fidelity Inter- of individual companies, excluding Nonetheless, between a dovish Fed- to a period of suppression of volatil- rung hollow over the years - and the Fmarket prone to violent disloca- national, Goldman Sachs Asset Man- buybacks, while selling some $5.3bn of eral Reserve and headwinds to corpo- ity through monetary stimulus,” said expectation of outperformance in a tions will revive their fortunes as they agement and Berenberg are in fi ghting ETFs across the board. rate earnings, Wall Street banks in- Shoqat Bunglawala, head of the glo- weak market arguably runs counter to buy over-looked winners and snub spirits. “Clients continued to buy single cluding Bank of America and Morgan bal portfolio solutions for EMEA and the historic norm. After all, there’s no losers. “The market environment is re- stocks and sell ETFs, which has been Stanley are touting active bets as a APAC at Goldman Sachs Asset Man- divine reason why rotations spurred Famously, it hasn’t gone to plan ally changing,” said Mark Phelps, chief the case for the last four consecutive ticket to outperformance. agement. by shifting risk appetite or correla- over the years as the passive revolu- investment offi cer of global concen- weeks,” the fi rm’s strategists Jill Carey The logic is simple: As stocks sway In Europe, in particular, the valu- tions should hurt passive investors in tion marches on. But the underbelly of trated equities at AllianceBernstein in Hall and Savita Subramanian wrote in a to their own tune, money managers ation rift between the cheapest and particular – emerging-market ETFs equity markets is fl ashing more bullish London. “Quantitative easing meant February 5 note. have ample opportunity to boost ex- priciest stocks has been widening to and defensive developed strategies, for signals for the besieged industry. buying beta and the best way to access US equity funds saw outfl ows of posures to securities that exceed the multi-year highs, a boon for relative- example, have seen bumper infl ows of More shares are marching to their it was via ETFs, no question. But now $700mn in the week through February index return while underweighting the value hedge funds. late. own beat and relative valuations are we’re looking at alpha, and now is the 6, according to a Bank of America note, laggards. Another rationale for stock-picking Another big caveat: If price swings looking stretched – giving investors time to fi nd active funds.” citing EPFR Global data. Equity valuations in the US coming right now: The market is particularly rise, it can ramp up correlations and hit across Europe and the US fresh op- There’s evidence investors are mi- Sure, rebalancing for tax reasons into the year were more spread out than unforgiving this earnings season. Ac- stock pickers along the way. portunities to beat the index. Even the grating out of passive vehicles to wager may have something to do with it, any time since the crisis era, according cording to Morgan Stanley, US compa- “It remains to be seen whether red-hot ETF market is seeing rare out- on single equities as macro risk reduces and as the maxim goes, fl ows follow to Bank of America. Meanwhile, the nies that miss profi t expectations are more volatile markets will be a boon fl ows of late, as more money managers the allure of undiff erentiated alloca- performance - explaining some of the degree to which European and Ameri- underperforming peers with positive for active managers and the histori- fl ock to single stocks. tions via the benchmark. US and Euro- withdrawals from large-cap ETFs last can stocks swing together has tumbled surprises by the most since 2017. cal evidence is fairly mixed in that And as late-cycle volatility fl ares up, pean ETFs were stung by $16bn of re- month after the December meltdown. after they moved almost in lockstep in Idiosyncratic forces are in play, too. regard,” said Citigroup Inc analyst bidding up benchmarks looks peril- demptions in January even as developed Deutsche Bank AG, for one, expects October. Within Europe, traders ex- UK investors had better wager on in- Louis Odette. German minister signals US fund managers brace support for ‘national champion’ bank Bloomberg WirtschaftsWoche reported Frankfurt earlier Friday. ‘Bad Bank’ for consumer slowdown “There is no debate about a bad bank,” Scholz said on Friday. Reuters erman Finance Minis- “There are two banks, they New York ter Olaf Scholz signalled are doing their businesses, Gsupport for a “national they are doing anything to get champion” in the banking in- enough profi ts and things like ith expectations for slow- dustry, amid speculation that that.” Asked whether the timing ing growth escalating, US the government is seeking to reported by the magazine is ac- Wfund managers are selectively drive forward a potential merger curate, he said that “I couldn’t avoiding stocks in consumer companies of Deutsche Bank AG and Com- imagine what the European as lofty valuations, concerns about de- merzbank AG. elections should have to do with clining earnings estimates, and consum- While he stopped short of the banking sector.” Deutsche er confi dence keep them on guard. explicitly spelling out a plan Bank fell 1% in Frankfurt trading Low US unemployment and rising for Germany’s biggest lenders, on Friday, while Commerzbank wages should point to a healthy consum- Scholz’s comments at a Bloomb- rose 0.8%. Both companies lost er, but worries about global growth, do- erg event in London on Friday more than half of their market mestic US politics and a US-China trade are the clearest acknowledgment value last year as concern about war have been wearing on consumer and yet by a top offi cial that the gov- their future increased. investor moods. ernment is mulling all options. Deutsche Bank executives be- Wall Street expects fourth-quarter It is “important to have a lieve their ability to avoid a gov- earnings growth of 14.7% for the S&P strong banking sector that is able ernment-brokered merger could 500’s consumer discretionary index — to do what national champions rest on the bank’s performance below the 17.8% consensus from Octo- are able to do,” Scholz said at in the fi rst quarter, people briefed ber at the beginning of the fourth quar- the event. “We are very happy to on their thinking told Bloomberg ter, according to data from Refinitiv as have a lot of international banks last month. Revenue shrank for of Friday. acting in Germany,” he said, “but an eighth consecutive quarter And for the fi rst quarter, analysts ex- also to have a stable banking sec- in the fi nal months of last year, pect discretionary earnings to fall 1.7%, Traders work on the trading floor at the New York Stock Exchange (file). Wall Street expects fourth-quarter earnings growth of tor in Germany that is able to go leading CEO Christian Sewing to compared with expectations for 6% 14.7% for the S&P 500’s consumer discretionary index — below the 17.8% consensus from October at the beginning of the fourth with any company abroad.” pledge yet more cost cuts. growth on October 1. For consumer sta- quarter, according to data from Refinitiv. Scholz and Joerg Kukies, a Imperfect Solution Com- ples, fourth-quarter earnings are expect- former Goldman Sachs banker merzbank, led by Martin Zielke, ed to grow 4.2%, down from the 6.7% “For the wealthy it was watching the tors. Companies that have yet to report quarter earnings expectations, with more who serves as his deputy, have is scheduled to report earnings consensus in October, with 0.7% growth stock market go down 15% in the fourth their earnings include Coca-Cola Co, than half of the results already released. been pushing a merger of both next week. expected for the fi rst quarter. quarter,” Kravetz said. “For government PepsiCo Inc, Newell Brands Inc, and About 64% of staples companies have lenders to support the small and While a deal is viewed by some In comparison, the broader S&P workers, it was weeks of no cash fl ow and Walmart Inc, which fi t into the staples beat estimates, with reports out from mid-sized companies that are the as an imperfect solution, the gov- benchmark is expected to report fourth- uncertainty. category, while discretionary companies two-thirds of the sector, according to backbone of the export economy, ernment thinks it will be impos- quarter earnings growth of 16.8% and For many it was the uncertainty of the that have yet to report include retailers data from Refi nitiv. people familiar with the matter sible for Sewing to turn around decline 0.1% in the fi rst quarter. shutdown and what the secondary ef- such as Home Depot Inc, Macy’s Inc, Gap A major challenge to fi rst-quarter have said. Talks between Deut- Deutsche Bank before a potential “Our thoughts on the global consumer fects might be to them directly, to their Inc and Target. numbers for consumer companies was sche Bank and the government economic slowdown exacerbates is that the marginal data points coming jobs or businesses, or the economy at “The big retailers like Walmart are the 35-day partial US government shut- intensifi ed over the past year. the situation, people familiar in are more negative than positive,” said large...everyone was touched directly or fairly valued with solid expectations down, when hundreds of thousands of “We are debating with the dif- with the matter have said. Ger- Eric Freedman, chief investment offi cer indirectly. but also with some risks,” Kravetz said. federal workers went without paychecks. ferent banks about their situa- many last month slashed its eco- at US Bank Wealth Management in Min- That didn’t pop the bubble but cer- “The brands like Coca-Cola and Pepsi Because of the shutdown, government tion for being able to do the nec- nomic growth forecast for this neapolis. tainly let a little air out.” Like other in- are mostly near their highs as safety in data releases were delayed. The US Com- essary things when something is year to just 1%, which would be His fi rm is “market weight to slightly vestors, Kravetz is largely avoiding con- storms but with enough risks to keep us merce Department’s Census Bureau an- to be done,” Scholz said. “We’re the weakest pace in six years. underweight” on consumer discretion- sumer stocks because of their valuations. away. The stores like Macy’s and Gap are nounced earlier this week that it would discussing with them and with The country still owns a large ary while it views consumer staples valu- The consumer discretionary index challenged.” release December’s retail sales report on others about the situation of the stake in Commerzbank after a ations as “fair to slightly over valued.” trades at roughly 19.8 times forward Jharonne Martis, director of consumer February 14. banking industry in Germany. bailout. It doesn’t own a stake in US consumer confi dence fell to a 1-1/2 earnings estimates compared with 17.3 research at Refi nitiv, said retail growth In a recent Reuters poll a majority of And that is our task to do that.” Deutsche Bank, but representa- year-low in January as a partial shut- for consumer staples and a 15.8 multiple is still healthy, but because growth was economists saw the shutdown having a Scholz pushed back against a tives of Germany’s largest bank down of the government and fi nancial for the broader S&P, according to Refi ni- “signifi cantly stronger” earlier in 2018, signifi cant impact on fi rst quarter gross media report that the government had 23 discussions with offi cials markets turmoil left households nervous, tiv data. “some of the stocks could be punished” domestic product growth, with the me- is seeking a deal before European in Berlin since the new govern- according to a Conference Board survey. “You’re paying more for less growth,” when retailers report earnings. dian expectation for a 0.3 percentage elections at the end of May. ment was formed in March, most Shawn Kravetz, Esplanade Capital said Burns McKinney, a portfolio man- “We’re already seeing that consumer point trim. That deal may involve setting of them with Kukies. LLC’s chief investment offi cer, said while ager at Allianz Global Investors in Dallas. confi dence has lowered and analysts have On top of this, a late-2018 equity mar- up a bad bank to wind down Sewing and supervisory board the “consumer remains generally robust, His fi rm holds stocks in consumer been lowering expectations for 2019,” ket sell-off , which sliced 19.8% of the unwanted assets of both com- chairman Paul Achleitner each most people have had something in their companies including Target Corp and said Martis. S&P 500 between September 20 and panies, potentially attracting had six exchanges, according to life in the past few months that has given General Motors but is underweight the So far, 71% of consumer discretion- December 24, also scared consumers, ac- the attention of EU competi- a fi nance ministry letter seen by them pause.” broader discretionary and staples sec- ary fi rms have beat Wall Street’s fourth- cording to Morgan Stanley. tion authorities, the magazine Bloomberg. Looking for answers from Dr Copper? He’s confused as well By Andy Home Stimulus is already on its way. This time around there was no shock at in the bull camp. The title of the bank’s London Doctor Copper’s problem is calculat- all. The metal markets spent the second February 4 research note, “Let’s get loud ing when it’s going to start working and half of last year talking about little else. — copper should rally by 10 percent”, tells whether it’s going to be suff icient to kick- Gone too is any awe. Beijing has learnt its you everything. Doctor Copper seems very confused at start the Chinese economy. past lessons from simply tipping money The 3-6 month forecast is predicated on the moment. The metal with the honorary Graphic on copper and China’s Manu- into more construction and infrastructure. copper’s own micro fundamentals, such as degree in economics is caught between facturing PMIs: There will be a sprinkling of both this the expected boost to Chinese grid invest- the current reality of deteriorating macro Economic storm clouds seem to be time again. And demand specifically for ment and low visible inventory. signals and the belief that things will soon gathering the world over. copper will get important micro boosts Stocks registered with the London get better. The International Monetary Fund last from the power and construction sectors, Metal Exchange, the Shanghai Futures Nowhere more so than in China, the sin- month cut its global growth forecasts according to analysts at Citi. Exchange and the CME registered only a gle biggest user of copper and just about for 2019 and 2020 with the warning that The State Grid, a major component of highly modest collective build of 20,000 every other industrial metal. “risks (...) tilt to the downside.” China’s copper usage, is forecast by the tonnes in January, a seasonal trough for It was Beijing’s campaign to soak up The European Commission has this bank to increase spending by 5% this year global manufacturing activity. excess liquidity in the Chinese economy week done the same to eurozone growth after a flat 2018. At 371,000 tonnes combined visible that stopped copper in its upward tracks and there are signs of manufacturing A surge in housing starts last year exchange stocks at the end of January in the second quarter of last year. weakness spreading across Asia. should also translate into a pick-up in were 299,000 tonnes lower than one year The London price slumped from over But the two most important indicators copper-intensive completions this year. earlier. Moreover, Citi argues, the current $7,000 per tonne to under $6,000 over for Doctor Copper are China’s manufactur- But the larger impact on metals usage slowdown evident in China’s sliding PMIs the course of June and July. ing purchasing managers indices (PMIs). copper price. A new stimulus package, a mix of fiscal, from the latest stimulus will come from is in the price, leaving sentiment vulner- Fears of a slowdown in China, even an Both fell into contraction territory below The last time the indices fell through monetary and infrastructure measures, is the credit impulse that is now travelling able to any positive surprises from China engineered one, sent funds running for 50 in December and both stayed there in the growth-contraction threshold was already now working its way through the down multiple pathways in the Chinese as it returns to work after the Lunar New the copper exit door. January. over the course of 2015-2016, which Chinese economy. economy. This stimulus creep will take Year celebrations. Since then copper has trudged There was some stabilisation in the of- marked a cyclical low point for the copper But will it be enough? And how long will some time to make its impact on actual Others take a diametrically opposed sideways in a broad $5,700-6,400 range, ficial PMI last month but the Caixin Index, price. That also marked the Chinese gov- it take to reinvigorate Chinese manufac- manufacturing activity. view. Again, the title of Barclays’ Jan. marching to the news beat of the US-China a more accurate barometer of health in ernment’s last attempt to engineer a slow- turing? Many analysts are pencilling in the 24 research note, “Copper — dancing trade dispute. China’s smaller company sector, fell again down in its economy. Beijing hit the brakes The Chinese cycle of engineered boom second half of the year for a tangible on a precipice”, tells you much about its More tariff s mean more potential pain to 48.3, its lowest reading since February too hard and unleashed another round of and slowdown is now on its third rota- rebound. It’s what happens between now bearish stance. for Chinese manufacturers. 2016. corrective stimulus. That’s the one it was tion after the shock and awe stimulus of and then that is causing Doctor Copper Fewer tariff s help Beijing to re-stimulate Recent history shows that weakness in mopping up last year until growth started 2009-2010 and the less shocking and less consternation. Because that’s where any Andy Home is a columnist for Reuters. the country’s flagging growth engines. China’s PMIs is never good news for the stalling again. awesome stimulus of 2015-2016. analyst consensus breaks down. Citi is The views expressed are those of the author. Gulf Times Sunday, February 10, 2019 23 BUSINESS How gas, coal and nuclear power compete for global electricity generation www.abhafoundation.org are negative for coal and somewhat negative for gas. A strong nuclear revival is likely to be dependent on the For large-scale dispatchable electricity deployment of new reactor designs; generation, coal and nuclear are the continuing major coal growth would main global contenders with gas (due to require large-scale, low cost carbon constraints on hydropower). So, which capture and storage (CCS). Neither of energy source will triumph? Asked the these possibilities can be ruled out, but Al-Attiyah Foundation in their latest they do not appear very likely. energy research report. So, what are the implications for Each of these energy sources has leading gas exporters such as Qatar? strengths and weaknesses regarding Gas has the opportunity to gain costs, safety, public acceptability, significant market share from ageing greenhouse gas emissions and other coal and nuclear plants if relatively important criteria. With standard inexpensive. forecasts to 2040 suggesting the Conversely, if gas is priced stagnation or decline of coal, and only expensively, it will encourage countries slow expansion of nuclear, gas appears such as China and India to develop and well-placed to come out ahead. But deploy nuclear and cleaner coal. this picture varies significantly by The emergence of low-cost CCS geography. In addition, technological still probably favours gas more than in key growth markets. Overall, the main emerging Asian economies, and more nuclear power too. To avoid major the Al-Attiyah Foundation’s website advances could bring coal and/or coal, though it would boost both over negative outlook for coal and nuclear is nuclear to grow, but not dramatically. surprises, leading gas exporters should www.abhafoundation.org/insights/ nuclear forward. nuclear. quite favourable for gas. However, this line of development does monitor the technological, regulatory energy. The typical predictions for the global Leading gas exporters should Major gas exporters like Qatar can and rely on gas being perceived as a secure, and public opinion landscape for power sector see gas growing strongly, monitor technological progress on coal should gain market share as old coal relatively aff ordable and accessible fuel. advanced nuclear and coal CCS in the This article was supplied by the nuclear slowly and coal flat-lining or CCS and on advanced nuclear, and keep and nuclear plants in North America If gas is price expensively, China, India key markets: North America, Europe, Abdullah bin Hamad Al-Attiyah shrinking. Scenarios of strong climate an eye on the regulatory landscape and Europe are closed down. At the and other major Asian states will rely China, Russia and India. International Foundation for Energy action do not help nuclear much, and public opinion concerning nuclear same time, coal is set to stagnate in the more on coal, and are likely to deploy The full report can be downloaded from and Sustainable Development. QFC Regulatory Authority, Qatar Chamber sign deal for information sharing QIB Group CEO Bassel Gamal receiving the award from QSE CEO Rashid bin Ali he Qatar Financial Centre al-Mansoori. (QFC) Regulatory Author- Tity and Qatar Chamber have recently signed a Memorandum of Understanding (MoU) for sharing information at a ceremony held in QIB honoured at QSE’s Doha. The MoU was signed by QFC Regulatory Authority CEO Michael G Ryan and Qatar Chamber director ‘4th Annual IR general Saleh bin Hamad al-Sharqi. The MoU establishes a frame- work for co-operation under which Excellence Programme QFC Regulatory Authority and Qa- tar Chamber will provide each other with assistance for projects of mu- tual interest. Awards’ ceremony They will also join hands in ex- changing information that will help atar Islamic Bank (QIB) has been trust is to provide fair disclosure of in- in enhancing their roles in serving recognised as one of the best In- formation and ensure eff ective two-way the national economy and the private Qvestor Relations websites among communication channels are in place. At sector. all listed companies at the QIB honoured QIB, we believe in transparency, being Ryan said: “The QFC Regulatory at the QSE’s ‘4th Annual IR Excellence one of our core values, and we will con- Authority is keen to grow and expand Programme Awards’ organised by the tinue investing in improving our inves- its co-operation with other Qatari Qatar Stock Exchange (QSE), in collabo- tor communication programme.” organisations and work together in ration with Iridium Investor Relations. QIB received the reward in recogni- achieving common goals.” The QSE announced the winners of tion of improving its overall investor re- For his part, al-Sharqi said: the ‘2018 IR Excellence Programme’ at lations function and in particular for the “Qatar Chamber is pleased to join a high-profi le event held on Wednesday upgrade of its investor relations website, hands with the QFC Regulatory attended by the QSE CEO Rashid bin Ali as well as the introduction of its IR (QIB Authority, which plays a key role al-Mansoori, top management and sen- IR) mobile app. in enhancing the business environ- ior offi cials from the QSE, Qatar Finan- These initiatives ensure that investors ment in the country and providing cial Market Authority (QFMA), listed get instant and equal access to informa- a competitive platform for firms to companies in Qatar, and members of the tion about the bank’s shares evolution, expand to Qatar.” country’s business community. fi nancials, credit ratings, corporate gov- Al-Sharqi also said the agree- QIB Group CEO Bassel Gamal said, ernance, and other essential informa- ment is “an important step” to boost “I would like to thank the Qatar Stock tion. co-operation between two infl uen- Exchange for the Investor Relations Ex- The Annual Investor Relations (IR) tial entities on Qatar’s economy. He cellence Award Programme and its con- Excellence Award event was launched noted that the MoU will help both tinuous eff orts and guidance in develop- by the QSE to motivate and support sides transfer information between QFC Regulatory Authority CEO Michael G Ryan and Qatar Chamber director general Saleh bin Hamad al-Sharqi shaking ing best practices in the fi eld of IR for companies in Qatar to further improve them to the advantage of the national hands after signing the MoU. all listed companies in Qatar. Eff ective investor relations and adopt best inter- economy and the private sector. investor relations build confi dence in national practices. The QFC Regulatory Authority is when necessary, discipline fi rms and bers of commerce among the GCC The chamber also works to sup- an organisation increasing its long-term It recognises the best companies and an independent regulatory body es- individuals. The QFC Regulatory Au- countries. port and develop the economy and investors and reducing its overall cost of individuals in Qatar that excel at com- tablished in 2005 by Article 8 of the thority regulates fi rms using princi- The chamber represents and sup- its productivity for the benefi t of the capital. municating a clear picture of their listed QFC Law. ple-based legislation of international ports the business community in country, in general and to the ben- “Thus, it is very important to develop company’s strategic, fi nancial, and op- It regulates fi rms that conduct fi - standard, modelled closely on that Qatar through its services and high- efi t of the member companies of the and constantly maintain relationships erational developments, and adhere to nancial services in or from the QFC. used in major fi nancial centres. lights the business opportunities Chamber, in particular, supporting of trust with current and potential in- the highest standards of transparency It has a broad range of regulatory Qatar Chamber was established available in various industries and and developing a sustainable busi- vestors and analysts. Key for building and disclosure. powers to authorise, supervise and, in 1963 as one of the oldest cham- sectors in Qatar. ness environment in Qatar. US threatens action if firms tap Iran trade vehicle Bloomberg ed sanctions. Germany, France and ket place calls into question whether Brussels the UK are shareholders of the SPV, international business will risk using which was unveiled last month and the new vehicle. is called the Instrument in Support “Most non-US institutions want to Companies using a European initia- of Trade Exchanges. The initiative avoid running afoul of the US sanc- tive meant to facilitate trade with Iran is the cornerstone of the EU’s eff ort tions regime, to avoid the risk of any face US retaliation, President Donald to keep Iran from quitting the Joint potential restrictions on accessing the Trump’s envoy in Brussels said in Comprehensive Plan of Action, which US market,” Doug Davison, a dispute a warning that casts even greater was signed in 2015 and was aimed resolution partner and sanctions ex- doubts about the plan’s eff ectiveness at constraining the nation’s nuclear pert at the lawfirm Linklaters, said in in contending with US sanctions. activities. a January 31 statement when the SPV “Anyone actually using it to trade The US pulled out of the deal in was unveiled. “What happens next on anything other than humanitar- May. ‘Maximum Pressure’ Since the will be a true test of how far parties ian activity is going to be sanctioned US left the nuclear accord, the deal’s are willing to go to trade with Iran in by the US,” US Ambassador to the remaining powers – China, France, view of US economic sanctions risk.” European Union Gordon Sondland Germany, Russia and the UK – have The new financing vehicle will said in a February 7 interview. “We’ll struggled to provide the sanctions likely be discussed at a meeting this find them and sanction them and relief promised when Iran agreed to week of the North Atlantic Treaty they won’t be doing any business limits on its nuclear activities. The Organisation, which has already come with the US.” mechanism launched by the Euro- under fire from the Trump administra- The threat of US action means that pean nations had faced delays and tion for members spending too little the so-called special purpose vehicle skepticism that it can successfully on defence. “will sit there and will be little used,” persuade companies to trade. The US president had questioned Sondland said, adding that it’s a “fig The European action inflamed the American commitment to the leaf” the European Union off ered to tensions with the US, which called the trans-Atlantic body and was forced the Islamic Republic to salvage the SPV an attempt to evade its “maxi- to address reports that he privately Iran nuclear deal after Trump pulled mum pressure” campaign on Iran. But threatened to leave the post-World the US out of the accord and reinstat- the importance of the American mar- War II alliance. Sunday, February 10, 2019 GULF TIMES BUSINESS Fed delivers dovish message and markets expect no hikes in 2019, says QNB report he US Federal Reserve has delivered a message that clearly sheds light into the Tpossibility of an early end to the current tightening cycle, QNB said and noted the mar- kets do not expect further rate hikes this year. The Fed “surprised” the market over the Jan- uary 29-30 meeting of its Federal Open Market Committee (FOMC) by delivering a “dovish message” that clearly shed light into the pos- sibility of an early end to the current tightening cycle, QNB said in an economic commentary. The message has come amidst rising down- side risks for global growth, muted infl ation pressures and infl ation expectations, and tight- er fi nancial conditions. It has contributed to support the market view that the Fed will pause with its rate hikes in 2019. After nine rate hikes since the start of the This means that the FOMC is expecting to tightening cycle in December 2015, the Fed has keep an ample supply of reserves in the future decided to maintain the target range for the fed- and therefore will not need to return to the eral fund rate at 2.25% to 2.5% for the time be- small balance sheets of the past (prior to the ing, QNB said. Great Financial Crisis). More signifi cantly, the Fed has clearly sig- Moreover, the statement mentioned that the nalled a patient wait-and-see approach to FOMC is ‘prepared to adjust any of the details monetary policy, which is miles away from pre- for completing balance sheet normalisation in vious confi dence on the need to continue the light of economic and fi nancial developments.’ slow, but steady, interest rate hikes. The new “This is in sharp contrast to previous com- message signals a partial convergence with munications in which the balance sheet was re- market expectations and in some ways carries garded as a passive tool on auto-pilot. While the the brunt of the market response to the previ- bar is high to slowdown or halt the quantitative ous meeting in December 2018. tightening, the odds for more active manage- On that occasion, QNB noted markets did not ment of the balance sheet have increased,” QNB interpret the “dovish hike” as dovish enough to said. tackle the tsunami of weak global demand data According to Chair Powell, the FOMC should and the pains of a correction in equity markets, fi nd the appropriate end point of balance sheet and responded in a way that further tightened normalisation by ‘approaching that point quite broader fi nancial conditions. carefully,’ which should take place in a rather QNB analysis delves into the FOMC’s policy ‘gradual’ fashion. statement and discusses the signifi cance of the All in all, the latest FOMC meeting expressed latest changes in terms of language, outlook The US Federal Reserve building in Washington, DC. The Fed “surprised” the market over the January 29-30 meeting of its Federal Open Market that the Fed has turned signifi cantly more do- and policy guidance. Our view is that there are Committee by delivering a “dovish message” that clearly shed light into the possibility of an early end to the current tightening cycle, QNB said in an vish in recent weeks. three key developments in the statement. economic commentary. As fed funds rate are closer to estimates of First, the updated policy description of the neutral rate or the rate that separates ac- the US economic performance has changed FOMC introduced a new line in which it ac- mandate of maximum employment and price is going to depend entirely on incoming data commodative from restrictive policy, the Fed is somewhat, with carefully selected words and knowledged that market-based measures of stability. and its implications for the outlook. expected to be more cautious and avoid a lead- sentences being shifted to express a slightly infl ation compensation ‘moved lower’ in recent Importantly, the statement indicating ‘some Third, the revision of the guidance about ing role in shaping expectations. less benign backdrop. The characterisation of months. further gradual increases in the target range for policy implementation and balance sheet nor- The idea is that incoming data should move overall growth was downgraded to ‘solid’ from Second, the policy outlook section has the federal funds rate’ was removed altogether, malisation has taken place. The statement has markets and then align expectations with fu- ‘strong,’ even if the labelling of the job market, changed signifi cantly. A line about ‘global implying less confi dence about the future di- formalised that the Fed intends to conduct pol- ture policy moves. household spending, unemployment rate and economic developments’ and ‘muted infl ation rection of the policy rate. icy under the so-called “fl oor” system of mon- “In fact, the implied probability of rate business fi xed investment remained the same pressures’ was included to justify the FOMC’s Fed Chair Jerome Powell’s remarks in the etary control, i.e., a system in which the interest hikes in any of the remaining 2019 FOMC as in previous statements. patience ‘as it determines what future adjust- post-meeting press conference emphasised on excess reserves is the main operational tool meetings has plummeted from more than While the statement highlighted that infl a- ments to the target range for the federal funds that the case for raising rates has weakened and to maintain the federal funds rate within the 90% in October 2018 to less than 6% at the tion and core infl ation are still near 2%, the rate may be appropriate’ to supports its dual that the length of the ‘patience period’ or pause FOMC’s target range. time of writing,” QNB said.