Qatar National Bank Financial Services (QNBFS) issued a report on Ahli Bank of Qatar (ABQ), stating that net Income surged QoQ on the back of a drop in provisions, robust fees & commissions and investment income. Ahli Bank registered a net profit of QR150.8mn in 1Q2014 (4Q2013: QR112.1mn), surging by 34.5% QoQ and 11.6% YoY, according to Qatar National Bank Financial Services.

ABQK’s net profit surged QoQ on the back of a 75.2% QoQ drop in net provisions and impairments. Net interest income dipped by 2.5% QoQ (+14.6 YoY) to reach QR179.0mn. Annualized NIM receded to 2.87% vs. 3.20% in 4Q2013 (1Q2013: 3.11%). Non-interest income increased by 27.3% QoQ (+21.4% YoY) on the back of robust fees & commissions and investment income. Fees grew by 13.5% QoQ (+18.0% YoY) to reach QR33.9mn, while the bank booked investment income of QR10.2mn vs. QR0.3mn in 4Q2013 (1Q2013: QR5.0mn). Operating expenses improved QoQ, decreasing by 3.9% sequentially (+20.0% YoY). Thus, the cost-to-income ratio rested at an acceptable 29.5% in 1Q2014 vs. 31.5% in 4Q2013 (1Q2013: 28.5%), according to QNBFS.

ABQK’s loan book expanded by 11.0% YTD reaching QR19.2bn. Moreover, deposits followed suit and grew by 7.3% YTD reaching QR21.4bn. Thus, the LDR climbed to 90% in 1Q2014 vs. 87% at the end of 2013. ABQK’s NPL ratio improved to 1.39% in 1Q2014 vs. 1.43% at the end of 2013. The bank’s coverage ratio remained at an optimum level of 123% in 1Q2014 vs. 125% at the end of 2013. The following developments could be perceived positively by the market: 1) a consistent rise in market share; 2) improvement in the stock’s trading liquidity and 3) announcements/newsflow on infrastructure projects (QNB Group estimates an annual spend of ~$30bn during the next three years).

We rate ABQK an Accumulate with a price target of QR57.17. ABQK trades at a FY2014e P/B of 2.1x.