QNB H1 2025 presentation: Solid growth despite Pillar Two tax impact

Qatar National Bank (QNB) reported H1 2025 net profit of QR8.4 billion, a 3% year-on-year increase, significantly impacted by new Pillar Two Taxes; excluding these, net profit grew 11%. The bank demonstrated strong underlying performance with an 8% rise in operating income, 7% growth in total assets, and a 9% expansion in loans, which outpaced the 5% growth in customer deposits. Despite the tax headwinds, QNB is on track to meet its full-year profitability guidance, underscoring its resilience and consistent execution of its growth strategy.

Analysis

Qatar National Bank's (QNB) financial results for the first half of 2025 demonstrate strong underlying business momentum, though headline figures are materially impacted by new global tax regulations. The bank reported a 3% year-on-year increase in net profit to QR8.4 billion; however, excluding the effect of the newly implemented Pillar Two Taxes, net profit growth was a robust 11%. This underlying strength is further evidenced by an 8% rise in operating income to QR21.8 billion, showing an acceleration from the 6% growth seen in Q1. Balance sheet expansion remains solid, with total assets growing 7% to QR1,354 billion, placing the bank at the upper end of its 5-7% full-year guidance. A notable dynamic is the divergence between asset and liability growth, as loans and advances expanded by 9% while customer deposits grew by only 5%. This gap suggests an aggressive lending strategy that may impact the bank's loan-to-deposit ratio and warrants monitoring. Despite the tax headwinds, the performance confirms QNB is on track to meet its full-year post-tax profit growth guidance of 2-4%, though investors should note the potential for margin compression from anticipated rate cuts in the second half of the year.

Key Decisions for Investors

• Investors should evaluate QNB based on its robust underlying performance, particularly the 11% pre-tax profit growth, which is masked by the impact of new global tax regulations.
• It is critical to monitor the widening gap between the 9% loan growth and 5% deposit growth, as this could pressure the loan-to-deposit ratio and future funding costs.
• Consider potential headwinds from the two anticipated 25 basis point rate cuts in H2 2025, which may compress net interest margins and temper full-year profitability despite strong business volumes.