National Finance closed the year with a net profit of RO6.35mn as against RO6.02mn in 2015 representing 5.4 per cent increase and the highest ever in absolute terms in company’s history, says CEO, Robert Pancras in an interview
Can you highlight National Finance’s performance in 2016?
National Finance is a non-banking finance company with two main streams of business, financing business customers and salaried individuals. In terms of numbers, our earning assets grew 3.16 per cent to reach RO193.3mn as a result of growth in both business and retail lending. Inspite of the current economic environment, our portfolio quality remained strong with a slight increase in our NPA to earning asset ratio to 5.8 per cent (from 5.3 per cent in 2015).
Did the company improve its profitability in 2016?
We closed the year with a net profit of RO6.35 mn as against RO6.02 mn in 2015 representing 5.4 per cent increase and the highest ever in absolute terms in company’s history. Given the prevailing economic scenario, we reckon this is quite a significant achievement.
Has the company undertaken any initiatives to reduce non-performing loans and curtailing disbursements in 2016? How successful were these measures?
We have not curtailed disbursements. However, the business growth has been below the expected level. This is mainly due to reduction in government’s spending resulting in lesser demand for credit and dent in customer confidence especially in the corporate segment due to depressed revenue stream. As regards non-performing loans, we have been managing our collections well which is a key success factor in this business. As mentioned earlier, we have been able to maintain the quality of the portfolio with just a marginal increase in our NPA to earning asset ratio from 5.3 per cent in 2015 to 5.8 per cent in 2016.
What is the company’s outlook for the future?
2017 is certainly going to be a very challenging year for the economy as a whole and FLCs can’t be an exception. The government has taken several initiatives to reduce the dependence on oil and enhance non-oil revenue. There is a greater focus on investment spending and support to non-oil based sectors which we believe will augur well for improving the investment climate and consequently more demand for credit. We also strongly believe that the government’s decision to focus on development of non-oil sectors such as manufacturing, transportation and logistics, tourism, fisheries and mining would present a growing market for financial products.
Retail segment also poses significant challenge as fresh recruitments have slowed down and the private sector’s preference is to consolidate. However, we believe that commitment to our core values of customer service, flexibility and employee development will enable us to capture a fair share of the market.
Are there plans to increase interest rates in 2017 or will it continue to remain at the same level?
The interest rate at which we lend to our customers is intrinsically linked to our borrowing cost from commercial banks. We expect the borrowing rates to go up in the medium term and at the same time expect competition to continue to pressure spreads going forward. The challenge is really to maintain the correct balance between risk and return and avoid the temptation of booking higher risk business.
Does the company have plans to expand into new product areas?
We are continuously listening to our customers and customising our products to suit their requirements. We have substantially increased our branch network in the last few years and will continue to invest in our customer facing infrastructure to make it easier for customers to interact with us.
In the business segment, we have been strong financiers of SME customers from the beginning. In the past few years, we have expanded our corporate customer base by adding products like debt factoring, working capital finance and guarantees to our traditional finance lease product. Our retail customers approach us for financing of cars and consumer durables.
How is National Finance coping up with the increased competition in the market?
We believe that commitment to our core values of customer service, flexibility and employee development will enable us to capture a fair share of the growing market. When the customer has unlimited choice, we believe that he will prefer to deal with people that make him comfortable.
What do you think about the performance of non-banking finance industry in the coming years?
The market is evolving with many new competitors, Islamic banks, Islamic windows as well as traditional banks. National Finance and our fellow finance companies have grown in the face of all the alternatives available to customers by providing flexibility and service. Increased competition is compressing spreads and making everybody work harder to maintain their service propositions.
2017 is going to be a very challenging year for reasons well known. Realistically, it is not going to be business as usual and growth will take a hit unless the oil price rebounds and the government succeeds in its efforts to boost revenue from non-oil sector. Nevertheless, non-banking finance industry in Oman which is known for personalised service and customer friendly approach would do well to sustain its growth.