Andrew Long, CEO, HSBC Bank Oman argues that technology is going to be a game changer for the banking industry

If you were to sum up HSBC Bank Oman’s performance in 2017, how would describe it?
In terms of our internal performance, we had some very large transactions on the wholesale side, both in the government and the private sector. On the retail side we invested in technology and rationalised our network while our customer recommendation scores went up. We have happy customers, good business and good results. The economy still faces it’s challenges, the oil price was subdued last year and this year it is not a lot better, unless there is a dramatic increase in prices, which is unlikely and given the scale of shale oil production in the USA, which has grown faster than the cuts by OPEC. There is going to be a cap on oil prices and due to it significant scope for expansion of budgets for the government sector is unlikely which is going to make it difficult for the private sector to make a lot of money. HSBC Oman is cautiously optimistic. We think that we have a good brand, good people and products and good opportunities.

You mentioned about good large wholesale lending by the bank, can you elaborate on it?
We made good profits on the wholesale side, as we lend to a range of companies across sectors, so we spread our risk. The returns are reasonable as we have high quality companies that we lend to, compared to if we lent to a more risky segment, but there is a risk and reward for that and we choose where we want to be. Our wholesale lending has been very good without many bad debts, which is quite surprising in this environment. There are one off transactions that we are involved in like Oman Oil Company raised a billion dollars last year and we were a part of that transaction. Such one off transactions bolster the returns that you get from your core products. We are focused on the premier section of the market or the higher end of Omanis and non-Omanis in the public and private sector, which positions us well in this environment.

You mentioned about rationalising your retail network, how has the bank gone about the process?
Our branch network has come down over the last four years. We have reduced our network to 48 branches and three customer service units. We still have a broad geographic footprint as we are present from Daku to Al Mazyona in the South, we have three branches in Musandam and we are in the middle of Oman, so we are broadly spread. Where we had branches relatively close to each other, we have merged them and have continued to keep customers of the two branches.

HSBC has traditionally been strong in international trade and finance. Have you strengthened these business lines in Oman?
It is quite difficult to grow when the country’s import and export has not grown. We certainly maintained our marketshare. There are certain corridors where we are very strong, for example for business with the Asia Pacific region, which is HSBC’s heritage. We are spread all over the Asia Pacific and that gives us an advantage in trade with the region. We are good at intra Gulf trade and then we have our European presence. So we have certain geographic advantages over other banks in Oman. It is also about presence and quality of service.

What measures has HSBC Bank Oman taken to support SMEs?
Interestingly enough there has not been much of a demand from SMEs. When the economy is struggling which it is at this moment, opportunities for SMEs to start up are a little constrained. I have had this discussion with the government and the Central Bank of Oman. Money is not the issue for SMEs, there is plenty of money available for SMEs across the banks and SME related funds. The issue for SMEs is that the bureaucracy in the government for starting up a business has been simplified slowly. It is also about whether they have marketing e, production and sales expertise and that is actually as important if not more important than money. As a bank we have not turned down a single SME loan in the last 12 months. We have not had a lot of increases in demand, we offered workshops where we brought in SMEs and taught them about cash management, finance and things like that. If SMEs have non-banking requirements we do that with lawyers, CA’s etc. We will continue to do this and in addition we have an SME International Fund, which we launched two years ago. The first tranche of RO20mn was drawn very quickly two years ago and we have increased it by another RO20mn so $100mn is available in the fund, a good proportion of which is already drawn, but there is some money which is still available.

What were the major HR and Omanisation initiatives taken by the bank?
We are now upto 93 per cent Omanised, with 75 per cent at the senior management level. We are always on the lookout for Omanis. If you look at our senior management team today compared to three years ago, there are a significantly more number of Omanis. We also offer Omanis international experience either as a short term attachment or overseas training or a two to three year secondment and our better Omanis have access to all of those.
Is technology going to be a major game changer for the banking industry?
The answer is yes, though the regulatory position on this remain unclear. My discussion with CBO shows that they are absolutely interested in blockchain as you would expect. HSBC has a trade finance programme with some Fintech companies. We are looking at how we can use blockchain in our securities custody business and other areas. We are seeing where we can benefit, we don’t think it will take off dramatically in the near term as people have to explore these options and see how they can commercialise it and make it compliant, customer friendly and technically efficient.

In terms of cloud computing HSBC is globally focused on it, the CBO here has some concerns around data privacy etc. and we are in dialogue with the regulator to make sure that we meet their concerns. Open banking is another area where we are experimenting overseas. In the UK we are developing those capabilities. This may or may not be delivered in the Middle East in future. Technology is absolutely critical to everything that banks and HSBC in particular is looking to utilize it.

Are Fintech companies collaborators or competitors for banks?
They are both, we at HSBC as a group recognise that because of our size we are good at scale computing, we are less nimble in niche computing. We have a number of investments around and partnerships around the world, with Fintech companies. There are other Fintech companies which are looking at taking on the banks. Fintech will be a competitor and collaborator based on what base you are operating on.

What are the bank’s future plans in terms of enhancing operational efficiency and how do you foresee business prospects for 2018?
We are looking at two specific areas, one is our raw operational efficiency – how can we use technology and process improvement to improve the speed of processing for our clients enhancing their satisfaction and reducing our costs if we can in the process. The other area that we are looking at is finance crime compliance, where we are in the forefront of protecting the Sultanate from those who want to use criminal proceeds and we have put considerable effort in coming up with policies and procedures over the last five years, some of which is quite bureaucratic and we are trying to streamline those processes so that we are less intrusive in how we deal with finance crime compliance in dealing with customers. We are committed to do this by being best in class, but we are going to do it in a more efficient way.