Sheikh Waleed Al Hashar, CEO, Bank Muscat, talks about banking industry’s outlook for 2019 and the challenges facing the sector and the economy in general in the years ahead. Excerpts from an interview with Muhammed Nafie   

How do you foresee Oman’s economic growth in 2019?
The positive economic indicators to help Oman enter 2019 on a positive note include that the nominal GDP recorded 15.1 per cent YoY growth in H1 2018, the average oil price rose 33 per cent YTD Sep’18 and the fiscal deficit stood at RO1.9bn, 36 per cent YoY compared to RO3bn as of Sep’17.

Despite the conscious drive towards diversification away from hydrocarbon, the country’s revenue are still largely dependent on oil. As we all know, the higher levels of volatility witnessed in this commodity remains a concern and will have a major influence on the overall economic performance. That said, the government has been quite prudent in tapping into international funding to finance the budgeted deficit for this year and hopefully this should help maintain the government spends despite volatile revenue inflows.

Sound macro-economic policies, stable financial system, fine-tuned monetary policy and recovery in oil prices augur well for Oman. The country’s real GDP is expected to grow by more than 5 per cent in 2019, becoming the fastest growing economy in the GCC region, according to the International Monetary Fund (IMF).

What is your industry outlook for 2019?
Overall, the moderate to positive outlook for the country’s economy should translate to an optimistic scenario for the banking industry. The Sultanate’s 9th Five Year Plan (2016-2020) centred on economic diversification serves as the plank for development projects in Oman. As a pillar of the national economy, the banking and financial sector is poised for growth owing to the government’s focus on economic diversification and infrastructure development across the Sultanate. The stability and sustainability of the Omani banking sector are characterised by adequate asset quality with relatively low impaired assets and sound capitalisation.

What are the challenges for the banking sector and the economy in general in the years ahead? What are your recommendations to address these challenges?
Macro-economic headwinds pose the major challenge for the banking industry. Shift towards tighter monetary policy across the globe, the fear of global slowdown amidst escalating trade wars and surging oil production in the US are all likely to have their impact on the oil-dependent economy like ours. Oman’s banking sector being largely focused on domestic economy driven by government spend and new job creation, will resonate the impact.

The threat to asset quality and rising cost of funds are the main challenges facing the banking sector. Banks would need to ensure adequate liquidity and credit availability to support productive sectors of economy. To sustain growth, the banking sector will require to focus on product innovation and improved level of service for customers.

What are the new areas that Bank Muscat plans to foray into in 2019?
Enhancing customer experience remains our key focus as envisaged in the Vision statement ‘To Serve You Better, Everyday’. We shall remain focused on this fundamental objective in all our operations. In line with the new Organisation Structure, the Bank will continue to focus on developing competent human resources and adopting cutting edge technology to provide the ‘best in class’ service. We will mark our differentiation with innovative digital channels and products catering to all segments. The Bank will be geared towards strong asset growth and innovation to improve operational efficiency, augment revenue, reduce risk and enhance customer experience, all in sync with fulfilling the social responsibility.

How was the year 2018 for banking sector in general and Bank Muscat in particular?
Reflecting sustained economic growth in Oman, the banking sector witnessed a healthy 7.5 per cent growth in credit YoY, touching RO24.7bn at the end of Aug 2018. Total deposits registered a growth of 3 per cent to reach RO22.3bn in the same period.

Supporting the objective of economic diversification, Bank Muscat focused on opportunities in the potential sectors identified by the government. The year 2018 was better for the economy and the banking sector given the higher level of oil price most part of the year and government’s continued efforts to manage the fiscal situation prudently. The bank’s financial results have been strong and stable in the last few years and the momentum continued in 2018 as well with good credit growth in line with the industry growth and stable profitability. The bank focused on its dynamic vision ‘To Serve You Better, Everyday’ to make a difference in banking excellence.