Said Abdullah al Hatmi, CEO of Ahli Bank, shares his thoughts on how Oman’s banking sector and the economy in general are going to shape up in 2020. Excerpts from an interview

How was the year 2019 for your company and the banking sector in general?

Overall, the banking sector in Oman has witnessed steady growth in 2019, despite the challenges in the operating environment. All the banks have published their Q3 results and the results are quite good across the industry. The total assets grew by around 5 per cent. The October 2019 monthly statistical bulletin published by the Central Bank of Oman reveals that the total outstanding credit provided by Other Depository Corporations (ODCs – comprising conventional and Islamic banks) as of October 2019 was RO25.9bn, an increase of 3.9 per cent as compared to the corresponding period of 2018. The total deposits of ODCs as of October 2019 were RO23.2bn, an increase of 3.1 per cent over the same period in the previous year. I am positive the industry will end the year on a positive note.

Ahli Bank has exhibited sustained growth in 2019 across the key financial parameters, in the face of overall challenging economic conditions.

On the balance sheet front, the bank’s total assets as of September 30, 2019 increased by 11.8 per cent to RO2.5bn while net loans & advances and financing increased by 10.2 per cent to RO2.1bn. The customer deposits increased by 3.5 per cent to RO1.6bn and equity increased by 26.2 per cent to RO383.1mn, as compared to the corresponding period in 2018. The bank’s capital adequacy ratio as of September 30, 2019 was 17 per cent, well above the regulatory requirements. When it comes to income statement, Ahli Bank’s net profit for the nine months ending September 30, 2019 was RO22.8mn, an increase of 5.2 per cent over the comparable period in 2018. The cost-to-income ratio for the period was 39.3 per cent, the best among the peers.

The bank continued to expand its footprints across Oman by adding three new branches (comprising both conventional and Islamic) to its network in 2019 so far, and invested significantly in technology and digitalisation to provide greater convenience and improve the overall experience for our esteemed customers.

How do you foresee Oman’s economic growth in 2020 and what is your industry outlook for 2020 and beyond?

It was expected that 2019 would be a turnaround year in terms of economic recovery. But it transpires that we may have to wait for some more time. However, we are cautiously positive about 2020 where the economy is expected to grow better than it grew in 2019.

Oman’s economic growth in 2020 will continue to be driven by government spending and the trends in oil prices, given that the oil and gas sector is still a major contributor to Oman’s GDP. However, the government is actively focusing on developing the non-hydrocarbon industry by focusing on selected non-oil sectors through various initiatives in its Tanfeedh programme and is also taking various fiscal measures such as higher excise taxes on selective commodities and potential VAT introduction in the near future. Privatisation efforts along with other initiatives will contribute a long way in providing an impetus to the economic growth of the country.

It’s been nearly five years since we are going through a challenging market situation and the new reality seemed to have set in across the industries, including the banking sector. There are certain reforms initiated by the government and we expect these reforms will continue.

Several key legislations, such as the new Foreign Capital Investment Law, the new Privatization Law, Law on Public-Private Partnership and the Bankruptcy Law have also been enacted in 2019 and these are expected to provide a fillip to the economic growth in the coming years.

The banking sector is expected to see a sustained growth in credit demand in the coming years, driven by the above factors, overall growth of Oman’s economy and the resultant evolving requirements of the corporate and retail segments. Islamic banking will continue to outpace growth in the conventional banking segment, given the still relatively low base and the needs and sentiments of the customers.

Increasing digitalisation and use of fintech will offer more opportunities for innovation by industry players and contribute to the overall growth of the sector.

Are you seeing any significant change in the regulatory environment in 2020?

We understand that various other regulations, including the banking law, is currently under review with the relevant authorities and believe that the new laws and changes in regulations, when introduced, is expected to be positive for the overall growth and stability of the sector in the medium to long term.

On its part, the Central Bank of Oman (CBO) has been pro-active during the last few years, engaging with the industry on a regular basis and making suitable modifications and changes to the regulations, as required, to resolve sector specific issues and to bring market practices and regulations in line with international best practices. Several measures introduced by the CBO in the recent past, taking into account the new market situation, have been very effective in enabling banks to support various industries and contributing to the development of these sectors and the overall economy. We would like to acknowledge the incredible and immensely helpful support and guidance we receive from the regulator on an ongoing basis.

The government is investing heavily in key diversification sectors such as logistics, manufacturing and tourism etc. What potential do you foresee in those sectors for the banks?

The banking industry plays a vital role in supporting the Tanfeedh focus sectors. There are expected to be many potential opportunities for the banks in these vital sectors, potentially in the areas of term financing and structured loans for greenfield projects, working capital facilities, treasury services and debt and equity advisory, among others. Ahli Bank will continue to support these critical industries such as SMEs, mining, logistics and tourism. If you look at our year-on-year allocation to SME credit, it is increasing, despite the liquidity constraints. I expect this to continue in 2020 also.

Can you talk about the future plans and major areas of innovation for the bank in 2020?

Ahli Bank will continue with its prudent growth strategy. We will expand our presence across Oman by opening new branches, both conventional and Islamic. There will be a greater focus on the retail banking segment. We will also invest significantly in digitalisation and relevant technologies with the goal of providing a seamless, smooth customer experience and service. In addition,
we will be focusing on and investing more in our people who are our key assets and play a pivotal role in the overall growth of the bank. We have ambitious plans in terms of physical and digital expansion.