The outlook for Oman’s economy is positive and in view of the government’s commitment to infrastructure development and industrialisation; Bank Muscat anticipates considerable growth opportunities, says AbdulRazak Ali Issa, Chief Executive. An OER interview.
How has Bank Muscat’s performance been in the financial year 2014? Please highlight the major initiatives and achievements.
Ranked among the top 500 banks worldwide, Bank Muscat enjoys an unrivalled position in Oman as well as the region, a clear recognition focusing on the global best practices pursued by the bank. As the flagship bank in Oman, Bank Muscat is in a strong position with 37 per cent market share of assets. The bank enjoys investment grade credit ratings and is rated ‘A1’ by Moody’s and ‘A-‘ by Standard & Poor’s. The bank’s biggest footprint and presence across the Sultanate and world class products and services are helping to make the vital differentiation, with the focus on its ‘Let’s Do More’ vision.
The bank achieved a net profit of RO126.73mn for the nine-month period ended September 30, 2014 compared to RO102.51mn reported during the same period in 2013 as all key business lines recorded healthy performance on expected lines amid the challenging economic and financial situation.
During the year, the bank’s shareholders granted approval for increasing the Euro Medium Term Note (EMTN) programme, as authorised at the EGM in 2011, from $800mn to $2bn. The shareholders also approved the setting up of RO500mn Meethaq Sukuk Programme and SAR 1 billion Sukuk programme by the bank’s branch in Saudi Arabia.
The bank arranged $725mn syndicated term loan facility for Shadeed Iron & Steel LLC (SIS), the first integrated steel plant in Sohar.
The bank launched al Wathbah Academy, a major initiative for training entrepreneurs in Oman, leading to accredited international certification. The academy marked a milestone, building up on the series of initiatives by the bank to complement government efforts in strengthening the role of SMEs in the economic development of Oman.
The bank also launched the first-of-its-kind ‘najahi’ suite of products and services as part of its commitment to encourage entrepreneurial initiatives by micro and small business sector.
Identifying new business opportunities, Bank Muscat Oryx Fund widened the objective of the fund to invest in companies listed in the MENA region, in addition to the GCC markets. In the first nine months of 2014, Oryx Fund continued its strong performance with a return of 42.3 per cent as against the 20.1 per cent gain of its regional benchmark index.
Aimed at harnessing investment opportunities in the GCC property market, Bank Muscat GCC Property Income Fund was launched. The mandate of the fund is to invest in income yielding properties that generate a stable annual yield of 7-8 per cent. The fund marked its first transaction with the acquisition of five-star Movenpick Hotel in Jumeirah Beach Dubai.
The bank joined hands with leading global insurance company American International Group (AIG) for a 10-year strategic bancassurance agreement under which AIG has become the exclusive provider of non-life insurance products to Bank Muscat customers in Oman.
Meethaq Islamic Banking widened the branch network to 11 in Oman.
Bank Muscat hosted the 31st Asian Bankers Association (ABA) general meeting and conference. The prestigious annual conference attended by over 100 leading bankers and banking regulators from around the Asia-Pacific region was organised for the first time in the Middle East region.
The bank announced a major boost to Green Sports initiative launched in association with the Ministry of Sports Affairs to promote Oman as a sporting nation. Till date in the first three years of the programme, 34 sports clubs have been given support to green their playing fields as part of the CSR initiative.
Bank Muscat topped Omani companies ranked in the Forbes Top 500 Companies in the Arab World 2014 which celebrated the region’s corporate success.
The bank won the coveted Sultan Qaboos Award for Excellence in e-Government 2014 in recognition of its electronic channel services.
Bank Muscat won two prestigious global accolades to be ranked as the safest bank in Oman as well as among the 50 Safest Banks in Emerging Markets by Global Finance.
Given the competitive banking scenario, what are the challenges that you foresee in the years ahead?
The banking sector in Oman is governed by policies defined by the Central Bank of Oman (CBO). Recognizing the socio economic fabric of Oman and in a bid to boost employment, the CBO has advised local banks to formulate a liberal lending policy for the Small and Medium Enterprise (SME) segment and banks are required to allocate 5 per cent of their total credit to SMEs. The banking sector is required to maintain 35 per cent ceiling on personal loan portfolio and 15 per cent ceiling on housing loans. The CBO has also reduced the ceiling of interest rates on personal loans from seven per cent to six per cent.
The Omani banking sector has always followed a conservative approach under the guidance of the Central Bank of Oman. The financial health of banks in terms of asset quality, provision coverage, capital adequacy and profitability has remained strong with the balance sheet reflecting robust growth in both deposits and credit.
In order to remain competitive, the banking sector requires to adopt the best international practices of prudential regulation and supervisory framework, including sound risk management systems, transparency and excellent customer service. In light of the increasing competition, Omani banks will need to make a differentiation with the launch of competitive channels and new products to cater to the various new and growing sectors even as fulfilling its social responsibility in meeting the financial requirements of citizens and residents and maintaining profit margins.
With oil prices falling below budgeted levels, do you think that Oman’s economic growth may slow down in 2015?
Notwithstanding the volatile oil prices marginally impacting the overall economic outlook, the Sultanate is expected to sustain growth momentum on the back of the government commitment to diversification of the economy and infrastructure development projects. As part of Vision 2020 economic blueprint, Oman is well on track to find alternatives for oil and gas revenues by investing in agricultural, industrial, fisheries, tourism and other sectors. The government has affirmed that Oman’s development projects will continue as planned and steps are being taken to avoid any negative socio-economic impact on the country and citizens. Driven by favourable operating environment, the banking sector is also expected to witness a healthy performance. The banking sector has adequate liquidity and financial strength to continue supporting development projects, which will positively contribute to the Omani economy in the coming years.
What are Bank Muscat’s plans for the financial year 2015?
The projections for Oman’s 2015 budget are encouraging for the private sector to target growth and achieve good results which positively reflects on the Omani economy. During the past 32 years since its inception in 1982, Bank Muscat has been closely involved in the progressive march of the nation. The outlook for Oman’s economy is positive and in view of the government commitment to infrastructure development and industrialisation, Bank Muscat anticipates considerable growth opportunities. The bank’s biggest footprint and presence across the Sultanate and world class products and services are helping to make the vital differentiation. Offering the right mix of traditional and electronic banking channels, the bank is set to leverage on investments in new technology to further increase efficiency, improve customer service and support growth plan.