06 May 2012
How do you anticipate credit growth within the banking sector this year? And how would be the growth of loans and advances for BankMuscat this year? What are the factors driving this growth?
The bank's loan book grew at 20 per cent in 2011.
We expect that the industry would grow around 15 per cent in terms of loan book this year and BankMuscat would grow in line with the industry growth. The increase in government spending, especially for infrastructure activities, is likely to boost project financing.
Being the market leader, BankMuscat is geared to meet the growing credit demand. The bank's capital adequacy is already at a good level, well above Central Bank of Oman requirements. As the level of disposable income increases, there is likely to be good growth in the retail segment as well.
Is there any fall in cost of funds this year? How is the bank bringing down its cost of funds?
The cost of funding has been coming down in the recent period in line with interest rate scenario in the global market. Liquidity conditions in Oman have been good. The deposits rates have fallen in 2011 and we do not expect much reduction in deposit rates in 2012. The interest rate movement will depend on the liquidity conditions and asset growth. The bank continues to focus on savings and current deposits to manage the cost of funding.
How do you expect interest margin this year? Will it be better than that of last year? Can you please give us the average interest margin of the banking sector in general and BankMuscat in particular?
The Sultanate's banking sector is set to witness competition resulting from the proposed launch of Islamic banking operations. Competition among banks will be tough because of the small size of the market in Oman. With the launch of Islamic banking, there will be pressure on interest rate margins as all banks are eager to grow in this market. Interest rates are likely to remain at current levels in 2012 and any reduction in rates will depend on the level of competition in the market. BankMuscat has a strong base and is ready to face the competition.
Which are the growth areas for BankMuscat this year? Will it be retail segment or corporate business?
The outlook for Oman's economy in 2012 is positive as the government has announced a 12 per cent increase in spending. In view of the government commitment to infrastructure development and industrialisation, BankMuscat anticipates good growth opportunities.
The good macro-economic growth will create beneficial operating conditions for the bank as the government accelerates financial support, primarily for infrastructure projects. The bank would continue to focus on both corporate and consumer banking. The opportunities are in both the business segments. The opportunity arising from Islamic banking is also expected to help the bank further consolidate operations.
We understand that BankMuscat is planning to raise capital base with the proposed private placement and a rights issue (RO58 million private placement and RO100 million rights issue) this year. What is the reason for raising capital base?
The Board of Directors of BankMuscat has given approval to raise additional capital amounting to RO57.75 million ($150 million) through private placement of shares with a reputable international institution and a rights issue of RO100 million at 20 per cent discount to the market price. These transactions, subject to necessary regulatory approvals, are part of the bank's capital augmentation plan in order to strengthen the capital adequacy ratio to meet future organic growth and planned business expansion.
The bank aims to strengthen its capital base to grow its loan book and expand business, particularly in project financing, corporate and small and medium enterprises (SMEs), personal and home finance and Islamic banking. The additional capital is part of the bank's strategic initiatives to tap growth opportunities ahead.
Coming to regional ambition, which are the countries identified by BankMuscat for expanding branch/joint venture operation? How was the performance of branches/JVs in countries like Bahrain, Saudi Arabia and Kuwait last year?
BankMuscat is one of the few GCC banks with a strong regional presence. While we are continuously on the lookout for strategic opportunities which fit in and add value to our network, our focus currently is to consolidate the existing network, and to ensure that the existing international entities contribute a reasonable share of the bank's future profit.
The Riyadh (Saudi) branch has been operational since 2007, and the Kuwait branch since 2010 - hence they are both relatively new. In the short period of existence, both branches have built a good corporate customer base and have positioned themselves well to take advantage of trade flows between Oman and Saudi Arabia/Kuwait as well as the rest of the GCC region.
Due to the global financial crisis in 2008 and the consequent slowdown in spending in key markets in the region - as well as the green field nature of the overseas branches - the financial returns from these investments have been delayed from what was originally envisaged. Both branches are, however, close to breaking even at the operating level, and we expect them to generate a healthy return on investment in due course. The expected increase in project implementation and economic activity in the region will serve to accelerate this process.
The associate in Bahrain, BMI Bank, has seen significant challenges due to the unrest in Bahrain during 2011. However, despite the environment, the bank has been profitable throughout the second half of 2011. The bank posted a loss for 2011, but these were due to impairment losses posted in the first half of the year. In addition, the bank is in a strong position with respect to liquidity, and has one of the highest capital adequacy ratios amongst banks in Bahrain.
The two overseas branches at Riyadh and Kuwait, BMI Bank and the Representative Offices at Dubai and Singapore represent the core of the bank's international network and have helped establish BankMuscat as one of the few GCC banks with a regional presence.
Islamic banking is a potential line of business every bank is planning to enter. How do you foresee the market potential? What are the strategies adopted by BankMuscat to get a share of the market?
BankMuscat is the pioneer of Islamic banking in Oman. As the nation's leading financial services provider, BankMuscat is well positioned to provide Islamic financial expertise to diverse segments and promote the good of society as a whole. The bank has in place a comprehensive strategy to effectively respond to the directive of His Majesty Sultan Qaboos on Islamic banking and thereby cater to the financial needs of people in accordance with the guidelines and regulatory framework prescribed by the Central Bank of Oman.
BankMuscat has taken major strides as part of its proposed Meethaq Islamic banking window operations. Meethaq will reach out to customers by offering a suite of banking products and services that fully comply with Shariah principles. Inspired by belief and a tradition of trust, Meethaq will assist customers in staying true to their values. The bank is ready to launch its Islamic banking platform and has made a headway assigning RO150 million capital for Meethaq. The bank has also announced a three-member Shariah board comprising some of the brightest minds in Islamic finance.
The Meethaq window will hold aloft BankMuscat's legacy in terms of standard of excellence, customer-centric service and transparency while delivering Islamic financial services. A Shariah review and monitoring unit has been established under the direct supervision of the Sharia board in order to oversee the Islamic banking operations. The bank has built a very strong system to ensure the segregation of funds between Meethaq window and its conventional counterpart.
To start with, how many exclusive Islamic banking branches BankMuscat is planning for? Also, what is the total capital set aside for Islamic banking?
To begin, subject to regulatory approval, Meethaq will start operations with seven dedicated branches. BankMuscat has assigned RO150 million capital for the proposed Meethaq Islamic banking window operations. The final allocation will be determined by business opportunities in the market and the board has indicated that the assigned amount may increase if required.
The capital allocation is subject to necessary regulatory approvals. The decision to assign RO150 million capital for Meethaq reflects the determination of the bank to be the market leader of Islamic banking in Oman.
How do you anticipate credit growth within the banking sector this year? And how would be the growth of loans and advances for BankMuscat this year? What are the factors driving this growth?
The bank's loan book grew at 20 per cent in 2011.
We expect that the industry would grow around 15 per cent in terms of loan book this year and BankMuscat would grow in line with the industry growth. The increase in government spending, especially for infrastructure activities, is likely to boost project financing.
Being the market leader, BankMuscat is geared to meet the growing credit demand. The bank's capital adequacy is already at a good level, well above Central Bank of Oman requirements. As the level of disposable income increases, there is likely to be good growth in the retail segment as well.
Is there any fall in cost of funds this year? How is the bank bringing down its cost of funds?
The cost of funding has been coming down in the recent period in line with interest rate scenario in the global market. Liquidity conditions in Oman have been good. The deposits rates have fallen in 2011 and we do not expect much reduction in deposit rates in 2012. The interest rate movement will depend on the liquidity conditions and asset growth. The bank continues to focus on savings and current deposits to manage the cost of funding.
How do you expect interest margin this year? Will it be better than that of last year? Can you please give us the average interest margin of the banking sector in general and BankMuscat in particular?
The Sultanate's banking sector is set to witness competition resulting from the proposed launch of Islamic banking operations. Competition among banks will be tough because of the small size of the market in Oman. With the launch of Islamic banking, there will be pressure on interest rate margins as all banks are eager to grow in this market. Interest rates are likely to remain at current levels in 2012 and any reduction in rates will depend on the level of competition in the market. BankMuscat has a strong base and is ready to face the competition.
Which are the growth areas for BankMuscat this year? Will it be retail segment or corporate business?
The outlook for Oman's economy in 2012 is positive as the government has announced a 12 per cent increase in spending. In view of the government commitment to infrastructure development and industrialisation, BankMuscat anticipates good growth opportunities.
The good macro-economic growth will create beneficial operating conditions for the bank as the government accelerates financial support, primarily for infrastructure projects. The bank would continue to focus on both corporate and consumer banking. The opportunities are in both the business segments. The opportunity arising from Islamic banking is also expected to help the bank further consolidate operations.
We understand that BankMuscat is planning to raise capital base with the proposed private placement and a rights issue (RO58 million private placement and RO100 million rights issue) this year. What is the reason for raising capital base?
The Board of Directors of BankMuscat has given approval to raise additional capital amounting to RO57.75 million ($150 million) through private placement of shares with a reputable international institution and a rights issue of RO100 million at 20 per cent discount to the market price. These transactions, subject to necessary regulatory approvals, are part of the bank's capital augmentation plan in order to strengthen the capital adequacy ratio to meet future organic growth and planned business expansion.
The bank aims to strengthen its capital base to grow its loan book and expand business, particularly in project financing, corporate and small and medium enterprises (SMEs), personal and home finance and Islamic banking. The additional capital is part of the bank's strategic initiatives to tap growth opportunities ahead.
Coming to regional ambition, which are the countries identified by BankMuscat for expanding branch/joint venture operation? How was the performance of branches/JVs in countries like Bahrain, Saudi Arabia and Kuwait last year?
BankMuscat is one of the few GCC banks with a strong regional presence. While we are continuously on the lookout for strategic opportunities which fit in and add value to our network, our focus currently is to consolidate the existing network, and to ensure that the existing international entities contribute a reasonable share of the bank's future profit.
The Riyadh (Saudi) branch has been operational since 2007, and the Kuwait branch since 2010 - hence they are both relatively new. In the short period of existence, both branches have built a good corporate customer base and have positioned themselves well to take advantage of trade flows between Oman and Saudi Arabia/Kuwait as well as the rest of the GCC region.
Due to the global financial crisis in 2008 and the consequent slowdown in spending in key markets in the region - as well as the green field nature of the overseas branches - the financial returns from these investments have been delayed from what was originally envisaged. Both branches are, however, close to breaking even at the operating level, and we expect them to generate a healthy return on investment in due course. The expected increase in project implementation and economic activity in the region will serve to accelerate this process.
The associate in Bahrain, BMI Bank, has seen significant challenges due to the unrest in Bahrain during 2011. However, despite the environment, the bank has been profitable throughout the second half of 2011. The bank posted a loss for 2011, but these were due to impairment losses posted in the first half of the year. In addition, the bank is in a strong position with respect to liquidity, and has one of the highest capital adequacy ratios amongst banks in Bahrain.
The two overseas branches at Riyadh and Kuwait, BMI Bank and the Representative Offices at Dubai and Singapore represent the core of the bank's international network and have helped establish BankMuscat as one of the few GCC banks with a regional presence.
Islamic banking is a potential line of business every bank is planning to enter. How do you foresee the market potential? What are the strategies adopted by BankMuscat to get a share of the market?
BankMuscat is the pioneer of Islamic banking in Oman. As the nation's leading financial services provider, BankMuscat is well positioned to provide Islamic financial expertise to diverse segments and promote the good of society as a whole. The bank has in place a comprehensive strategy to effectively respond to the directive of His Majesty Sultan Qaboos on Islamic banking and thereby cater to the financial needs of people in accordance with the guidelines and regulatory framework prescribed by the Central Bank of Oman.
BankMuscat has taken major strides as part of its proposed Meethaq Islamic banking window operations. Meethaq will reach out to customers by offering a suite of banking products and services that fully comply with Shariah principles. Inspired by belief and a tradition of trust, Meethaq will assist customers in staying true to their values. The bank is ready to launch its Islamic banking platform and has made a headway assigning RO150 million capital for Meethaq. The bank has also announced a three-member Shariah board comprising some of the brightest minds in Islamic finance.
The Meethaq window will hold aloft BankMuscat's legacy in terms of standard of excellence, customer-centric service and transparency while delivering Islamic financial services. A Shariah review and monitoring unit has been established under the direct supervision of the Sharia board in order to oversee the Islamic banking operations. The bank has built a very strong system to ensure the segregation of funds between Meethaq window and its conventional counterpart.
To start with, how many exclusive Islamic banking branches BankMuscat is planning for? Also, what is the total capital set aside for Islamic banking?
To begin, subject to regulatory approval, Meethaq will start operations with seven dedicated branches. BankMuscat has assigned RO150 million capital for the proposed Meethaq Islamic banking window operations. The final allocation will be determined by business opportunities in the market and the board has indicated that the assigned amount may increase if required.
The capital allocation is subject to necessary regulatory approvals. The decision to assign RO150 million capital for Meethaq reflects the determination of the bank to be the market leader of Islamic banking in Oman.
© Times of Oman 2012
