Innovation is a major plus with BankMuscat, point out analysts. In 2005, the bank introduced new electronic queue management system and quietly increased its ATM strength, which has crossed the mark of 165. It is also associated with US$1 billion worth contracts in the oil and gas sector, including a contract for Petroleum Development Oman’s Enhanced Oil Recovery programme. Simultaneously, it is mandated to be the main banker for the Electricity Holding Company SAOC and its subsidiaries. It is one of the early birds to introduce the Central Bank of Oman-mandated Real Time Gross Settlement System (RTGS), which would expedite fund transfer between banks, leading to enhanced liquidity management.

BankMuscat Growth (in RO Million)

Loan

Deposits

Profit

2001

098

816

1,7.75

2002

1,226

1,059

22.86

2003

1,245

1,104

27.85

2004

1,329

1,162

34.11

2005

1,290*

1,431*

 45.43#

* Jan-Sept 2005 # Annualised
Source: Corporate Research Division, Fincorp 2005

BankMuscat Shareholding Pattern

% Holding

Royal Court Affairs

20.1

Societe Generale

9.2

HSBC A/c (Bank of New York)

9.1

MOD Pension Fund

7.6

Muscat Overseas Company LLC

6.1

National Equity Fund

3.6

Altman Trading Establishment

3.3

Civil Service Employees Pension Fund

3.3

Mushtahil Ahmed Ali Al Maashani

2.8

Public Authority for Social Insurance

2.5

Others

32.5

Total

100.0

“We’re open to all quality growth opportunities”

BankMuscat Chief Executive Officer Abdulrazak Ali Issa opens up to share his thoughts on the bank in a dialogue with Group Editor Ramesh Kumar. Excerpts:

It seems BankMuscat’s appetite remains insatiable. What is the philosophy behind this urge to grow big? Did the failure of merger process with National Bank of Oman impact you adversely?
Even as we speak, we actually comprise eight other banks today with which we have been in successful merger situations. BankMuscat’s growth strategy has been derived from our objective of becoming one of the foremost banks across the region by the turn of the decade. Early on in the history of the bank, one of the key components of growth identified was the need for ‘critical mass’. The Board and Management of the bank realised a long time ago that by continuing to be small, the bank would call upon itself many restrictions and open it up to substantial risks that it might not be in a position to take on. This drove us to look at a strategy that combines the best of organic and non-organic growth strategies.

I really wouldn’t read too much into the failure of our merger talks. The National Bank of Oman is the oldest, and second largest, bank in Oman. I am sure they will continue to grow and prosper in their own right. Our strategy continues to be open to considering all quality growth opportunities that come our way, be they of an organic or non-organic nature.

Recently your bank got listed on the London Stock Exchange and became the first bank in GCC to do so. How is it going to help your bottom-line?
The Global Depository Receipts (GDR) issue is of great significance to us as a bank and as a leading Omani institution. We have today become the first bank from across the Gulf region and the first Omani institution to be listed on the London Stock Exchange. This indeed is a reason for pride and celebration as it has also allowed us to take Oman – the country, economy and financial sector - to international investor and fund manager audiences who have shown their overwhelming support for the same. The GDR not only allowed us to significantly diversify our investor base, but also allowed us to bring in an additional US$ 163 million into the country by way of the FDI route. The issue, you may recall, was oversubscribed several times.

Is being a listed entity on the bourses a pain or pleasure? How do you cope up with this inevitability?
BankMuscat has been a public limited company for quite some time now. We have a full-fledged set-up at our head office in Oman that is focused on managing our growing investor base in Oman and across Luxembourg, London and Bahrain. We believe we have a duty to perform to each of our valued investors and look upon meeting these to the best of our ability.

Oman is your playfield. How is your progress in terms of rural reach? How fruitful has your attempt to go beyond Muscat proved?
BankMuscat has a retail network of 90 branches and close to 170 ATMs to service the needs of the domestic retail customer in Oman. Fifty-five of these branches are located outside the Capital region. The bank’s branch network stretches from Khasab in the North to Taqa in the South and from Buraimi in the West to Sur in the East. We are committed to providing our customers with the finest banking experience across the country.

Either direct lending or assisting big borrowers to access money is your forte. How far has BankMuscat succeeded in helping create small and medium enterprises and building up an entrepreneurial class?
One of the most serious constraints the SME sector finds in most countries is ready access to the finances that would help them move up in terms of size/critical mass and consequently, the value chain. This has also been reflected in the World Business Environment Survey, which covers 4,000 firms across 54 countries. The SME sector has, by and large, irrespective of country, cited inadequate access to finance as its primary constraint to growth.

We, however, have been providing financial solutions to the SME sector in Oman for several years. More recently, we launched a comprehensive suite of programme lending services focused on the needs of the SME sector.

We do not consider these services as merely an addition to the products and services roster of the bank, but as our contribution to the valuable efforts of the Ministry of Commerce and Industry, Ministry of Manpower and the Central Bank of Oman to develop and nurture the small and medium scale sector in the country.

When it comes to lending a helping hand to mega projects, your track record seems to be good. What is your forecast for 2006 in terms of lending?
We have built considerable expertise in Project Finance in the domestic Omani market where we have been involved with almost all the large ticket project finance transactions with a significant role in several projects. With the increase in our equity, following the bank’s maiden GDR issue, and growing ability to take on cross border exposure, we plan to leverage on our project finance expertise in other GCC markets. We already have cross border exposure in syndicated transactions, and are looking to expand this activity further into primary top tier arranger and syndication roles.

Among the various facets where BankMuscat has a presence such as corporate banking, retail, investment banking, treasury, private banking and asset management, where do you stand in each of these categories vis-à-vis competition? What, according to you, is your weakest link and what is the strongest one? In 2006, what kind of growth strategy you are planning?
Today, BankMuscat is very much the leading bank in the Sultanate and has a market share in excess of 35 per cent across each of its key business lines. It would, therefore, not be right to try and identify which of the business lines are stronger than the others. Each have their own rightful position in the overall portfolio of our offerings and contribute to their own potential to the Bank’s bottom-line.

In 2006, the bank will continue to ride upon the strong foundations that it has laid in the past and will continue to forge ahead on its path to realise its ambition of becoming one of the foremost banks across the region by the turn of the decade. It will also continue to ride on its pillars of excellence and quality in everything it does and provide its customers with an even more superior customer experience.

Our growth strategy has traditionally spanned organic and inorganic growth opportunities. The bank will continue to explore all quality opportunities that come its way during the new year, both in Oman and across the geographies that have an abiding interest in the GCC countries. Whether this will be through BankMuscat or BankMuscat International remains to be seen.

In terms of innovative products, will BankMuscat surprise the financial world this year?
I am afraid you will have to wait and see! The year 2006, as I mentioned earlier, promises to be exciting for at least three key developments that promise to impact the banking sector both directly and indirectly in the Sultanate: It will be a watershed year with the WTO regulations coming into play at a national level and the Basel II regulations being implemented by the banking sector. To cap it all, year 2006 has begun with the signing of the Free Trade Agreement (FTA) between Oman and the United States of America.

While the Basel II regulations are essentially an issue that will impact the banking sector alone, the WTO regulations and the FTA will have a huge, overall impact.

For, while they promise to help the country integrate much farther into the global economy, in line with the vision of His Majesty, they are also expected to result in the emergence of substantial opportunities for the local industry to extend its competencies overseas. Finally, they will also result in many more global organizations looking at the Sultanate and its dominating youth market as a potential destination on the global map.

What challenges and opportunities that these three developments throw up for the banking sector, and in turn, customers across the Sultanate, remains to be seen. One thing, however, is certain: increased economic spending will both directly and indirectly help the sector and this indeed will result in leading players reaching out to woo discerning customers all the more persistently during the year ahead. Whether this will result in a slew of customer-focused initiatives or products and services, remains to be seen.

In pure numbers, what kind of growth percentage are you looking in 2006?
Historically, we have grown at close to 20 per cent over the past 10 to 15 years. However, I would not like to comment further on this at this point in time. We shall, however, continue to grow on the strong foundations laid during 2005 and the years that have preceded it, in our quest to move ahead.

What is your success rate in achieving the Omanization targets? Do you find any problems in meeting the targets at any levels? If so, how are you trying to overcome those areas?
Omanization is a key national objective. As the nation’s largest bank, we have a duty to provide quality employment opportunities to the talented youth of the country and Omanization ensures that each one of us play our part in the process. However, that is not to say that we do not have our fair share of expatriates working with us as well. Our Omanization levels as on 30 October 2005 was in the region of 91.23 per cent, the balance comprising talented professionals from the UK, Australia, Canada, Egypt, Jordan, Sudan, Kenya, Lebanon, Syria, India, Sri Lanka and Pakistan.

Every country, whether Oman, India or the United States, has room for its fair share of talented professionals from overseas. These people play a key role in bringing specialized skill sets to the table, which are otherwise wanting.
In the context of Omanization, the expatriates play an additional role of imparting knowledge and training to our people who are guided through their formative years by strong in-house mentors. Without the presence of strong talent at senior positions, many of our young people who start work immediately after college may indeed consider going abroad.

When we are on the verge of opening our national borders to international companies, we cannot really close our doors to international talent because of Omanization. Yes, the market will choose, and providing right opportunities to our youth will continue to be our priority, but in some fields we would need fresh expertise from abroad. This trend is valid for people from Oman as well. Tomorrow, these Omanis may indeed go abroad and play a meaningful role in the international arena.