Banking on a boom
BankMuscat is the third company that has managed to retain its last year’s position. Here is why it is still the No. 1 bank in Oman

BankMuscat enjoyed a market share of 42 per cent in terms of total assets, 41.4 per cent in terms of total credit and 39.2 per cent in terms of total customer deposits as on December 31, 2006. Similarly, the bank’s share of total savings deposits was 41.1 per cent.

While the bank continued on its path of measured growth during the year gone by, several measures have been initiated by it to prepare it for sustained growth in the future. The most significant amongst these was the bank’s decision to implement the recommendations of global strategy firm, Booz Allen Hamilton, on the re-organisation of the bank in line with emerging customer segments. This also resulted in a number of senior management changes. Also noteworthy was the bank’s decision to select and implement a new core banking system (CBS), replacing the existing MIE system. Assisted by Gartner Consulting, the bank evaluated three leading CBS solutions before selecting Temenos T24 as the best fit for its business model. The implementation project is expected to be complete by March 2008.

During the year, the bank’s corporate banking group has had a stimulating and eventful year. It was not only associated with the financial closure of two large petrochemical projects – Aromatics Oman in Sohar and Octal Petrochemicals in Salalah – as the mandated lead Arranger, but has also undertaken four major re-financing programmes. Of these, two were in the oil and gas sector, one for a power and water project and another for an LNG tanker. Besides, BankMuscat has upgraded its existing small business unit into a full-scale department (SME credit and marketing) with dedicated staff to look after the financial needs of the SME sector. The International Finance Corporation has also signed a technical agreement with the bank to help it promote the SME finance segment in the Sultanate.

The bank’s corporate finance and advisory (CFA) unit continued its progress during the year by successfully making an entry into the global advisory league tables. The unit played a pivotal role in the bank’s acquisition of a 43 per cent stake in the Mangal Keshav Holding (MKH) in India, one of the top 20 security houses in India. The CFA unit also successfully completed the US$ 147 million petrochemical project (Phase I), the first project in the Salalah Free Zone.

The bank’s brokerage unit also had a very successful year, becoming the number one brokerage house in the country, with a 19 per cent market share. All the major segments of the bank’s treasury and capital markets – foreign exchange, money markets and structured products – witnessed strong business growth during the year. The bank also became the first bank in the Sultanate of Oman to be granted approval for offering commodity-hedging products to local corporations. The focus on money market activities increased the treasury division’s balance sheet size by over 60 per cent.

On the international operations front, the bank’s subsidiary in Bahrain, BankMuscat International (BMI), continued to turn in robust performances during the year and received ‘investment grade’ ratings from Standard & Poors, Moody’s and Capital Intelligence at the beginning of 2006. BankMuscat’s Representative Office in Dubai accelerated its business development initiatives amongst the non-resident Indian community during 2006 by capitalising on the expertise and support of Centurion Bank of Punjab, its partner from India. BankMuscat’s largest international investment is its 21.95 per cent stake in Centurion Bank of Punjab, where it is also largest shareholder.

The bank’s performance were once again recognised and lauded by financial community during the year. Notable amongst the awards and recognitions during 2006 were Best Bank in Oman award for the 5th time by Euromoney; Best Bank, Oman (6th year running), Best Forex Bank and Provider, Oman (3rd year running), Best Trade Finance Bank and Provider, Oman (3rd year running), Best Internet Consumer Bank, Oman (3rd year running) by Global Finance; Deals of the Year, Oman by The Banker FT London; Banking & Finance CEO of the Year by Datamatix; and maiden entry into global league tables (mandates won) for financial advisors.

In an attempt to support the efforts made the by the Ministry of Social Development and the Central Bank of Oman to enhance the welfare of our society and promote long-term growth of the national economy, the Bank also launched a significant social awareness campaign during the year to address the dangers of excessive personal borrowing.

Hinging on the philosophy that one needs to ‘borrow sensibly, to live happily’, the campaign was intended to recognize responsible consumer lending as a key value and crucial growth engine for our society. This is the first such programme to be endorsed by the Ministry of Social Development and the Central Bank of Oman.

Outlook
The year ahead looks poised with promise: the promise of reaching greater heights, riding on the back of an even stronger performance in 2006; a local economy that is showing definite signs of being on the move; higher domestic consumption trends; greater prospects of geo-political stability across the region and continued strong global energy prices, all of which augur well for the bank, according to the company’s annual report.

The bank shall also continue to foray into and emphasise the importance of fee-based and commission-based value-added services, which today contribute significantly to the bottomline. To this end, the bank will continue its pioneering initiatives that cut through the clutter and command a distinct premium. It is only by achieving an ideal balance between its various revenue streams and by moving even closer to the customer with relevant products and superior services that the bank can strive to become future proof.

However, competition is expected to considerably increase in the domestic market during 2007. Resurgent local players, the influx of three strong regional banks, and the incorporation of a new bank in Oman are all expected to keep BankMuscat on
its toes.

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