'BankDhofar would continue funding all key projects to support economic growth'

March 25, 2017

BankDhofar posted a strong growth in its key profitability indicators in 2016. Despite challenging economic situation driven by volatile oil prices the bank's loan book expanded by 9.5 per cent and deposits base rose 11.6 per cent in 2016 compared to the previous year. In an interview with Muscat Daily , Abdul Hakeem al Ojaili, acting chief executive officer of BankDhofar talked about bank's performance in 2016 and outlook for this year.

Given the current economic and market conditions how do you evaluate the bank's overall performance in 2016?

Backed by strong fundamentals BankDhofar demonstrated a good growth and progress in 2016 achieving increased efficiency and productivity through prudent lending that supported projects of national importance and economic growth. This coupled with constant monitoring helped us manage the operating income and the costs very well in line with industry and market conditions.

Loan book grew by 9.5 per cent and deposits mobilized by the bank achieved a higher growth of 11.6 per cent in 2016. How did the bank manage to continue strong growth in all key areas despite the economic situation driven by volatile oil prices?

BankDhofar has maintained healthy customer relations due to its strong and continued commitment for improved customer service year-on-year which is in line with bank’s transformation strategy.

In addition, the bank continues to extend its support for all key projects to enhance economic growth. Further, BankDhofar has been able to maintain its quality of assets due to prudent risk management policies and internal controls. The bank has effectively managed its liquidity by balancing deposits with its lending requirement to ensure sustainability and growth. The overall performance achieved in 2016 is a testament to customers’ confidence and trust reposed in BankDhofar.

Total assets of Maisarah Islamic Banking Services increased more than 50 per cent to cross RO450mn mark and your Islamic deposits also recorded a strong growth in 2016. How do you evaluate Maisarah’s performance since its launch in 2013? Which were the new products added by your Islamic banking window during 2016?

Since its inception Maisarah Islamic Banking Services has been able to outperform in all key areas. Maisarah's achievements are not only related to financial numbers but also in other key areas such as availability of wide range of financing and deposit products for customers, increase in branch network and customer satisfaction.

With a diversified product portfolio and large customer base Maisarah has become a key player in Oman's Islamic banking industry. Based on exceptional performance in 2016 Maisarah was awarded 'Best Islamic Bank in Oman' award by internationally renowned organization 'Europe, Middle East, and Africa (EMEA) Finance Limited'.

Maisarah started with a seed capital base of RO10mn in March 2013 and now stands at RO55mn as of December 2016. Total assets grew almost nine times to RO450.71mn at December 2016 from RO50.02mn in December 2013. With growth in capital base and customer deposit (from RO3.68mn at December 2013 to RO285.67mn at December 2016), Maisarah’s earning assets have also grown with a tremendous pace. Total financing portfolio grew from RO28.27mn at December 2013 to RO311.59mn at December 2016 (i.e. growth of almost 11 times).

It was due to outstanding performance that has enabled Maisarah recovering its initial investment cost of RO2.2mn within two years’ time. Maisarah had recorded net profit before tax of RO2.57mn in 2015. The year 2016 has also been very productive and we were able to post a profit before tax of RO3.18mn for the year.

As a part of the core strategy of Maisarah for providing complete range of Sharia'a compliant products and services, several new products were launched during 2016 for customers. The new products launched by Maisarah in 2016 included: savings account with prize scheme; Sharia'a complaint credit card; Maisarah travel finance product for retail customers; and inventory finance product for corporate customers.

The response from customers for these new products have been encouraging.

How many Islamic banking branches and ATMs are being operated by Maisarah at present, and what are the expansion plans for this year?

Maisarah branch and ATM network now stands at total 10; which are strategically located throughout the sultanate.

With regards to Maisarah’s future plans, the key areas and initiatives for 2017  include: expanding existing distribution network by opening more branches across the country; continue rolling out new products and services to increase market share; investing in technology and operational infrastructure to streamline process for ease of customers; and positioning Maisarah as a leading player in Islamic finance through participating actively in seminars, workshops and corporate events.

BankDhofar successfully completed a rights issue of RO40mn in 2016 and also closed club deals and syndicated borrowings of US$350mn. Is the bank in a comfortable position in terms of funding requirements, or you have further plans for capital raising in near future?

After raising the capital of RO40mn and borrowing of US$350mn, the bank is currently in a comfortable position. However, BankDhofar has embarked on a transformation journey with a five year rolling strategic growth plan. To meet this growth, the bank has developed its funding and capital plan. The bank is following the plan and given the present business growth may target to raise the equity in the last quarter of the year to ensure a comfortable capital adequacy position above the regulatory capital adequacy requirement always.

With prevailing slowdown in economic activities, what is your outlook for credit growth this year?

Though there will be a general slowdown, the bank would be funding all the key projects supporting the economic growth both in corporate/project financing areas as per the bank policies. The retail lending, which is based on the strength of the employers and governed by the regulations, will grow in tandem with the corporate business.

What would you say about the development of electronic channels and mobile banking services at BankDhofar?

BankDhofar's main focus is developing an advanced electronic banking experience by using the latest technologies available worldwide to make banking easier to our customers.

BankDhofar's mobile banking allows customers to transfer to any other local bank instantly, make utility payments to Omantel, Ooredoo bill payments, electricity and water bill payment instantly and several many others main services providers in the country. It also initiates automated standing instructions payments to these service providers and instructing a cardless cash transaction where our customers can withdraw without using BankDhofar ATMs and debit cards. These are few examples of the services available through our award winning application which is also recognized globally.

Last year Oman government increased borrowings from local and international markets and flows of government deposits to the banks were reduced. How do you assess the current liquidity situation in Oman's banking system?

Given the present economic conditions, there are some challenges in the current liquidity situation. However, the Central Bank of Oman and the government has managed the current situation very effectively by raising  funds from overseas, without disturbing liquidity within the economy. In fact, this has helped in easing the liquidity condition. The government has taken suitable steps to bridge the budget gap and liquidity position for the entire year and with the steps initiated by the government we expect liquidity situation to become normal in near future.