Salaam Al Shaksy, CEO, National Bank of Oman shares his views on the bank’s achievements and the roadmap for future in a candid chat with Mayank Singh.
Looking back on the year 2012, what are your thoughts on NBO’s performance, challenges and opportunities?
The year 2012 has been a good one for the National Bank of Oman; yet as is often the case in business, there were challenges to tackle and overcome. Our retail banking business has taken off and established itself as a leader in that market; however, in wholesale banking, as a result of stiff competition, shrinking margins have affected the banking sector as a whole and NBO is no exception. In addition to this, regulatory changes in retail banking took effect mid-year which has resulted in further reducing profitability.
Overall, I am pleased with what we have achieved in 2012. We won the Bank of the Year award amongst further recognition by various other bodies. NBO is continuing to regain its leadership position in the sector, although I feel that there is more that can be done as there is always scope for further improvement in a highly competitive market.
You mentioned the success of NBO’s retail business-were there certain initiatives that helped you to do well in retail banking?
On the retail banking side we have undertaken a number of strategic and operational initiatives, including an enhanced product offering, improved delivery channels and superior customer service in order to offer an ever improving experience to our customers.
Another key business driver that has been, and continues to be addressed, is recruitment and employee development. We worked hard on attracting good talent and I am proud to say that many of them are Omanis. We have ensured a clear and effective communication to the team on our vision and strategy, which has enabled our people to take ownership and pride in where we want to go and how we want to get there.
NBO’s retail banking division turned around rapidly because of our people, a shared vision, our focus on the customer and the fact that we were market driven. These were and continue to be critical to the success of retail banking.
Changes in the regulatory framework and shrinking margins were challenges – did these affect your performance or would you have done better?
Globally things have changed as dollars are not as readily available as they previously were and the cost to banks has increased drastically. Some large quasi-government entities or companies have shifted from dollar borrowing and moved to Rial Omani, at very low pricing.
The hope is that going forward this issue will resolve itself. As more banks enter the market, margin pressure is going to be a continuing challenge, but I hope that all of us will start interacting sensibly and ensure that there is healthy rather than destructive competition.
The Central Bank of Oman has changed the interest rate structure charged by banks; will this affect the profitability of the banks like NBO?
I believe the new regulations on consumer lending will bring much needed long term benefits to the economy. However, in the short-to-medium-term, there will be an impact on the profitability of the banking sector’s retail business.
Also, the effect of the interest rate reduction by one per cent has started to be felt as loans come up for renewal and new loans get disbursed. It is now imperative that banks shift their focus towards more constructive forms of lending, which would include mortgage and SME loans.
A lot has been said about Islamic banking and its prospects. Is NBO prepared to commence its Islamic banking operations and what kind of an opportunity does it present for banks in Oman?
NBO is certainly ready; we have an Islamic window which is ready to be launched, offering a range of Sharia’a compliant products under the brand name of “Muzn” which has already been launched. Our Islamic banking branch and our people are ready.
I am not sure whether Islamic banking will necessarily create significant new opportunities in the banking sector, but it will certainly help us in substituting some conventional products, for customers to do their financial transactions and borrowings in a Sharia’a compliant manner. It is also claimed that significant funds were deposited outside the country in search of Sharia’a compliant offerings. These funds can now return and be put to good use to serve the further development of our nation.
What are NBO’s priorities for 2013 and what are your thoughts on the coming year?
Our priority for 2013 is to diversify our revenue streams. We are looking at expanding our UAE franchise in that market. In addition, we will be pursuing other strategies: the bank is looking at strengthening its mortgage proposition and its offerings in the SME segment as well. We will continue to work hard to deliver sustainable results for 2013 and beyond.