How was Oman Arab Bank’s financial performance in 2016?
The year 2016 was a challenging year for the region, primarily due to the prevailing low oil prices. However, with significant development in the industry towards the latter part of the year and with oil prices projected to climb in 2017, we have begun to get a clearer image of the future. The bank also registered a strong income and balance sheet growth in 2016 with net interest income increasing by four per cent to reach RO50.9mn. While strategic investments were made to upgrade the bank’s infrastructure and build sustainable business momentum to elevate the customer experience across our digital and physical delivery channels through the implementation of new technologies.
Loans and advances also increased by five per cent to reach RO1.64bn while customer deposits increased by two per cent to reach RO1.64bn, with a two per cent increase in deposits the bank maintained a loans to deposit ratio of 97 per cent.
The total assets of the bank also increased by four per cent to reach RO2.07bn. As of the end of 2016 we maintained a capital adequacy ratio of 16.11 per cent, well above the regulatory requirement of 12.62 per cent. Another key development in 2016 was the bank selling its investment banking activities to a newly formed company, U-Capital, at a net post-tax gain of RO9.88mn.
What were the measures taken to enhance retailing, ATM and CDM networks of the bank?
Our transformation drive continued during the year with many service improvements such as in-branch queuing solution, paperless loan applications process, e-statements and automated customer complaint management system. We managed to create a strong digital identity and a new customer channel for the bank with an upgraded website and social media presence. We added innovative products like secure EMV contactless debit cards, suite of Bancassurance, tiered rate saving products for our Elite customers and VISA commercial card for corporate clients with online usage capability. We also implemented a state of the art software that makes our ATMs functionally rich with cross border remittance and bill payment functions. We also renovated many of our branches with a new look facelift and are now in the process of renovating the branch layouts.
We have continued to support the national agenda by contributing to the financing of key energy and infrastructure projects across the Sultanate , such as the new Bid bid-Sur road, Mazoon Dairy, and the conclusion of the second phase of the National Programme for Enhancing Economic Diversification, Tanfeedh, to name a few.
How was your retail and corporate lending during the year?
Our corporate loans business has remained steady throughout the year. This was achieved by the bank increasing its portfolio in syndicated loans while reducing short term lending, when taking into consideration the current economic conditions. Retail loans on the other hand increased by 14 per cent with a growth of RO89mn during 2017. However, retail lending was slowed down in Q4 2016 in order to focus our efforts on deposit mobilisation.
What about the measures taken to support SMEs?
We place great emphasis on supporting SMEs and start-ups, by offering a range of innovative financial products and services which includes working capital finance, term loans for capital expenditure, contracts and equipment finance, import and export finance, enabling us to act as a one-stop-shop for all their financing requirements.
We have also participated in numerous government led initiatives, such as symposiums in Duqm and Al Batinah, where we presented papers to SME stakeholders in the regions explaining our capabilities and to gain a better understanding of the challenges that they face.
Additionally, through our extensive branch network, we are more than capable of providing our entire range of SMEs products and services to clients across the country; be it financing or advisory.
How was the performance of your Islamic finance window during the year?
Our Islamic finance window, Al Yusr, has seen significant growth in 2016, with our financial portfolio registering a year-on-year growth of 33 per cent, reaching RO65mn, while deposits increased to RO58mn growing by 41 per cent. As a result, the window booked a net loss of only RO253,000 for 2016, a significant improvement over the loss of RO1.05mn booked in 2015 and will be breaking even in 2017, showing a net profit for the year.
What were the major HR initiatives taken by the bank?
At OAB we consider our staff to be amongst our greatest assets and as such we spend a great deal of time and effort to ensure they receive the proper training and development in order to grow their careers and take on greater responsibilities within the bank. This is especially true for our Omani staff given the fact that we are amongst the strongest proponents of Omanisation in the country with over 95.4 per cent of our staff being nationals.
Given these facts our HR initiatives, of which there are several, are given great importance within the bank. The initiatives we organised in 2016 were generally split into three distinct categories. The first of these was ‘Talent Management and Employee Engagement’. The most important initiatives under this category included the development of our competency framework, the Mukafaati Incentive Programme, and the Ma3kum Programme – an induction program for new recruits. In addition, several employee surveys were conducted throughout the year.
The second category was ‘Strategic HR Initiatives’ focused on succession planning, structured development plans, and career advancement of the bank’s staff. The final category was ‘Digital Talent Management’. As the name implies, this category involved the bank’s e-learning initiatives such as the Fitch E-learning Solutions, Harrison Assessment Talent Solutions, E-learning Platform for Branches Staff, cloud-based programme on anti-money laundering, and the Halogen Performance Management Solution, the latter of which will introduce an online performance appraisal system later this year.
In addition to the above categories however, we had one initiative that stood out – our LEAD initiative; a six month multi-modular development programme that saw 20 carefully selected candidates undergo a range of different workshops and activities designed to provide participants with the skills, resources, and experiences necessary to become the future-ready leaders of Oman Arab Bank.
To ensure the effectiveness of the programme’s activities, LEAD incorporates assessment sessions after each phase using Hogan and 360s reports to address any improvement area proactively, promptly and systematically to ensure successful roi.
A LEAD Mentoring Group (LMG) was also established, comprising of 15 top management members including the DCEO and myself. We also conducted two socialisation workshops between LMG and LEAD delegates to identify key project areas to focus on.
The programme was facilitated by Inspirational Development Group (IDG), a UK based institution. Specialised in leadership and management programs, IDG features an exclusive partnering agreements with the World Class Royal Military Academy Sandhurst and Cass Business School.
What are the future plans to enhance operational efficiency?
We have in place a three stage system through which we aim to improve our overall operational efficiency in the years ahead. The first of these stages is to improve the efficiency of our internal processes. This will include the creation of a Business Process Reengineering team (BPR) that will oversee the reengineering of processes at all bank levels. SLA will be implemented for all services the bank provides and a new help desk system will be established to follow up on these services at a bank level. All non-added value activities will be removed and a robotic process automation concept will be implemented.
The second stage will be aimed at improving effectiveness of existing processes across the bank. This will include the shift of all manual controls to electronic ones, the implementation of extensive training plans to improve the knowledge at a bank level, the preparation of check lists for all services to ensure error-free processes, and proper study of the root cause of any problems and getting them resolved to prevent errors.
The last of the three stages focuses on the centralisation of operations. As with the previous stage, this stage will include four key steps – centralising all processes at a branch level to free the staff for direct sales, clearly divide the branch setup to front and back office, free the departments from operations duties, and implement a universal staff concept in operations. Each of these stages, being carried out simultaneously will ensure OAB is well on its way towards achieving operational excellence at all levels within the bank in 2017.
What are your thoughts on financial year 2017?
With oil prices expected to stabilise at the current level of around $50 per barrel and with the external borrowing by the Oman Government, there will be adequate liquidity in the market. That said, over the course of 2017 we expect to see a lower growth in assets amongst banks, with increased focus being put on the mobilisation of deposits. Internally, we will be looking for more fee based income through better services provided via our digital channels as well as our redesigned branches, both of which will together provide an enhanced customer experience. As mentioned earlier, we will be controlling costs and improving processes within the Bank to achieve better operational efficiency. There will also be increased efforts put towards the monitoring of credit quality and higher levels of recoveries.