In a region that is in the throes of change, Oman Arab Bank SAOC sees stability and growth rooted in its traditional standing and historical values. The bank has embraced current global banking trends in management and infrastructure while remaining committed to its traditions – its sound conservative approach and policies have helped the bank to grow while maintaining asset quality and profitability.
Oman Arab Bank (OAB) began operating in 1984 after acquiring the branches of Arab Bank, Plc. which had been operating in Oman since 1973. In 1992 it expanded its operations in the Sultanate with the acquisition of all the retail branches of Omani European Bank, which OAB merged with in 1994. Oman Arab Bank currently has 53 offices and branches spread all over the Sultanate.
The bank offers a wide range of products and services to meet the needs of a broad client base: individual, corporate, and institutional customers, government agencies and other international financial institutions. These services include retail banking, private banking, trade financing, merchant banking, commercial banking and real estate lending.
Its competitive advantage revolves around four pillars: its diversified customer base, a conservative yet developmental approach, synergies developed through Arab Bank, and experienced and loyal senior management.
Pioneering customer care
OAB has an active retail banking and marketing department which continuously strives for better customer solutions and products to match their needs. Pioneering initiatives in e-banking and mobile banking have benefited customers with the latest technology while also increasing the bank’s customer base. Customers can choose from a varied product mix, from conventional banking to Bancassurance products, according to their specific needs.
The bank has also introduced online and mobile bill payment systems, and enhanced the systems to perform additional banking services such as payment, cashing and settlement of utility bills. For over a decade, Oman Arab Bank has invested in building a sophisticated infrastructure and a refined IT backbone, which can be aligned with evolving business needs quickly and effectively.
OAB employs more than 800 people, with a turnover ratio among the best in the industry; 56 percent of its employees have more than four years of association with the bank. OAB believes in continuous development and quality improvement of all its assets – including human assets. The overall Omanisation is currently 93 percent (the required level is 90 percent), while senior management Omanisation stands at 80 percent: the bank believes that local talent will play a vital part in the effective management of the post-crisis situation.
The financial crisis had a limited impact on the economy in the Sultanate and its financial and banking institutions. This is the result of the wise planning, far-sightedness and prudent policies of the government, which continued to carry out its plans, increased expenditure, and ensured that adequate liquidity was always available to the banks.
Meanwhile, OAB remained focused on playing its role in development. The bank is a pioneer in financing projects throughout the Sultanate, participating in all the projects established around Sohar Port, as well as projects in other regions. It is the bank’s firm belief that the main role of banks is to participate in national development – all OAB’s investments and loans are within Oman, with a view to dedicating all its support to this local goal.
Moody’s Investors Service has upgraded the long-term and short-term foreign currency deposit rating of Oman Arab Bank to A2/Prime-1 from A3/Prime-2; the outlook on these ratings has been changed from positive to stable. International credit rating agency Capital Intelligence has raised OAB’s foreign currency ratings to BBB+ long-term and A2 short-term.
Financial performance 2010
OAB has posted a net profit of RO 23.2m ($60.3m) for the year ended December 31, 2010, on par with its net profit of RO 23.1m ($60m) for the year 2009. Net interest income for the year stands at RO 33.4m ($86.8m), eight percent more than 2009’s RO 30.8m ($80m). Due to the ongoing financial crisis the bank faced losses in investments – however other operating income was RO 18.2m ($47.3m) for 2010, compared with RO 17.8m ($46.2m) for 2009. Due to higher net interest income and non-interest income the operating income of the bank was up from 2009, but increasing operating expenses, loan impairment and tax liability resulted in similar net profit for the year.
In 2010 the bank’s total assets grew to RO 953.7m ($2.48bn) – an increase of 11 percent over 2009. The loan portfolio increased to RO 660.3m ($1.72bn) from RO 565.6m ($1.47bn), a growth of almost 17 percent. Customer account levels grew by eight percent to reach RO 769.8m ($2bn) compared with RO 696.1m ($1.81bn) in 2009. Net worth of the bank rose almost 13 percent to RO 125.8m ($326.8m) from RO 111.5m ($289.6m). The loan portfolio increase matched that of the personal loan portfolio – personal loans made up more than 43 percent of gross loans as of 2010Q3 end, compared with 34 percent at the same period in 2009.
The bank is active toward its capital management, and as its risk weighted assets are increasing it is capitalising accordingly. In 2008 the adequacy ratio was 11.8 percent, but significant growth in adequacy helped it reach 13.4 percent in 2009 and 14.5 percent during 2010.
Omani banking sector
The Omani banking system experienced modest growth in 2010, similar to the overall economic growth. GDP grew 28.3 percent by September 2010, compared to a contraction of 27.4 percent up to September 2009. The petroleum and non-petroleum sectors witnessed growth of 54.2 percent and 11.4 percent respectively up to September 2010.
Total assets of commercial banks increased by 10.2 percent to RO 15.65bn ($40.64bn) in 2010, compared to RO 14.2bn ($36.88bn) in 2009. Total outstanding credit stood at RO 10.72bn ($27.86bn) in December 2010 and accounted for 68.5 percent of total assets. On a year-on-year basis, credit growth was nine percent as at the end of December 2010 compared to 6.2 percent in the previous year.
Total deposits (Rial Omani plus foreign currency) witnessed year-on-year growth of 14.6 percent to RO 10.52bn ($27.32bn) in December 2010 from RO 9.18bn ($23.83bn) in December 2009. Provisional net profits stood higher at RO 249.1m ($647m) at the end of December 2010, compared with RO 190.8m ($495.6m) a year ago.
Investment Management Group
Established in 1998, Investment Management Group (IMG) is the investment banking arm of OAB. IMG is licensed by the Capital Market Authority and Central Bank of Oman to carry out Investment Banking Activities. Being an established player in the market, OAB-IMG is the most comprehensive source on investment banking services in the Sultanate. Continuous product development and top-of-the-line advisory services have played a part in supporting equity market stability, public issues advisory and management, and research coverage of all major sectors of the economy. Mr Lo’ai B Bataineh (DGM Investment & Development) has led IMG since its inception and is supported by a qualified and experienced team.
Licensed in all major aspects of investment banking, OAB-IMG provides:
– Floor and off-the-floor brokerage
– MSM & Non MSM Trust Account
– Issue management
– Fund management
– Investment advice
– Portfolio management
– Margin trading
– Organisation and promotion of funds
– Custodial services
IMG’s Corporate Finance and Advisory (CF&A) division is an active player in issue management and advisory services, raising more than $1.8bn. IMG was the lead issue manager, underwriter and placement collection agent for the Voltamp IPO. It plays an active role in developing issue management process in Oman in coordination with the Capital Market Authority. Two major deals executed by CF&A in 2010 were a secondary issue of $10.6m for Oman National Engineering & Development Company SAOC, and a private placement of $5.2m for Muscat Gases Company SAOG.
The Asset Management division currently has assets under management (including custody) in excess of $800m. Through Asset Management, IMG was the first Oman-based institution to successfully launch a mutual fund investing in Oman & GCC after the global financial crisis. IMG has outperformed the Muscat Securities Market (MSM) by delivering a compounded return of 245.33 percent over the last 10 years (up to Dec 31, 2010) in contrast to MSM’s return of 156.04 percent.
IMG began brokerage operations in 2002 and is one of the top brokers on the MSM. IMG also has the distinction of executing the largest single deal on MSM, which involved the sale of a 49 percent stake of BP Group in BP Oman to Oman Oil Company (2002). Covering 10 regional markets including all GCC markets, Lebanon, Palestine, Jordan and Egypt, IMG offers both broker assisted and online trading services for the Omani markets. Clients include high net worth individuals, pension funds, and institutional and corporate clients.