Ahlibank transforms Oman’s financial services industry

Oman’s banking industry has gone from strength to strength in recent years. World Finance spoke to Lloyd Maddock, CEO of Ahlibank, to find out how the bank has set itself apart in what is becoming an increasingly competitive environment


Oman’s economic growth continues to be robust. This is driven, primarily, by public sector activities backed by domestic demand and has been characterised further by the improved diversification of the economy. Moving forward, this overall growth is expected to be sustainable, with current GDP measures in alignment with potential growth (see Fig. 1).

As per IMF estimations, nominal GDP growth was at five percent in 2013 and 12 percent in 2012. A similar trend is expected to continue and could act as a risk mitigant to evolving inflationary trends. The government, meanwhile, will maintain an expansionary fiscal policy to support economic development. Oil prices are projected to remain high. Elevated oil revenues and robust government spending will be the primary drivers of Oman’s momentum over the medium term (see Fig. 2). According to the IMF, inflation is forecast to average 3.3 percent a year from 2013 to 2018 as food prices stabilise. This is much lower than inflation in 2007-2012, but still high by historical standards.


Cost-to-income ratio

The government continues its efforts to diversify the economy and to reduce its dependence on oil revenues. The results of these efforts are likely to show improvement with increase in non-oil based economic output in the medium to long term.

Meanwhile, the banking sector in Oman continued its positive trend in 2013, consistent with the sustained growth of the real economy. Banks remained sound, resilient and profitable due to appropriate regulatory and supervisory policies adopted by the Central Bank of Oman (CBO). Thanks to stronger funding bases, solid capitalisation, sturdy liquidity buffers and a low level of non-performing loans (NPLs), financial institutions made solid growth. Furthermore, despite tough competition and higher wages, profitability for most banks remained unaffected by decent credit growth and low provision requirements. The majority of banks have enjoyed steady growth and increasing profits over the past 12 months, allowing them to expand credit availability. Economic reforms mandated by the government have served to increase transparency throughout the banking sector, while also providing more protection to customers.

Despite the past and current global economic uncertainties, Oman’s banking sector has performed well with total assets showing a growth at compound annual growth rate (CAGR) of 12 percent, loans and advances at CAGR of 11 percent, customer deposits at CAGR of 14 percent and shareholder equity at CAGR of eight percent over the last five years.

Oman’s banking industry has gone from strength to strength, largely off the back of a burgeoning group of financial institutions that are dramatically modernising the sector. Despite a turbulent few years for the MENA region’s financial industry, Oman’s banks have built up enough capital in order that they can withstand any serious shocks to the country’s economy. It is because of the prudent direction that Oman’s central bank has taken, encouraging the industry’s leading players to store up capital.

With 18 commercial banks in the country, Oman’s banking sector has become a battleground of institutions vying for the business of its three million citizens. With this competition comes a need to offer a unique and high quality service, something Ahlibank, which has been recognised by World Finance for its achievements, offers in abundance. We spoke to Ahlibank’s CEO Lloyd Maddock about how the bank is helping to transform the country’s financial services industry, and what the future holds for the industry as a whole.

Ahlibank has been awarded yet another accolade from World Finance. What accounts for this consistent performance?
Our growth and development have come together in a very positive way due to a sound strategy and careful planning. When we first established Ahlibank we also established a vision of where we wanted to be in the coming years, and our growth has been substantial. We were lucky to have an established regional player as our strategic partner, Ahli United Bank (AUB) and IFC Washington, who, between them, have acquired 45 percent of the bank. AUB has 35 percent and the IFC 9.9 percent. Our strength is the team we have built here, and the profit is there for all to see.

Source: International Monetary Fund. Notes: Post-2010 figures are IMF estimates
Source: International Monetary Fund. Notes: Post-2010 figures are IMF estimates

At Ahlibank, we emphasise the quality of our products and services on the processes and procedures that we follow to ensure the security of transactions, and this is of the greatest importance to us. Having won this prestigious award for the second year it is undoubtedly a testimony to this and the unwavering commitment of our people to the high standards we believe in.

Ahlibank has been a recipient of a number of other accolades. What does such recognition mean to the bank?
We are keenly aware that each new award brings with it the additional responsibility of continuing to better ourselves. It gives us great pride to be recognised for our achievements in such a short space of time – only six years since our inception. In a highly competitive market, to receive numerous local and international awards is indeed encouraging for our employees, who drive our customer-centric banking model. This also encourages our customers and other stakeholders to once again put their faith in us. We are firm in our resolve to meet all expectations.

What differentiates Ahlibank from its competitors – is it your products or services?
Our products and services are all designed to incorporate our customer requirements and address their financial needs in the best, most convenient, and smartest way possible. Our commitment to customer service is further supported through our expanded branch network, our specialised business units and the use of technology in all our offerings. This has positioned Ahlibank as one of the fastest growing banks in the region, with the exponential growth in customer deposits, loans and total assets.

Has the bank’s financial performance in the 2013 financial year been in sync with your expectations?
Ahlibank achieved a net profit of OMR23m in 2013, an increase from OMR21.7m in 2012 – registering a growth of six percent. The bank’s customer deposits have grown by 29 percent in line with our strategy to build a stable low-cost deposit base. Loan growth of over 19 percent has been established with a prudent risk management approach on a diversified sectorial basis. The loan book continues to be of a very high quality as reflected by our NPL ratio of 0.97 percent in 2013 (1.1 percent in 2012). Our cost to income ratio at 33.9 percent is best among the banks in Oman and other efficiency ratios are also comparable.

What human resources initiatives have been planned in terms of staff development and customer service?
Our training calendar is well-planned and based on the identified gaps and needs of individuals. We have recently launched a diploma and bachelor’s degree tie up programmes with the College of Banking and Financial Studies, as well as a programme that provides financial support to the staff members who want to complete their education and/or pursue higher studies. We realise that the growth of any organisation is due to a number of factors, most important of which, is the human factor.

Source: KPMG
Source: KPMG

No business can achieve sustainable growth unless the people involved in the business are given the opportunity to grow and adapt to the changes that the organisation is going through.

Ahlibank is the perfect example of business growth and job creation going hand in hand. We started off with 80-odd ‘Ahlibankers’ six years ago, and now we have over 400 in our ranks and growing. We have to focus on the competencies of our employees, train them and provide them with the opportunity to show their skills. We attempt to align our business aspirations and the aspirations of our employees to achieve our objectives.

What are the bank’s business plans going forward?
Ahlibank remains an innovative banking centre by developing a task force of dedicated professionals to fulfil customer needs. We believe in adding value through the sharing of our knowledge and expertise. Ahlibank recognises that innovation is the key to progress and as a result we are constantly upgrading our products and our services. We are in the process of launching numerous self-service banking kiosks in prominent locations in the sultanate, as well as cash deposit machines and a state of the art mobile banking application for smart devices.

The bank has also introduced a unique concept dedicated to meet the needs of the customers. This concept is known as ‘Ahlibanking’. The bank introduced this concept to create a culture of servicing our clients around five basic banking values; professional banking, smart banking, convenient banking, quality banking and responsible banking. We will extensively use technology in our product delivery.