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A milestone year for Ahlibank

Interview - March 27, 2014
According to its CEO, Mr. Lloyd Maddock, 2013 was a “milestone” year for Ahlibank Oman after its assets grew by 19% - three times the sector average - andit opened six Islamic “Al-Hilal” branches, as well as moving into a new head office branch in January of this year. With this “tangible statement of intent” and 2014 having stared positively, Mr. Maddock tells United World about the banks plans for further investment, expansion and the healthy outlook of the Omani banking sector in general
The Sultanate of Oman has experienced sustained GDP growth during the last 20 years. Oman has emerged as an attractive destination for foreign direct investment due to its free market system, stable macroeconomic environment and political stability under the guidance of His Majesty Sultan Qaboos Bin Said. What in your opinion are the main recipes for success in Oman?

The key reasons include the political stability that you have mentioned, an accommodative platform for FDI, and from my perspective, well regulated and healthy banking and capital market sectors, which are the cornerstone for the development of sustainable economic growth. The Banking sector continues to return satisfactory financial results for shareholders and, within the region, benefits from comparably low levels of nonperforming loans. Banks in the Sultanate are well capitalized, consistently profitable and very liquid. This has enabled the sector to support the Sultanate’s economic expansion, through the provision of financial services to corporates and consumers alike.

Success in any field depends upon attracting, developing and retaining talent, and in this respect the Banking sector has been fortunate, to be an attractive destination for ambitious, career minded Omanis. However, as the Sultanate moves forward with substantial capital expenditure projects, and select privatizations, local Banks will need to place more emphasis on building expertise in the areas of project and debt capital market finance, asset management, and international loan syndication.

In our meeting with the Executive President of Central Bank, H.E. Al Zedjali, we discussed that Oman has been ranked 33rd in global effectiveness, as assessed by the World Economic Forum, with improvements in each of the sectors analyzed. I would like to ask what you think makes Oman so competitive in the international arena?

Whilst oil production has stabilized at around 900,000 barrels per day, efforts are underway to diversify the economy, with the sectors of infrastructure, agriculture, fisheries and tourism in focus. In addition to the oil and gas industry, these other sectors evidence opportunity and investment from abroad. For example, in the contracting sector, Ahlibank is working with international contractors engaged in building roads, airports, ports and real estate. Oman also has a vibrant manufacturing and logistical base, which benefits from the country’s favourable geographic position, and proximity to regional trade corridors.

In my view, Oman is a country that is “open for business” with supportive legislation and regulation. The large capital expenditure projects have caught the attention of the international business community, and I expect to see continued FDI investment plus increasing interest from Foreign Institutional Investors, given the strong performance of the Muscat Securities Market.

We have seen HSBC merge with Oman International Bank, and further M&A activity is expected within the banking sector. Ahlibank has evolved from a Housing Finance institution to a fully fledged commercial bank. How have you managed to grow so fast organically since 2008.

On behalf of all our stakeholders, and by that I mean shareholders, customers and employees, we invest for consistent, sustainable growth. We strive to provide our employees with the best working environment that enables them to excel, supported by a product proposition that our customers value, underpinned by requisite Branch and electronic delivery channels.

2013 was certainly a milestone. Early last year we opened six Islamic “Al-Hilal” branches on the same day, plus our new Head Office branch in January of this year. We have been very encouraged by the response from existing and new customers. A bespoke SME team was formalized to meet the specific needs of our growing Omani business clients, and we acquired a brokerage operation. Our Asset Management business launched a pioneering Islamic Al-Hilal investment fund, which has outperformed in its first year. We were delighted that our endeavors were recognized by the The Banker publication, which awarded Ahlibank the Best Bank in Oman.

In terms of specifics, in 2013, Ahlibank grew assets by 19%, which is three times the sectors average. However, we are growing from a comparably smaller base. While the bank has grown consistently since 2008, our ratio of Non Performing Loans has remained flat, at circa 1%. So despite this broad based expansion in our corporate and consumer business, credit discipline has been front and center. Costs have also been managed in a judicious manner, which is reflected in our cost efficiency ratio of 33%. Return metrics are satisfactory, with RoA at 1.8% and RoE at 12.7%.

Through our strategic partner, the Ahli United Group, we are able to extend a consistent service to our Omani customers whom have international banking needs in the countries where the Group has banking operations; such as Bahrain, Kuwait, Egypt, Libya, Iraq and the UK. Further, inward banking requirements for the Group’s clients whom expand their business into Oman, have also proven to be a regular source of new business opportunity for Ahlibank.

2014 has started on a very positive note, as we moved into a new Head Office building, which is a tangible statement of our intent; to invest further, to expand our capacity to serve our customers to the very best of our ability.

You mentioned SMEs, what services do Ahlibank provide?

The development of banking services to facilitate the sustainable growth of the SME sector is a focus for all of the Banks in the Sultanate. Last year we increased resources and implemented specific policy and propositions to meet SME needs. We have a dedicated leasing operation in addition to conventional and Islamic financing propositions. We offer branch based and electronic banking options, and extend banking services to the business owners and their staff.

After the Free Trade Agreement with the United States in 2009, have you seen a rise of American companies operating here?

The Sultanate has witnessed an increase in inward investment from many geographies, including American companies. Examples of American firms are; Occidental Petroleum, Duraline Corporation, Weatherford International, Cameron International, Parsons Brinckerhoff, Baker Hughes, Haliburton, Harsco, General Electric, Microsoft, Metlife, AIG, plus many more.

In regard to the various upcoming capital expenditure projects in Oman, what are your thoughts about the role which the Banking sector has to play?

We are looking at the prospect of a number of substantial projects, which on a project by project basis, will necessitate various consortia of Omani banks to collaborate with each other, and international Banks, to raise finance. While the Oman banking sector is liquid, the quantum of funding, the proportion that will need to be raised in US$ and the longer tenors will require some international syndication. As I mentioned earlier, Ahlibank has local and Group balance sheet capacity, and we have project finance experience across the Region, so we will be an active player.

Apart from your activities in banking, we have read about your Go Green campaign. Can you please share details and advise your expectations?

As an organization we embrace Corporate Social Responsibility within our community. We promote a number of Corporate Social Responsibility initiatives tailored to society needs. Go Green is one of our campaigns which has facets such as the internal decision to reduce paper usage in the bank, for example, by partnering with Muscat Daily, to recycle all of the newspapers and papers used. Further, there is “Clean up Oman”; we started in partnership with a small group of people cleaning beaches, which evolved into one of the biggest non-profit organization in the country. So we do support many CSR initiatives which benefit society. Road safety is another focus, and our branches carry a comprehensive brochure which we sponsor, that provides advice on family road safety considerations.

As a British citizen, can you share a European perspective about Oman?

Well, my observation is that the UK has long standing and highly valued relationship with Oman; the ties are both historical and current, and are intrinsic to both nations. Oman offers a level playing field to all foreign investors, and from what I understand and perceive, future collaboration with the UK and broader Eurozone will only increase.

Then to end this interview, I would like to ask, what are your prospects for future in the next 3 to 4 years?

If we can continue to make Ahlibank the preferred choice for our local and international customers; the best place to work for our talented employees, and return attractive returns for our shareholders, then we will be meeting our objectives.