(MENAFN- Muscat Daily) Muscat- In an exclusive interview with Muscat Daily, Mohammed Mahfoudh al Ardhi, chairman of Bank Sohar talked about the outlook on Oman's banking sector in 2018, interest rate scenario in the domestic market and Bank Sohar's plans to maintain the growth momentum going forward.
What is your outlook for the current year? Will 2018 be a better year for Oman's banking industry and Bank Sohar compared to the previous two years?
The economy witnessed a trough in the last two years yet with an expectation of improved oil prices in 2018, there is optimism that the fiscal deficit will experience some traction. In addition to the government's plans for diversification through various infrastructure related projects which are currently underway.
Oman's budget for 2018 emphasises the requirement for increased austerity, but maintains its strategic allocation of funds in regard to public spending. The budget features a higher than expected rise in public spending at seven per cent, following a success of multiple contributive mid-term economic investments across the sultanate. Also, the government has implemented proactive measures to bridge fiscal deficit, so we can expect a period of improved liquidity, further spurred by a boost in economic activity.
There are projections of hardening interest rates in the domestic market arising out of stiff competition. What are your views on the situation?
The banking sector has remained resilient despite the rise and fall of economic challenges and subsequently decreased international ratings during a period of growing market competitiveness. By employing robust yet flexible strategies under the governance of the Central Bank of Oman, the sector has delivered a successful performance defined by best practice, and consequently observed significant growth amidst Oman's economic downturn.
The US interest rates are expected to increase by at least 75 basis points during the year. The tightening in the eurozone is also expected to aggravate and further push the interest rates. In this global context of interest rates hardening, Oman could also face an increase in the interest rate scenario.
According to you, what are the factors that will drive growth at Bank Sohar?
The government has unveiled its current five-year plan outlining reduced dependency on oil and gas revenue and further depreciating the sector as a significant contributor to GDP. Instead, the plan proposes increased focus on key industries such as manufacturing, mining, transport, hospitality and tourism. Thus, one of the biggest factors that will drive growth at Bank Sohar will be focusing on economic diversification. Bank Sohar expects to unleash a progression of strategies to increase market opportunities in Oman's approaching non-oil era. This will subsequently benefit both retail and corporate business, yielding improved performance, while helping to identify new opportunities within each major economic segment as they continue to emerge.
Bank Sohar has been focusing more on retail customers. Does the bank has plans to further ramp up retail segment?
Bank Sohar strives to be consistently innovative and push the envelope when it comes to injecting new synergies into the retail segment. At the helm of this strategy is customer-centricity where we endeavour to create an above-par banking experience across the wide range of services that we offer. The focus stems from our commitment to provide customers with superior products and services and the most enriching banking experience with every transaction.
This year, our efforts will continue to further shift focus to incorporate a more customer-oriented approach in everything we do under the slogan 'The Year of You'. As the phrase implies, it signals even more dedication to fulfilling our clients' banking requirements. A good example is the campaign's kick-starter - the 2018 edition of the Al Mumayaz Savings Scheme. While the scheme probably has few contenders in being the most diversely segmented savings product in the industry, we have introduced even more opportunities for customers to win big.
At the same time, the bank is also progressing rapidly with strategies to further streamline efficiencies through an expanded operational network, a greater number of access points and growing its product portfolio. Our research and development team is constantly honing product specifications to meet the changing demands of our diverse demographic. We have already earmarked significant avenues for digitisation where we expect to transform the industry beyond conventional banking. These advancements envisage futuristic banking solutions such as 24/7 universal banking services across all branches and channels with digital processing, programmes to support the digital processing of customers' accounts and loans with paperless technology and faster turnaround times.
What are the key challenges you expect to face this year that could potentially hamper the growth? How do you plan to tackle and overcome these challenges?
The rising interest rate scenario could put pressure on the bank and its customers. However, proactive liquidity management is being pursued to mitigate that. Competition is also expected to be fierce, with all banks geared to take advantage of the improved economic scenario.
Most industry players have complained that due to stiff competition in lending business, margins are under pressure. Do you see a possibility that reduced margins may necessitate consolidations in the lending segment?
Some banks may face pressure of margins due to increased competition. However, Bank Sohar has been proactive in managing its liquidity in order to ensure that reasonable margins are maintained in its lending business.
With over 25 banking institutions – including local, foreign, and Islamic banks and Islamic windows – many believe the financial lending segment in Oman is very fragmented and consolidation is likely. What are your views on the subject?
The presence of such a large number of players has given rise to intense competition, which means that in order to stay afloat, banks need to remain focused and innovative. Bank Sohar is on track with its strategies on these fronts as it continues to grow and expand its market share. The banking sector - as a whole – remains resilient as well, supporting economic diversification initiatives and credit needs.
Bank Sohar was in talks for a merger for long time but we've witnessed no move in that direction. Are you still open to mergers to support growth?
Had the merger happened, there would have been a different paradigm, as there was a different strategy behind it. However, the reality is that the bank didn't slow down its momentum during merger discussion phase; our investment plans in our capabilities continued regardless. The bank's track record of excellence has already demonstrated our innate prowess in achieving growth. We have made rapid strides in every operational segment to earn the reputation and respect of Oman's banking community. Bank Sohar continues to be a very strong brand, as well as a strong institution that continues to retain customers' faith and confidence.
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