introduction - · pdf fileintroduction omani economy bankmuscat overview and strategy...

www.bankmuscat.com

September 2012

Investor Presentation

2

Agenda

Introduction

Omani Economy

BankMuscat Overview and Strategy

Financial Performance and Capital

Appendix

Note:

• Financial figures are as at 30 June 2012 unless otherwise stated.

• All numbers in this presentation have been translated from the respective local currency into US$ for convenience of the

readers. Exchange rate used: 1$ = 0.385 RO. BankMuscat follows IFRS.

3

Introduction

4

BankMuscat Summary

#1 bank in Oman

#1 Omani bank with a 37.22% market share with assets of ($19.2 billion) as at

30 June 2012

Established and well-recognised domestic brand

Focused geographic

diversification

Financial Strength

Strong shareholder

support

Stable and experienced

management team

Well-positioned to

benefit from growth

opportunities in Oman

Significant infrastructure development expected to contribute to banking sector growth

Substantial product cross-sell opportunities

Sizeable “unbanked market”; over 49% of population less than 25 years old

Expansion in Gulf Co-operation Council (GCC) countries – direct presence in Bahrain, UAE,

Saudi Arabia and Kuwait. In direct presence in Qatar.

Presence in India leveraging customer links and market’s growth potential

Return on average equity of 16.3% - June 12

Net profit CAGR 2003 – 2011 of 20.1%

Investment grade credit ratings

Only Omani bank to have the largest shareholding by Royal Court Affairs (Omani

Government)

Financial investment by Dubai Financial Group LLC with 14.74%

Members of existing senior management team in place for over 10 years

Proven track record of successful organic growth and acquisitions

Re-energized management team with new organisation chart to enhance synergies

between various business functions

5

Omani Economy

6

Sultanate of Oman

Total size: approx. 309,500 square kilometres

Population: 2.77 million*

Political system: Monarchy (Sultanate) advised by

Council of Ministers

Constitution: Basic Law of the State issued in 1996

Oman is a member of GCC, UN, IMF, IBRD, Islamic

Development Bank and WTO

Well-regulated banking and capital markets through

Central Bank of Oman (CBO) and Capital Markets

Authority (CMA)

Credit ratings: A (S&P) and A1 (Moody’s)

Source: Ministry of National Economy (MONE). Omani population per 2003 Census 2.3 mn.

* Preliminarily 2010 Census

7

GDP Growth

Increasing Oil ProductionGDP growth driven by Oil price

•Provisional

•** Preliminary

21,756

24,740 30,883

36,756

41,846

60,653

48,205

59,151

72,585

7.2%13.7%

24.8%

19.0%

13.8%

44.9%

(20.5%)

22.7%

22.7%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2003 2004 2005 2006 2007 2008 2009*2010*2011**

S m

illio

n

GDP in current prices (USD mn) GDP - growth nominal

299285.4 282.6 269

259

277 297316 323

27.834.4

50.361.7

65.2

101.1

56.7

76.6

103.0

0

20

40

60

80

100

120

0

50

100

150

200

250

300

350

$ / b

arre

l

mn

ba

rre

ls

Prodcution Oil Price

8

GDP components under “Vision 2020”GDP components at the end of 2011*

Source: Central Bank of Oman’s Annual Report 2010 .

* Preliminary

A New Omani Economy by 2020

Agri. & fishing

1%

Financial inst.

4%

Transport &

communication5%

Manuf., mining &

construction15%

Trade, tourism

and real estate12%

Petro activities

51%

Others

12%

Agri. & fishing5%

Financial inst.8%

Transport & communication

8%

Manuf ., mining & construction

17%

Trade, tourism and real estate

26%

Petro activities19%

Others17%

9

BankMuscat Overview and strategy

10

BankMuscat – Oman’s #1 Bank

Market capitalization $2,753 million

Retail customers 1,180,494

Market share by assets 37.22%

Branches 133

Employees 3,104

Total customer deposits $13.2 billion (Customer deposits and CD’s)

Total assets $19.2 billion

Net loans and advances $13.5 billion

Major shareholders Royal Court Affairs (Omani Government) 24.83%

Dubai Financial Group 14.74%

Strategic investments 49% in BMI Bank, Bahrain

43% in Mangal Keshav Holdings Limited, India

Other regional locations Dubai RO (UAE), Riyadh Branch (Saudi Arabia), Kuwait

branch, Muscat Security House (subsidiary in Saudi

Arabia) & Singapore RO

Long-term credit ratings A- (S&P – June’12), A1 (Moody’s – June’12), A- (Fitch – June’12), A

(capital intelligence June 2012)

Note: Market Capitalization as on 30 June 2012.

11

Diverse Income and Asset Base ...

International group include associate operations in India and Bahrain, branch in Kuwait and branch and subsidiary in Saudi Arabia

Assets by Group Net Profit by Group

As at 30 June 2012

Corporate, 34.4%

Consumer, 36.8%

Intl, -1.6%

Wholesale, 28.8%

Islamic, 1.7%

Wholesale24.7%

Corporate38.4%

Consumer28.3%Intl.

6.9%Islamic

1.7%

12

Loan and Deposit Portfolio Breakdown

Loans and advances by segment Deposits by segment

As at 30 June 2012.

Construction2.7%

Government0.5%

Import & Export trade

3.9%Manufacture

5.6%

Mining and quarrying

7.9%

Real estate5.6%

Services11.7%

Transport5.1%

Utilities5.4%

Wholesale & retail trade

3.7%

Personal / Housing Loans

40.5%

FI's and Others7.2%

Financial institutions

1%

Individuals and others

36%

Ministries and other

government

organisations36%

Private Commercial

Sector

27%

13

BankMuscat Strategy

Consolidate leading position in Oman

Capitalise on growth opportunities in Oman

– Infrastructure development projects and Government focus on economic diversification and

developing tourism

– Omanis entering the workforce; over 49% of the population less than 25 years old

Leverage large network of branches and other delivery channels to target the growth potential

and cross-sell opportunities

Focus on fee based income by scaling up businesses such as Credit Cards, Investment

banking, asset management, private banking and others

Islamic Banking Opportunity - Meethaq (subject to regulatory approval)

Full fledged product and service offerings, standard of excellence, customer centric approach

and transparency

Leverage on investments in new technology and state of the art head office building to

further increase efficiency, improve customer service and support growth plan

Strengthen regional presence through focused and controlled expansion in GCC countries

Presence in Bahrain, UAE, Saudi Arabia, Kuwait and Qatar

Leverage the regional presence and scale up business growth

14

Corporate Banking

Market leader in corporate

banking

Extensive and expanding range

of products and services

Project finance of prime

importance; BankMuscat plays

a prominent role in the

financing of nearly all major

Omani projects

Technology-led developments

Commitment to maintain strong

control over asset quality

Large number of infrastructure

/Industrial projects in the pipeline

Privatisation and diversification

drive by Government

Increasing business flows

between Oman and regional

countries

1,021 1,417 2,139 2,193 2,325 2,736

40.1

50.7

62.468.0

79.5 81.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

-

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011

RO

mil

lio

n

Total assets Operating income

Overview Strategy Opportunities

Corporate Banking

Financial Performance

Leverage the leading position

and expertise to benefit from

large infrastructure and

industrial projects in Oman

Utilize the presence in regional

markets

Focus on non-fund business

and fee income

Target all segments in value

chain

15

Retail Banking

Over 1.1 million customers

Customer-focus and service-

oriented approach

Largest delivery channel

network in Oman

Innovative products have been

successful

Substantial low cost retail

deposit base

Front-runner in card services

segment, Bancassurance,

remittance etc.

Merchant acquiring market

share of over 60% by volume in

2011

Total retail credit in 2010 amounts

to approx. 18% of GDP of 2011.

Favourable demographics; over

49% population less than 25

years old

Housing finance


Retail Banking Financial

Performance

Leveraging the large customer

base and achieving cross sell

Technology-led product

development and service

offerings

Enhance process efficiency

Focus on development and

utilization of e-delivery

channels

930 1,187 1,872 1,907 1,997 2,347

66.9

84.8 116.6 115.5 114.7

137.4

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

-

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011

RO

m

illi

on


16

Wholesale Banking Group

Treasury: Manage funding and

asset and liability management

requirements and offer structured

solutions (e.g. derivatives,

commodity) to corporate clients

Brokerage: Leadership position

on Muscat Securities. Strong

client base.

Corporate Finance: Leader in

corporate advisory with a series of

successful transactions. Able to

build track record outside Oman.

Asset Management: Largest

Omani mutual fund manager with

potential for growth. Expanding

fund management outside Oman.

Private Banking: Banking and

investment solutions for high net

worth individuals

Significant cross-sell opportunities

Leverage transaction experience in

attracting new corporate finance

mandates

Leverage regional expansion to

introduce new products

Strong growth potential in the high

net worth market segment


Wholesale Banking

Financial Performance

Strengthen the leading position in

specialised areas

Utilize the presence in regional

markets to expand business

Leverage specialised product

expertise in other markets

Focus on fee income

Inorganic growth

971 1,457 1,616 1,453 1,281 1,783

23.6

36.4

52.7

42.6

65.9 66.3

0

10

20

30

40

50

60

70

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2006 2007 2008 2009 2010 2011

RO

m

illi

on


17

Islamic Banking – Meethaq (subject to regulatory approval)

Experience in Islamic Banking

through overseas operations

Leverage service excellence

and infrastructure

Assigned a capital of up to

RO 150 million

Dedicated branches with

Meethaq branding

Established the Sharia Board

New business opportunity with

unexplored market potential

Large net worth size to leverage

business

Potential to target existing customer

base of over 1 million

Leverage on strong BM brand


Full fledged product and service

offerings

Customer Centric approach and

transparency

Plan to have 7 branches in the

first year and expand

18

International Group contd...

Footprint in all GCC countries, Southeast Asia and the Indian Subcontinent region.

Overseas branches in Riyadh, KSA and Kuwait

Representative Offices in UAE (Dubai) and Singapore

49% owned commercial bank in Bahrain (BMI Bank).

97% owned subsidiary in Riyadh, KSA (Muscat Capital LLC)

43% owned securities company in India (Mangal KeshavSecurities Ltd)

Increasing interdependence and

trade between GCC countries

Large banking markets in Saudi

Arabia and Kuwait

Efficiency; rationalization of back-

office costs

Leveraging presence in all GCC

countries


Focus on existing GCC operations

and improve profitability

Drive synergies within the group

Scale up business volumes to

attain desired return

Capture trade/business flows

between GCC and Asian region

through Representative Office in

Singapore

19

Operational since 2007

Focused on mid-market for corporate and treasury businesses

Credit losses in 2009 and 2010, and a marginal loss in 2011. However, posted net profit for the first half of 2012.

As on 30 June 2012, Net Loans & Advancesof USD 477 mn and Customer Deposits ofUSD 999 mn; Net profit of USD 269k duringthe period YTD June.

Enhance scale through continued

focus on corporate and treasury

Performance as at 30 June 2012

Overview Short-term Strategy Medium-term Strategy

Focus on corporate and treasury

businesses

Prudent credit growth with

improvement in credit quality and

monitoring

Focus on bulk deposits from large

corporate and HNI clientele

Cost containment and increase

shared resources with HO

Riyadh Branch, KSA

• Operational since 2010

• Focused on corporate, trade and treasury businesses

• Healthy pipeline built, however credit utilisation is low due to delays in project implementation

• Operating profit of USD 374k (before provisions) for the first half of 2012; break even at net profit level

• As of 30 June 2012, Net loans and advances of USD 51 mn and customer deposits of USD 124 mn; Non-funded exposures of USD 141mn.

Scale up business volumes with

a focus on quality lending


Short term, working capital lending and

trade finance to corporates as well as

contract financing for Govt./ Oil & Gas

sector

High net worth clients for liabilities

Launch internet banking

Leverage off low operating cost base

Kuwait Branch


20

A subsidiary of BankMuscat with

97% stake

Operational since 2009

Focused on brokerage, asset &

wealth management and corporate

finance/advisory

As of 30 June 2012, net loss of USD

1.4 mn for the year to date

Scale up business volumes

Leverage BankMuscat presence in

other markets



Aim to leverage institutional

relationships in brokerage in Oman

Leverage expertise built in Oman

on Corporate Finance/Advisory

Focus on retail and institutional

brokerage business

Low cost of operations sharing

back office activities of Oman

Muscat Capital, KSA

Acquired 43% stake in this

securities house in India in 2007

Network of 150 branches/

franchises across India

Focused mainly on brokerage

business

As of 30 June 2012, Net profit of

USD 890k (3-m)

Scale up business through organic

and inorganic growth


Diversify from mainly brokerage

business to commodities

brokerage, insurance and mutual

fund distribution

Focus on institutional and NRI

brokerage business

Leverage BankMuscat GCC

network for NRI business

Mangal Keshav, India


21

International Group

BankMuscat holds 49% stake in BMI Bank

Operational as independent bank since 2005

Full-service bank across corporate, retail, private banking and treasury businesses

Network of 10 branches and 30 ATMs, resulting in a strong retail presence in Bahrain

Holds strategic stake of 21.3% in Gulf African Bank, a green field first Islamic Bank in Kenya

Holds a strategic stake of 50% in an offshore bank in Seychelles and an office in QFC, Qatar

As on 30 June 2012, Net Loans & Advances of USD 1,265 mn, Customer deposits of USD 1,273 mnand Shareholders Equity of USD 221mn

Net profit of USD 766k for the first half of 2012

Establish franchise in Bahrain

Inorganic growth in markets where

already present and with strategic

advantage such as East Africa,

Indian Ocean region.



Focus on Bahrain business to build

scale and market share

Strengthen existing presence in

international markets

Improve operational efficiency and

reduce cost to income ratio

Leverage on investments in

technology and infrastructure to

scale up business volumes

BMI Bank, Bahrain

22

Financial Performance and Capital

23

Financial Highlights – 6M-2012

Achieved a Net Profit of US$ 177.6 mn as against US$ 148.6 mn , an increase of US$ 29 mnor 20% over 2011

Annualized Basic EPS of US$0.197 for every US$ 0.260 share of the Bank

Annualized ROAE of 16.3%; Annualized ROAA of 1.8%

Capital Adequacy Ratio of 15.1% (as per Basel II)

Net Interest Income (NII) at US$ 283 mn, higher by US$ 7.5 mn or 2.7% over 2011

Revenue mix of 70% : 30% (NII : Other income)

Cost to Income ratio of 42.9%

Growth of US$ 2,373 mn (21.41%) in Net Loans over Dec 2011

Growth of US$ 1,797 mn (16%) in customer deposits and CD’s over Dec 2011. (Includes

increase of US$ 1,313 mn (34%) from demand deposits, US$ 502 mn (18%) from savings,

US$ 13 mn from term deposit and certificate of deposits.

24

Revenue and Cost Control

Revenue growth Cost-income ratio

40.8% 40.7%

36.7%

34.6%

38.8%

41.1%

42.9%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

42.0%

44.0%

46.0%

48.0%

2006 2007 2008 2009 2010 2011 Jun-12

0

100

200

300

400

500

600

700

800

900

2006 2007 2008 2009 2010 2011 Jun-12

Other income Investment Banking income

FX income Commission income

Net interest income

24%

28%

32%

340

449

615

690

40%

29%

756764

28%

423

30%

25

Loan Growth and Asset Quality

Gross Loans and advances growth Coverage ratios

5,073

7,261

10,009 10,525 10,894

12,977

13,953

4.8%2.7% 2.3%

5.0% 4.2%

3.0% 3%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 June-12

NP

L /

Gro

ss L

oan

s %

US

$ m

illi

on

Gross loans and advances NPL/Loans

308 282

326

555

484 458

499

243

193

235

524

457

387

457

126.8%

145.9%

138.8%

106.0% 105.9%

118.5%

109.1%

0%

20%

40%

60%

80%

100%

120%

140%

160%

-

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 June-

12U

S$ m

illi

on

Provisions NPLs Prov/NPLs

26

Strong Capital Growth with Stable Returns

Robust capitalisation Capital growth with stable returns

CBO requirement of CAR of minimum of 10 % (12% by Dec 2010) is stricter than BIS requirement of minimum 8%

10.04%

12.58%10.75% 11.57% 11.85% 11.37% 12.14%

1.93%

2.56%

2.27%

3.63% 2.93% 4.56%4.21%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

2006 2007 2008 2009 2010 2011 July'12

Tier 2 and 3 ratio

Tier 1 ratio

831

1,630

1,856 1,848 2,068

2,262 2335

22.0

25.8

14.8

10.9

14.6 15.416.3

8.0

12.0

16.0

20.0

24.0

28.0

-

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011 2012U

S$

m

n

Shareholders equity Return on equity

13.02%

15.14%

11.97%

15.2%14.78%

15.93 %16.35%

27

Thank You

28

Appendix

29

Balance Sheet

Balance sheet

$ (million) 30-Jun-12 31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08

Cash and bank (incl. placements) 3,441 4,403 3,315 4,218 3,975

Loans and Advances 13,457 12,518 10,410 9,969 9,682

Non trading investments 1,391 891 694 375 983

Tangible fixed assets 182 186 194 68 57

Other assets (incl. invt in associates) 705 777 584 566 960

Total assets 19,176 18,774 15,198 15,197 15,658

Bank deposits / FRNs 1,677 1,914 2,014 3,665 3,959

Customer deposits (incl. Bonds & CDs) 13,232 12,741 9,705 8,474 8,544

Other liabilities 1,059 989 934 720 1,003

Subordinated debt 873 869 477 490 295

Total liabilities 16,841 16,513 13,129 13,349 13,801

Share capital and premium 1,288 1,185 1,133 1,063 1,063

Convertible bonds 42 84 84 84 -

Total reserves 584 591 493 373 313

Cumulative changes in fair value 8 3 24 13 180

Retained profits 414 397 335 315 301

Shareholders' equity 2,336 2,261 2,069 1,848 1,856

Total liabilities + shareholders's equity 19,176 18,774 15,198 15,197 15,658

Key ratios

Loans and advances / customer deposits 101.7% 98.2% 107.3% 117.6% 113.3%

Shareholders' equity / total assets 12.2% 12.0% 13.6% 12.2% 11.9%

Subordinated debt / (debt + equity) 27.2% 27.8% 18.7% 20.9% 13.7%

BIS total capital ratio 15.10% 15.93% 14.78% 15.20% 13.02%

30

Profit and Loss Account

Profit and loss account

$ (million) 30-Jun-12 31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08

Net interest income 282.8 551.0 486.2 452.9 421.1

Other operating income 118.9 213.3 203.4 303.1 194.0

Operating income 401.7 764.3 689.6 756.0 615.1

Operating costs (172.2) (314.0) (267.3) (213.3) (218.8)

229.4 450.3 422.3 542.6 396.3

Recoveries from impairments 41.2 67.3 44.6 28.6 34.3

Credit loss impairments (65.1) (145.9) (121.0) (255.2) (64.0)

Other impairments (1.2) (8.8) (7.2) (60.4) (76.6)

Gain/(loss) from associates 0.8 (9.2) (32.8) (27.2) (8.4)

Profit before Tax 205.2 353.8 306.0 228.5 281.6

Taxation (27.6) (48.5) (42.1) (37.0) (38.1)

Net Profit 177.6 305.3 263.9 191.5 243.5

Key ratios

Cost/income ratio 42.9% 41.1% 38.8% 28.2% 35.6%

Return on average assets 1.80% 1.80% 1.74% 1.24% 1.83%

Return on average equity 16.30% 15.37% 14.64% 10.90% 14.80%

Basic EPS (US$) 0.197 0.197 0.171 0.178 0.226

Share price (US$) 1.519 1.990 2.514 2.140 2.070

31

Omani Banking Sector

1. BankMuscat (BM) 133 1982

2. HSBC Oman** 90 1979

3. Nat. Bank of Oman (NBO) 69 1973

4. Bank Dhofar (BD) 59 1990

5. Oman Arab Bank (OAB) 51 1973

6. Bank Sohar 25 2007

7. Ahli Bank 12 1998

439

Local and specialised banks Foreign banks

1. Habib Bank Limited 8 1972

2. Bank of Baroda 3 1976

3. Standard Chartered 1 1968

4. Bank Saderat Iran 1 1976

5. National Bank of Abu Dhabi 7 1976

6. Bank Melli Iran 1 1974

7. State Bank of India 1 2004

8. Bank of Beirut 2 2006

9. Qatar National Bank 1 2007

25

1. Oman Development Bank 13 1977

2. Oman Housing Bank 9 1977

22

Branches

(in Oman)

Est.Branches

(in Oman)

Est.

**HSBC Bank Middle East Limited (Oman branches) merged with and into Oman International Bank (OIB) and

the combined listed entity was renamed as HSBC Bank Oman S.A.O.G

32

Relative Loan and Deposit Volumes

Total customer deposits & FRNsNet loans

Source: CBO and Annual report of Banks.

BM

market

share

43% 40% 36% 36% 33%40% 41% 38%38% 33%

7.0

9.7 10.0 10.4

12.513.5

2.4 3.6 3.5 3.5

4.3 4.8

1.5 1.6 1.6 1.6 1.8

3.2

1.8 2.6

3.2 3.23.9 4.2

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2007 2008 2009 2010 2011 Jun-12

($ billion)

BM NBO HSBC Oman BD

6.5

8.8 8.5

9.6

12.813.2

2.4

3.5 3.3 3.44.2

4.7

2.1 1.9 1.9 2.12.6

4.7

1.8 2.5 2.9 3.2

3.93.2

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2007 2008 2009 2010 2011 Jun-12

($ billion)

BM NBO HSBC Oman BD

33

Relative Asset and Equity Bases

Source: CBO, Annual report of Banks.

Total assets Shareholders’ equity

BM

market

share

41% 42% 41% 40%38%

1.63

1.86 1.85

2.07

2.262.34

0.60 0.64 0.65 0.69 0.73 0.74

0.42 0.45 0.44 0.44 0.45

0.76

0.29

0.49 0.53 0.59 0.60 0.63

-

0.50

1.00

1.50

2.00

2.50

2007 2008 2009 2010 2011 Jun-12

($ billion)

BM NBO HSBC Oman BD

11.0

15.7 15.2 15.2

18.8 19.2

3.8 5.2 4.7 4.7

5.8 6.5

2.8 2.6 2.7 3.0 3.2

6.1

2.5 3.4 3.9 4.3 5.1 5.5

-

5.0

10.0

15.0

20.0

25.0

2007 2008 2009 2010 2011 Jun-12

($ billion)

BM NBO HSBC Oman BD

34

BankMuscat Organisational Structure

introduction - · pdf fileintroduction omani economy bankmuscat overview and strategy...

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