What major initiatives is Ahli Bank is focused on?
Some people say branch banking is a bit of a sunset industry. I do not particularly think it is, but as we move forward we are investing in different channels like mobile and internet banking. We have developed business-to-business e-banking solutions. We are prioritizing digital solutions in addition to selective additional branch openings. When we launched Islamic banking, we opened six branches on the same day because we were not able to simultaneously launch internet banking. This is now about to be launched. We recently opened six customer service kiosks in shopping malls, which are open 10am to 10pm, with cash deposit/withdrawal machines. With most banks embracing the digital transformation, it is a very broad category, and our challenge will be to differentiate Ahli from other banks in terms of products and pricing. We are focusing on our turnaround times, complaint management handling, and customer service.
How are you able to attract new customers, foreign or domestic?
Increasingly remote (or digital cellular) banking is important because most people have access to mobile phones. We can integrate a full banking model in this manner, to reach customers throughout Oman. We attract many new customers through word of mouth. For example, although we have not yet advertised Islamic mortgage pricing, we are struggling to keep up with demand. In terms of new companies coming into Oman, we benefit from our partnership with Ahli United Bank in making introductions through its regional offices in other countries. In particular, we are serving incoming investment from Egypt and Kuwait, both directly and through the free zones.
How would you describe the health of the banking sector today?
I have actually worked in five GCC countries, all but Qatar. In Oman, the banking sector is in good shape. Despite the economic crash, there have been no bank failures here because banks are well regulated and well capitalized. They are consistently profitable and prudently managed. Within the region they have the lowest non-performing loans ratio of about 2%, and among the highest capital adequacy ratios.
Will this confidence in banking fuel more investments throughout the country?
I have no doubt about that because the capital investment project plan is significant, and we are seeing foreign direct investment coming in. When the oil price fell suddenly in December of last year, Oman was one of the countries described as being overly dependent on oil. The local stock market declined substantially, and many foreign investors withdrew money at that time. But interestingly, Oman was able to recover quickly because local investors saw value and put money into the stock market, which rebounded quickly. This shows us that investors have confidence in the securities market and those firms listed on it.
How will this confidence be maintained in the coming years?
Despite the sudden drop in oil prices, the government actually increased its budgeted expenditure by 4% in 2015. It listed expected sources of revenue and showed allocated expenses, so it was clear that the program of government-led investment would continue. The budget at that time was based on an average price of $75. Though this may or may not be the case this year, it is clear that the government has adequate resources from various areas, to bridge the budget deficit forecast. We are seeing the economy diversifying, and there are great opportunities beyond oil and gas.
What are some of the challenges facing the banking sector?
The biggest challenge might prove to be the liquidity in the banking sector and the market. In the GCC, in respect of their banking sectors, governments tend to be the largest depositors, borrowers, and owners, whereby banking and government are comparatively more inter-dependent. My concern is replacing any withdrawal of government-linked deposits, and how this potential scenario might reflect to banks' capacity to lend. There is no indication that such withdrawals will occur, but it is important for banks to diversify their deposits and have standby lines of credit from foreign banks. We are also expecting the US Federal Reserve to increase interest rates later in 2015, which should renew borrowers' appetite for interest rate hedging.