The Business Year

Abdulaziz Al Balushi

OMAN - Finance

Well Diversified

CEO, Ahlibank

Bio

Abdulaziz Al Balushi is the CEO of Ahlibank in Oman, having joined the company in 2007. In November 2012, he was ranked Second Best CEO in the Arab Banking World by Forbes Middle East. He holds a Master’s degree in Finance from the University of Strathclyde, Scotland, and is a Fellow of the Chartered Institute of Bankers (FCIB) in the UK. His career has spanned two decades and he has held positions of increasing responsibility in all major areas of banking. Prior to joining Ahli Bank, he was the Deputy CEO of the National Bank of Oman.

"We feel SME finance is very important, not just for us but for the country as a whole."

How has Ahlibank developed since it was formed in 2008?

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 had a vision of where we wanted to be in five years. We were fortunate to have an established regional player, Ahli United Bank (AUB), as our strategic partner. AUB and IFC Washington together have acquired around 45% of the bank. Our strength is our team. We have grown the bank from a profit of OMR2.1 million in 2008 to OMR21.7 million in 2012.

How dynamic is Ahlibank’s portfolio?

We have a well-diversified portfolio. It is split 45-55 between retail and commercial banking. Our commercial banking portfolio is also well diversified, and there are no sectors that account for more than 10%. For that reason, our non-performing asset (NPA) ratio is just around 1%. Our corporate books have almost zero NPAs.

“We feel SME finance is very important, not just for us but for the country as a whole.”

What level of mobilized customer deposits do you have?

Almost 60% is wholesale and 40% is high-net-worth (HNW) clients and retail. On the deposit side we are at about OMR900 million. We have increased our capital to OMR125 million, and are well capitalized. Our net worth as of June 2013 is OMR193 million.

With regards to the retail bank, how many branches do you have around Oman?

In total we have 12 retail branches and five Islamic banking branches. Our ATM network is also growing with 17 on-site ATMs and five off-site ATMs. We have plans to expand the branch network to a maximum of 25 branches as per our current strategy and are also looking at self-service kiosks in a number of locations around the Sultanate.

How important do you think SME and project finance is for you at the moment?

We feel SME finance is very important, not just for us but for the country as a whole. Right now we are in the process of completing a due-diligence exercise to acquire a finance company with the aim of growing the SME business. Under our SME model, we are targeting really small and micro enterprises. Project finance is a very competitive business. We participate in all the big projects. As we have a strategic partnership with AUB, we can underwrite transactions of more than $500 million in size.

How would you characterize your lending strategy?

We want to build this institution with a long-term plan in mind, so we are conservative and prudent. There is a danger that the level of competition in the banking market will force banks to become less conservative in their lending strategies. There is a lot of liquidity in the sector. Project finance is mainly done in US dollars, but the liquidity is in Omani rials. Our focus is not on the quantity but rather on the quality of the assets on our books.

What impact do you think the rise of Islamic banking will have on the banking sector in Oman?

I think Islamic banking will gain a share of 10% to 15%. The competition in Islamic banking will be based more on pricing than liquidity. I believe it is more about the relationship than the interest or profit earned when it comes to small depositors. Big depositors do not really care about whether it is an Islamic bank or not, and they tend to focus on the returns. I think there is growth, but I do not think it will impact heavily on traditional banking. If you look at other countries you can see growth in Islamic finance, but it is not a significant portion of the banking sector. Having said this, as one of the leading financial institutions in the country we want to be a leader in the Islamic finance sector, as we believe we can gain a huge portion of the segment and we have always believed in catering to all the needs of our customers. Islamic banking is another service we can provide to them.

What advantage do you think you will have in the Islamic banking market as an established bank?

I think it is an advantage and a disadvantage. We already have a good branch network and a solid reputation in the market, so some clients will happily shift their business from conventional banking to Islamic banking. Since our Islamic banking division is a window and not a full-fledged Islamic bank, some people have the wrong idea that only full-fledged Islamic banking banks are fully sharia compliant, and therefore tend to lean toward them rather than an Islamic banking window. Growth and advantages are mainly based on the strategy that you have set, and on how you communicate this strategy to the public. I do not think that being already established will guarantee success, but I do believe that educating the public about Islamic banking and its functions will be a differentiator.

In the wider picture, are you expecting to see a sovereign sukuk issuance?

Yes, there is a lot of liquidity in the market, so the Central Bank of Oman (CBO) may have to issue sukuk to drain this liquidity. Now, they can use government bonds, they can use treasury bills, but when it comes to Islamic banking you do not have any other option other than issuing sukuks.

What are your overall expectations for the banking sector in Oman?

I think the sector will continue to remain strong. The growth will not be the same as in previous years, but the bottom line will be stable and profitable. We have a strong and prudent central bank, and I do not think the banks will be allowed to take excessive risks in other markets. Overall, I am optimistic. We believe in steady and prudent growth. Our strategic partner AUB has a presence in seven countries, including the UK, Bahrain, Kuwait, Egypt, Libya, and Iraq.

Do you have any plans to establish operations outside of Oman?

We see ourselves as a local bank with a regional presence. Our strategic partnership with AUB means that if we have a client who wants to conduct business in Kuwait, for example, we can do so through our sister bank in the country; the same goes for Bahrain, Egypt, Libya, and the UK.

© The Business Year – June 2013

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