TBY talks to Andrew Long, CEO of HSBC Bank Oman, on finding the underbanked, modernization, and 70 years in-country.

How much demand has the HSBC seen for its bank guarantee products?

HSBC is focused on larger local and international players for its bank guarantee products, as many of them require performance and guarantee bonds. In the sectors we choose to compete in we have seen extremely good growth. We are not deeply entrenched in the SME sector. There is a Central Bank mandated 5% target for SME lending that few, if any bank has managed to hit so far. However, this is not because there is a shortage of cash for the SME sector here. Given that all the banks have this target and none of us have hit it, this suggests there is more money than demand. We help SMEs in other ways, such as seminars with accountants and lawyers to provide financial, legal, and accounting advice. Through our CSR initiatives, we also help some small businesses in craft industries with environmental and education issues.

How does HSBC attempt to better reach Oman's rural or under-banked population?

HSBC has the third broadest network across Oman. We have branches in some pretty remote places, such as towns near the Yemeni and Saudi borders, and in Haima near the oil fields. Our research concluded that younger bank customers use the ATMS and mobile, internet, and telephone banking more often. As a result, we have merged a few of our branches together because there was not as much demand for them.

How has the market received mobile internet banking in Oman?

Reasonably well. HSBC has had internet banking in Oman for many years. We were one of the first banks with a mobile banking app and we were the first to have an Arabic app here. Offsetting a considerable drop in manual transactions over the last two years, digital transactions have grown quickly in corporate and retail alike.

Are there an adequate number of banks for Oman's population?

Banking services are readily available to nearly everyone in Oman. HSBC has 300,000-400,000 clients and they are spread across the country, and is one of two or three banks that have broad networks. So if anything, Oman is over-banked—there are too many banks for the market, especially when you consider the presence of Islamic banking as well as the conventional banking sector. The number of branches across the whole country are in excess when compared to the bankable population. In terms of borrowing, most people have borrowed up to the hilt. This is why there have been discussions around several potential mergers.

How has the Omani banking industry and HSBC been impacted by the introduction of IFRS9?

The initial impact has been positive. IFRS9 is an attempt to produce more consistency across the banking sector. However, because of the way IFRS9 is constructed, banks can take several different approaches to running models behind it for forecasting credit losses going forward. So, there is some inconsistency in approach, which the Central Bank is aware of. At HSBC, we take a particular approach that is global and conservative because there has been some increase in our provisioning. We expect this to continue during 2018 and maybe even into 2019.

What regulatory measures do you think could be introduced in Oman to further modernize the banking industry?

Oman has a new executive president of the central bank; hence, time will tell what his particular focus will be. He has had discussions with us, other banks, and other regulators, and he travels a lot and is well informed and connected, so I expect there will be changes coming through, and that he will continue the path of modernization set by his predecessor. In terms of changes, the Oman Bankers Association has highlighted a number of areas where they think some relaxation might take place. One example is the interest rate cap on personal loans. The cap of 6% has been in place for six or seven years and in that time the cost of funding these loans has risen, and as a result, banks have been squeezed quite hard.

What are your operational objectives over the next 12 months for HSBC?

To improve the speed of processing, reduce the number of complaints, and to make more money for our shareholders. This can all be facilitated by ensuring that our systems, processes, and procedures are not only helping our clients, but are also removing frustrations for our staff to create a happy workplace. The key focus for us is how we can leverage technology and move more away from paper to digital so that we are more efficient internally.

Would you tell us about the milestone HSBC Oman is celebrating in 2018?

HSBC has been in Oman for 70 years, which is at east 20 years longer than any other bank. We arrived here in 1948 as the Imperial Bank of Iran, then changed to the British Bank of the Middle East before changing to HSBC Bank Oman today. We have had many firsts in the country, including the introduction of the first ATM in Oman and the launch of the first online banking system. We have also assisted in the printing and distribution of the first Omani currency in the 1970s, which was the Saidi Rial. We have some relationships that go back to 1948. We are cognizant that it is a tremendous responsibility on our part to maintain the happiness and loyalty of our clients who comprise of all parts of the society. We are holding various celebrations in Oman to mark this milestone, but the key for us is that we have been here for 70 years and we want to be here for another 70. We value our involvement in the country; we are not here just from a profit-loss perspective, we like being part of the community.