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Concept and content by Akshay Bhatnagar Susmita De Ghalib Abdullah Mohammed Fahmi Rajab Product Manager Shivkumar Art Directors Sandesh S. Rangnekar Minaal G. Pednekar Design M. Balagopalan Khoula Rashid Al Wahaibi Production Manager Govindraj Ramesh Photography Rajesh Burman Sathyadas C. Narayanan CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy Vice President Ravi Raman Senior Business Support Executive Radha Kumar Translator Mustafa Kamal

Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel (968) 24700896 Fax (968) 24707939 Email: akshay@umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for all advertising contents.

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Copyright © 2010 United Press & Publishing LLC Printed by Mazoon Printing Publishing & Advertising (LLC)

Beginning of change

A

fter one of its worst years in 2008, the global banking industry is limping back to recovery. The world’s 500 most valuable banking groups, in 2009, have grown by 62 per cent in terms of market capitalisation and their brand values have cumulatively increased by 49 per cent, according to the fourth edition of the BrandFinance Global Banking 500, an annual review of the top banking brands in the world.

The survey indicates that Middle Eastern brands, and more specifically in the GCC region, have notched up a strong performance increasing in brand value by 78 per cent. Apart from the bouncing back of oil prices, the growth of Islamic banking is also one of the key reasons behind the success of GCC banks. In an expected development, US is losing its sheen in the global banking industry. Only 85 US banks made it to the list. Last year, the figure was 95. The number of UK banks has also gone down to 22 from 24. Following the US and UK, Japanese banks’ brand value declined by 3 per cent. On the other hand, rest of the Asian banks did well. The brand value of India and China went as high as 137 per cent and 58 per cent respectively. In another pointer towards the changing order of the global banking industry, a Russian bank Sberbank entered the Top 20 list for the first time. It had a growth of 160 per cent over the previous year and its brand value was estimated to be $11.7 billion. David Haigh, CEO of Brand Finance plc. stated, “The value of the Top 500 global bank brands is now 4 per cent higher than in 2008, prior to the banking crisis. The total value of the top 500 global bank brands is $716 billion, an increase of 49 per cent. There has been a significant shift in the balance of power globally away from the US and towards banks in emerging markets.” He added,“Investors that suffered from the credit crisis sought the comfort of stricter lending rules imposed by Islamic law. It will be interesting to see if other big international banks will begin to offer Islamic banking services in 2010 and try to make inroads in the Middle Eastern market in addition to providing their existing customers with greater choice.” In the case of Oman, it has been a year of mixed performance for different market players but overall the sector has managed to overcome the challenges with great success. In the current issue of OER Dossier, we are showcasing the developments that have marked the year 2009 in the banking, finance and insurance sectors in Oman.

Enjoy reading! Akshay Bhatnagar akshay@umsoman.com OER DOSSIER February 2010 1


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18

Virtue of resilience

For Oman, a sound and resilient financial system is an essential precondition to promote economic growth especially under the current global environment

OPINIONS

14 HE Hamood Sangour Al Zadjali, CBO CBO’s key areas of focus in 2010

16 HE Yahya Bin Said Abdullah Al-Jabri, CMA The current capital market

28 Philipp E. Baertschi Chief Strategist of Bank Sarasin gives global view for 2010

SPONSORED FEATURE

42 National Bank of Oman

43 College of Banking and Financial Studies

44 Taageer Finance Company

FINANCIAL PERFORMANCE

6 News in Brief 34 Pragmatic Approach 38 NBFC Overview 2 OER DOSSIER February 2010

20 Bank Muscat 22 National Bank of Oman 24 Bank Sohar

25 Bank Dhofar 29 Oman International Bank 30 Ahli Bank


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CONTE NTS

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RISK MANAGEMENT

50 Insurance – a growing industry

47 Insurance update Sponsored features

52 RSA Insurance Company 53 Al Ahlia Insurance Co SAOC 54 Al Madina Gulf Insurance 4 OER DOSSIER February 2010

55 Lebanese Insurance Co 56 Oman United Insurance Co SAOG 57 Prudent Loss Adjusters LLC


NE WS IN BRI EF

BankMuscat Visa card’s FIFA offer two to South Africa, hotel accommodation at 4 star hotel for two, and tickets to watch one match besides city tour. Six packages are to witness the preliminary round games while one package is for a quarter final game. BankMuscat’s new and existing Visa credit cardholders can participate in the draws.

Offering a lifetime chance to experience the electrifying live action of the FIFA World Cup 2010 in South Africa, BankMuscat in association with Visa is offering an opportunity to existing and new cardholders to win tickets

and witness the matches in South Africa. Seven lucky BankMuscat customers will be awarded a fully paid package to the FIFA World Cup through a prize draw. The package includes return economy class air tickets for

Adding momentum to the campaign, BankMuscat has also re-branded its ePayment prepaid card and issued a limited edition series with the World Cup 2010 theme. The objective of this campaign is to support the government’s e-Governance initiative. The ePayment card can be used locally and around the world. The Bank will give away LCD TVs to 5 lucky winners from among customers who apply for this card through a ‘scratch & win’ scheme. The BankMuscat Visa FIFA World Cup credit card acquisition-cum-usage campaign will run from 27 January, 2010 to 10 May, 2010.

OAB in agreement with Bahwan Contracting Oman Arab Bank has signed an agreement with Bahwan Contracting Company for the construction of the bank’s new head office building in Al Ghubra North. On behalf of Oman Arab Bank, the agreement was signed by Rashad Al Zubair, Chairman of the Bank and by S.K. Virmani, Managing Director of Bahwan Contracting Co. OAB’s new head office building will be constructed using the latest in technologies and office ergonomics, stated a press statement from the bank. The new building will cater to OAB’s current and future requirements and consolidate all its departments in one convenient location with ample car parking space. The project is expected to complete in 18 months. Abdul Kader Askalan, CEO of OAB said: “This prestigious project of our future head office building will not only be a work of art in terms of architecture, but also means of con6 OER DOSSIER February 2010

venience that will enable our customers to transact their business with ease and efficiency as the design approach is very cus-

tomer centric”. The engineering and design consultancy for the building is done by Khatib & Alami and Partners.


BankMuscat supports expedition BankMuscat has announced support to Hamed Al Harthy, an ardent Omani mountaineer, on an attempt to conquer Mount Aconcagua in Argentina. The 6962-meter peak is the highest mountain outside Asia and one of the seven summits of the world. Salim Al Kaabi, Assistant General Manager - HR, BankMuscat, said: “BankMuscat is associated with inspiring achievements and the decision to support Al Harthy’s mountaineering expedition stems from the Bank’s commitment to encourage extraordinary exploits which will bring glory to Oman. As Al Harthy embarks on this grueling expedition, BankMuscat is proud to support him in his mission driven by passion to overcome challenging situations. Reflecting the enterprise, grit and determination of adventurers, BankMuscat always leads with innovative products and services.” Mount Aconcagua’s appeal to mountaineers lies in its physical

and psychological demands on climbers, climate and the surrounding scenery. Its elevation and weather conditions call for a preparation for exacting challenges. Aconcagua has different routes with several levels of difficulty. Al Harthy will be taking the Aconcagua Ameghino Valley and Upper Guanacos traverse route which will provide him with the opportunity to improve climbing skills. Al Harthy does not underrate the task ahead of him despite having previous experience and adequate preparation. The expedition, according to him, had more to do with the desire to test oneself in extreme conditions, stretching the limits of mental/physical endurance and perseverance while at the same time enjoying the excitement of exploration itself. The value he sees in this attempt is to inspire young Omanis. The expedition is expected to take around 20 days.

National Bank of Fujairah records profit National Bank of Fujairah PSC (NBF) has announced its results for 2009 which have been submitted for Central Bank’s approval. The highlights of the results: NBF recorded profit of AED 104.3 million compared to a loss of AED 50.3 million in the same period last year. Results reflect the strength of core customer base and were achieved despite difficult credit conditions during the year. H.E. Sir Easa Saleh Al Gurg, Deputy Chairman of NBF commented:“The Bank’s progress amidst the global financial crisis is a testament to its prudent & balanced approach to these challenging times . The Bank has grown its core earnings which, coupled with the recovery of the investment portfolio, helped in absorbing credit losses and maintaining profitable operations.

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OIB-MasterCard on a promotion drive Arab Bank awarded ‘Best Bank in MENA’

Oman International Bank along with MasterCard Worldwide recently held a usage promotion drive on OIB-MasterCard product to recognize customer loyalty. The theme of the promotion was ‘Spend on your OIB MasterCard and win instantly in Scratch-NWin coupon’. The promotion was recently

held at Al Araimi Complex and lasted for 15 days attracting good response from the credit card members, according to a company release. Anyone spending 10 rials or more at any of the outlets in Al Araimi complex got a scratch-n-win coupon and also got a chance to enter the raffle draw.

NBO’s World Cup Football Promotion

Global Finance, one of the leading global magazines, awarded Arab Bank the title of ‘Best Bank for Trade Financing in the Middle East and North Africa’, for the year 2010. Abdel Hamid Shoman, Chairman & CEO of Arab Bank said: “This award confirms our premier position in the field of Trade Financing in the MENA region. Trade Financing at Arab Bank is supported by our extensive global network and financial strength in ensuring continuous support to our clients.” A Global Finance’s spokesperson commented, "We awarded the banks that stood by their clients at a time of a lending crisis, were able to find innovative means to reduce the risks at hand and enhance liquidity via international deals.” Nadia Al Talhoni, Manager of Treasury and Trade Financing at Arab Bank said: “Our proactive approach is the key behind our success.

With the 2010 World Cup Football fever building up, National Bank of Oman (NBO) in association with Visa has launched the ‘Go Fans’ promotion during the period 15 January-28 February, 2010. Any customer using their NBO credit or debit card will be entered into a draw to win an ‘all expenses paid’ trip for two to South Africa for the World Cup. During this promotion, customers who 8 OER DOSSIER February 2010

use their card will automatically be entered in the draw. Asif Redha Hussein, NBO’s Assistant General Manager–Consumer Banking said: “We hope our customers will get lucky to win the two tickets to South Africa for the World Cup Football. Recently, a NBO card member was the only winner across Oman to have won a ‘Go around the world trip’.

International commerce may be complicated and risky, however by adopting a proactive and dynamic approach, we have been able to assist our clients, more effectively, by allocating the required resources and emphasizing on the basic requirements that their business relies on.”


NE WS IN BRI EF

BankMuscat’s 10th CD oversubscribed BankMuscat successfully closed its 10th Certificate of Deposit (CD) auction which attracted bids totalling 34.5 million rials against the issue size of 15 million rials. There was a good mix of applications for the one year and five years’ CDs. The oversubscription is a reflection of the liquidity in market and lack of safe avenues to deploy resources in short term. The weighted average yield accepted for one year, three and five years are 4.10 per cent, 5 per cent and 5.50 per cent respectively. The yields

of one, three and five-year maturity for the first round of CDs launched in September 2008 were 5.23 per cent, 5.59 per cent and 6.01 per cent respectively. The comparison to the latest round of CDs points to a fall in interest rates at the shorter end of the Omani yield curve. BankMuscat expects the interest rates to further soften as rial liquidity continues to put pressure on the shorter end of yield curve. However, longer tenors, namely three and

five years, are expected to remain stable. The recent spate of bond issues within the GCC and ample liquidity have all contributed to the overwhelming response evoked by the CD issue. The spread between traditional bank deposit and CD is expected to narrow as market participants utilize the higher yield being offered by CDs. Till date from 10 rounds of CD auctions, BankMuscat has accepted bids worth 167.40 million rials against the subscription of 335.60 million rials.

Fincorp appoints new Brokerage GM Fincorp has appointed Samer E. Amireh as General Manager of its Brokerage Division. Jordan- born Amireh has been in the banking and finance industry for more than 12 years. His previous experience includes holding General Manager Brokerage positions at DAMAC Securities in UAE and AB Invest in Jordan. His last assignment was in Damascus where as GM of Global One Financial Investments, he established one of Syria’s first brokerage companies.

“I look forward to utilizing my leadership and technical international experience in this new role, and I aim not only to maintain the excellent reputation of the Fincorp Brokerage Division, but also improve upon the speed and efficiency of our service. I have already begun by restructuring the division and enhancing, for example, the existing facility to directly place trading orders on-line and access portfolio statements on a real-time basis to our clientele,” he said.

Gulf Corporate Credit quality to stabilize in 2010: Moody’s The outlook for corporate credit quality in the Gulf region going into 2010 is one of slow recovery or at least stabilisation, says Moody’s Investors Service in its New Special Comment entitled “Arabian Gulf Corporates: Review 2009 & Key Themes for 2010”. Overall, Moody’s expects fundamental corporate credit to stabilise, in line with a gradual recovery of the global economy, but also on the back of some more rapidly recovering domestic economies. The report identifies six key themes that will drive credit quality among Gulf corporates in 2010.“The main drivers of credit quality will be industry-specific fundamentals as well as the companies’ ability to improve liquidity profiles and to extend debt maturities, which have remained comparatively short and clustered,” 10 OER DOSSIER February 2010

explained Philipp Lotter, Dubai-based Senior Vice President in Moody’s Corporate Finance Group and co-author of the report. Another key theme for 2010 is Moody’s expectation of an increase in corporate issuance among highquality issuers as companies replace shorter tenors with longer maturities, and reduce their historically heavy reliance on rollover bank lending whilst continuing with their investments. Other themes include government support, which will remain under scrutiny, and transparency levels at both corporate and government level, which need to be enhanced for investor confidence to be restored. In its review of 2009, Moody’s new report says that it was a testing year for the Arabian Gulf corporate landscape. “In previous years, the

number of publicly known corporate defaults in the region had been negligible and the GCC demonstrated a highly interventionist and creditor-friendly track record,” said Raffaelle Semonella, Associate Analyst for corporates in Dubai and co-author of this report. However, by the end of 2009, a number of high profile-defaults had started to change this picture. A sharp deterioration in corporate credit quality due to a combination of weaker fundamentals and sovereign support uncertainty led to a substantial downward ratings migration, with a total of 34 rating actions of which all but two were in a negative direction. “Indeed, the average rating in the Gulf has migrated from A1 in 2008 to Baa1 in 2009,” said Lotter.


NE WS IN BRI EF

Bank Sohar launches single largest prize offer Bank Sohar has launched ‘2010 Al Mumayaz Savings Scheme’ offering the single largest prize money in Oman in 2010. The new scheme will commence in February and continue till the end of the year. Every month, there will be 40 prizes of 400 rials each with a minimum of two assured prizes for customers of every branch. Average balance of 100 rials in the account entitles customers to participate in this prize draw. In addition, there will be a celebratory prize of 40,000 rials every month for all customers who maintain a qualifying average balance of 1,000 rials in their accounts. The rewards on the prize cheque escalate every quar-

NBO appoints new CEO National Bank of Oman has announced Murray Sims, CEO of the Bank since April 2008 will be leaving on the expiry of his contractual term. NBO has appointed Salaam Al Shaksy as his successor. Al Shaksy has been the CEO of Dubai Banking Group and Dubai Bank since May 2005, and prior to this, was the CEO of Dubai Islamic Investment Group. He has more than 23 years experience in banking, including previously working in senior positions in various banks in Oman. He currently has a number of board memberships and affiliations in Oman and elsewhere. He is expected to assume his duties as CEO of the bank at the end of March.

12 OER DOSSIER February 2010

terly Big Cheque and in the year-end Super Cheque Prize draws,

ter. The March quarter Big Cheque prize of 140,000 rials scales up to 240,000 rials for the June and September quarter and becomes a Super Cheque Prize of 440,000 rials for the December quarter. To participate in the quar-

customers need to maintain a minimum average balance of 2,000 rials in their savings account, over a period of 30 days prior to the draw date.“We are a new commercial bank in Oman; we started the Al Mumayaz Savings Scheme soon after we opened for business in 2007. From the beginning, we have been talking to our customers, both big and small and listening to what they want and what they would appreciate in a Savings Scheme. Our 2010 Savings Scheme reflects the aspirations of our customers,” said Khalfan Rashid Al Taley, DGM-Retail Banking at Bank Sohar.

BankMuscat's 'Oman Celebrates’ campaign runs successfully Commemorating 40 years of the glorious Renaissance march under the leadership of His Majesty Sultan Qaboos, BankMuscat has launched a major national campaign envisaging year-long celebratory initiatives, programmes and activities. Titled ‘Oman Celebrates’, the objective of the campaign is to initiate programmes that celebrate and mark the country’s achievements during the last 40 years. BankMuscat will focus and convey the ‘Oman Celebrates’ theme to distinguish all its branding and communication campaigns during 2010. The announcement of all-new al Mazyona savings scheme offering exciting daily, monthly and jackpot prizes every four months marked the first in the series of the celebratory initiatives. Sulaiman Al Harthy, Group DGM – Consumer Banking, BankMuscat said: “The all-new al Mazyona reaches out to all citizens, offering an exciting line-up of prizes for different segments of savers at an unbeatable frequency.

The underlying theme is the generous use of the theme of 40 and its multiples thereof, establishing al Mazyona’s status as the savings scheme for the nation. For almost 20 years, the al Mazyona brand has made dreams of innumerable customers come true.” BankMuscat will offer a daily prize of 4000 rials, which will be available to all customers maintaining a minimum balance of 100 rials. There will be a winner for every working day of the week starting from Sunday to Thursday. With daily draws, customers can improve their chances to win prizes. The Bank has introduced a new monthly prize of 40,000 rials. The climax of al Mazyona will build up with a jackpot prize of 400,000 rials.


INTE RV IE W

Banking Sector Holds Ground HE Hamood Sangour Al Zadjali, Executive President of the Central Bank of Oman, speaks to Sushmita Sarkhel about the ups and downs experienced by the banking sector and CBO’s key areas of focus in 2010 How has the Banking sector in Oman fared in the past year? The banking sector in Oman continued its growth pattern during 2009 as it registered increase in all major banking aggregates such as deposits, credit and capital and reserves. Commercial banks' total credit expanded by 7.2 percent which stood at 9.8 billion rials as at the end of November 2009. Aggregate deposits witnessed a growth of 5.3 per cent over its corresponding period in 2008 to reach 9.1 billion rials. Core capital and reserves of commercial banks at the end of November 2009 amounted to 1.64 billion rials, roughly representing 12 per cent of total assets. Provisional figures of net profits of the commercial banks amounted to 249 million rials for the period January to November 2009. Has entry barriers for new entrants deterred them? What has been the scenario since these barriers were introduced last year? The impression that Central Banks raise minimum capital requirements to bar new entrants is not well founded. This is particularly highlighted by current developments when, globally, quantity and quality of capital requirements are being reviewed in the context of financial crisis and erosion in capital levels. Central Bank of Oman has been raising minimum capital requirement over a period of years to make our banks strong, resilient and competitive in the light of global competi14 OER DOSSIER February 2010

Oman recorded, as of November 2009, 4.2 per cent increase in assets, 5.3 per cent rise in deposits and 7.2 per cent rise in credit – when compared to November 2008. Liquidity has been comfortable for extending credit.

His Excellency Hamood Sangour Al Zadjali, Executive President , CBO tion. The move has stood the banks in good stead and they have had increased business reach and staying capacity. In the above context, new entrants, serious in business and having good vision and strategies, have been there and will always be there depending upon the dynamics of the market. Many local banks have been looking at growth plans. What has been the trend with regards to overseas growth in the last year? Has the economic slowdown impacted growth for the banks? The year 2009 witnessed reduced growth in business and banking sector globally and the emphasis has been consolidation and recovery of confidence. The final results for 2009 are not out but commercial banks in

So far as growth overseas is concerned, Omani banks tended to be watchful in 2008 itself even as the financial turmoil was unfolding. In fact, it was relevant to note that Central Bank of Oman’s prudential restrictions and supervision contained possible set backs which could have occurred otherwise. We believe that banks need to observe caution still in overseas operations, awaiting business turnaround. It may be added that banks, which had initiated branch opening in GCC countries, are pursuing the same. What will be CBO’s main strategy and area of focus for 2010? Some of the regulatory measures taken by the CBO in the recent past insulated our economy from the adverse effects of contagion. In pursuance of its commitment to adopt global best practices, the CBO mandated the implementation of Basel II from the year 2007. Considerable progress has been made in designing the Risk Based Supervisory (RBS) framework and the road map is being finalized for implementation. Significant advances are taking place in the area of payments and settlements with regard to mitigating systemic risks and increasing financial transaction efficiency.


INTE RV IE W

MOVING WITH THE TIMES CMA has upgraded its regulations as per international standards to satisfy global needs and investors’ ambitions. HE Yahya Bin Said Abdullah Al–Jabri, Executive President, shares with Susmita De more p about CMA and the current capital market

What measures ha have ave you taken to upgrade the regulatory framewo framework ork cconsistent with international standards and practices pracctice to ensure financial soundness in the capital m mark market? The Capital Market Authority Aut A (CMA) is a member in The International Or Organization gan of Securities Commissions (IOSCO) which pro provides international norms for rules and regulationss of capital markets. IOSCO has 30 fundamentals divided divide ed in into different sections, such as, Regulations, Self Regulation, Reg gula Enforcement of Securities Regulations, Co-operation Co--ope in Regulation, Issuers Collective Investmen Investment nt Sc Schemes, Market Intermediaries and Secondary Markets. Marke ets. Adding to that, the CMA often upgrades its regulations regulattion according to international standards to satisfy g glob global needs and investors’ ambitions. In order to do so, CMA C continuously requests all listed companies in th the capital market sector to follow the fundamentals fundam men and regulations in order to insure implementing impleme those standards. What are e yo your expectations from the market in 2 2010? Any exp expectations from the market on factors that could is dependent de epe impact impaact tthe market performance such as tthe growth of oil prices, country’s economic performance, investor eccono behavior, performance of compabe eha nies, ni es, and many other internal and external exttern factors that control the market. marrket However, when we look back at th the market performance in 2009, he m 16 OER DOSSIER February 2010


we see that the market performed positively and most companies listed in MSM were trying to get past the effects of financial crisis and become more efficient and profitable. From that perspective, we expect that the market will improve further as most international reports also indicate that the world economy is gradually recovering from the global financial crisis. What is the significance of new listings in the market? Will the year 2010 see further listings come onto the market across the banking, power, telecommunications and manufacturing industries? Listing new companies in our market will provide significant diversifications to investment markets and to the investors. In addition, new listed companies will benefit from regulations that protect the current owners, shareholders and the companies themselves.

ment Stability Fund to restore confidence in the market and to limit the market volatility through policies that ensure success to this initiative. In addition to this, MSM website got two Arabian awards that are considered additional to the previous MSM achievements of launching MSM website at the local or regional levels. This indicates the level of development that MSM has attained and the extent of fulfilling investors’ needs. Furthermore, the Sa’ad and Qusaibi crisis was the most risky crisis that was faced by the Omani market in 2009, but MSM was able to overstep it. The listed companies did not face real risk in the international financial crisis, but it was noticed that most Omani companies recorded better results

The Capital Market Authority has

At the moment there are some requests which are being studied and hopefully we should see the listing of Al-Nawras from the telecommunications sector by the middle of 2010. It should be mentioned here that CMA continuously encourages all major companies especially family businesses, which are not listed in the market, to grab this great opportunity to increase their liquidity and take the chance to share their experiences and achievements with the society. How has the MSM performed in 2009? How has it grown in terms of market value and capitalization? The MSM 30 index had performed positively last year with an increasing growth rate of 17 per cent against 40 per cent in 2008 and reached 6369 points compared to 5441 points in 2008. The market capitalization increased from US$20bn in 2008 to US$23.6bn in 2009; the number of securities traded was US$6.1bn through 888,000 trades and the turnover was US$9.5bn. What was the most notable thing that happened on the MSM in 2009? The most important event for MSM in 2009 was the decision to establish the Invest-

always encouraged the importance of transparency and disclosure in order to achieve fairness

in the third quarter of 2009. On the other hand, the market witnessed a remarkable growth in market values with an increase of 18 per cent with comparison to 2008. The performance of the companies and their financial results improved in comparison with those of 2008. We also have to mention here that the MSM has marked its 20 years since establishment in 1989 and I seize this opportunity to tell you about all the efforts that have been made to help develop a strong market. Is there any impact of the global downturn on MSM? Does Dubai debt crisis have any negative sentiment on the market here? All markets were influenced by the global crisis though variably as international capital

markets faced intense reduction, followed by a fall in the US markets. The Arabian markets in general and Gulf markets, in particular, were negatively affected by this crisis as they witnessed a remarkable fall back. MSM has also been affected, but at a lower degree, as the financial status in the Sultanate was really maintained well against negative falters of the sharp break in the international markets. Regarding Dubai crisis, MSM might have been affected for moral reasons resulting from the investor’s fear of the Omani banks being exposed to the crisis. However, the Capital Market Authority has always encouraged the importance of transparency and disclosure in order to achieve fairness. To establish security and stability in the market, CMA had requested all listed banks and companies to reveal all the information they have, directly or indirectly, of operations with Dubai World Group. In response to CMA’s request, data showed that the total exposures of local banks to Dubai World Group are 29.55mn rials distributed by three banks. In fact, Dubai crisis contributed indirectly to boost investors’ confidence in the market and presented the market in a glamorous way in respect of transparency and disclosure compared to some other markets that took no steps to observe the effect of the crisis on companies. Vis-a-vis the other GCC markets, how has MSM performed? Most Gulf markets ended 2009 at high rates after gross loss in 2008 due to the international financial crisis. Comparing MSM’s performance in 2009 to the other Gulf market’s performance, MSM closed at 6369 points with an increase at 17 per cent. The market receded 39.8 per cent in 2008. According to index growth in 2009, MSM was the second among Gulf markets after the Saudi market, the largest Arabian market, as the trading index closed at 6121 points with an increase of 28 per cent during the year. Abu Dhabi and Dubai stock markets grew by 15 per cent, 10 per cent, respectively, and Doha market grew slightly by 1 per cent only, while Bahrain and Kuwait markets declined by 19 per cent and 10 per cent, respectively. OER DOSSIER February 2010 17


BANKING – OVERVIE W

Driving the growth In the years ahead, the economy will rely on the ability of financial markets to allocate resources adequately and efficiently towards productive purposes

T

he global monetary and financial conditions changed dramatically during the course of 2009. After a phase of high economic growth and bullish asset prices, the global economy continued to encounter sharp corrections in asset prices, which in turn led to growing concerns about the health of the financial systems and deceleration in economic growth. 18 OER DOSSIER February 2010

Oman’s banking system remained relatively insulated though there were few areas of concern for some of the banks. Liquidity conditions remained, by and large, comfortable despite continued deceleration in the growth of monetary and banking aggregates. Total assets of commercial banks registered a moderate growth of 4.2 per cent to 14,234.4 million rials in November 2009 compared to 13,656.7

million rials in November 2008. Commercial banks’ assets in the form of cash and deposits with the Central Bank of Oman (CBO) amounted to 970.3 million rials at the end of November 2009 compared to 732.2 million rials in November 2008. Total outstanding credit rose modestly by 7.2 per cent to 9,812.2 million rials at the end of November 2009 from 9,157.4 million rials at the end of November 2008 reflecting the slowdown of


the economy. Outstanding investments in securities (domestic and foreign) decreased by 4 per cent to 1,564.6 million rials from 1,629.4 million rials a year ago. Investments in CBO CDs increased to 1,086.5 million rials at the end of November 2009 from 831 million rials at the end of November 2008. Commercial banks’ outstanding investments in foreign securities declined to 197.1 million rials from 523.3 million rials during the same period on account of an expected turnaround in interest rates. On the liabilities side of the balance sheet, aggregate deposits (Rial Omani plus foreign currency) registered a modest growth of 5.3 per cent to 9,065.4 million rials over the twelve month period ending November 2009 compared to an increase of 38.7 percent to 8,610.2 million rials a year ago. Government deposits with commercial banks increased by 9.7 per cent to 1,844.8 million rials, while deposits of public enterprises rose by 1.1 percent to 695.5 million rials. Private sector deposits, which constituted 72 per cent of total deposits with banks, recorded an increase of 4.6 per cent to 6,525.1 million rials by the end of November 2009 from 6,240.5 million rials a year ago. The increase was mainly reflected under demand and saving deposits. Demand deposits increased by 158.1 million rials, a rise of 9.9 per cent, while saving deposits rose by 159.1 million rials (9.7 percent). Foreign currency designated deposits of the private sector declined by 249.8 million rials (31 per cent) due to lower interest rates offered on such deposits. Core capital and reserves of commercial banks at the end of November 2009 increased by 9.8 percent to 1,634.6 million rials, representing 11.5 percent of commercial banks’ total assets, while provisions and reserve interest were augmented by 24.7 percent to 276.2 million rials. Outstanding provision and reserve interest constituted 2.8 per cent of credit to private sector and public enterprises as at the end of November 2009 compared to 2.4 per cent a year earlier. Provisional figures on profits of commercial banks (after provisions and taxes) as

at the end of November 2009 amounted to 249.6 million rials compared to 246.2 million rials at the end of November 2008 despite the notable increase in provisions and reserve interest. Broad money (M2) increased by 4.5 per cent to 7,919.1 million rials in November 2009 over the same period in 2008. Money supply as represented by narrow money (M1), comprising currency held by the public and local currency demand deposits, expanded by 19.7 percent over the twelve month period ending in November 2009 to reach 2,470.7 million rials. Quasi money (compris-

Total assets of commercial banks registered a moderate growth of 4.2 per cent to 14,234.4 million rials in November 2009 compared to 13,656.7 million rials in November 2008 ing Rial Omani savings and time deposits, certificates of deposit issued by commercial banks, margin deposits and foreign currency denominated deposits) declined marginally by 1.2 per cent to 5,448.4 million rials in November 2009. As regards the sources of broad money supply (M2), domestic assets of both commercial banks and the Central Bank of Oman increased by 19.5 per cent to 3,525.1 million at the end of November 2009, while combined net foreign assets of CBO and commercial banks decreased by 5 per cent to 4,394 million rials during the same period. CBO’s policy interest rate for absorption of surplus liquidity in the form of CBO CDs of 28 days maturity moderated significantly

from 0.850 per cent to 0.050 per cent over the twelve month period ending November 2009. Furthermore, CBO’s policy rate for injection of liquidity –the average rate for repos with CBO– declined to 2 per cent from 2.744 per cent during the same period under reference. Similarly, the overnight domestic inter-bank lending rate declined to 0.085 per cent in November 2009 from 0.341 percent in November 2008, suggesting comfortable short term liquidity in the banking system. In respect of domestic interest rate structure of commercial banks, the weighted average interest rate on RO deposits (demand, savings & time deposits of all sectors) decreased from 2.305 per cent in November 2008 to 2.260 percent in November 2009, while the weighted average RO lending rate increased from 6.955 percent to 7.435 percent during the same period. For a small open economy like Oman, a sound and resilient financial system is an essential precondition to promote economic growth especially under the current global environment. It has to shift emphasis from growth as a source of profit to soundness and stability as the means to contain the adverse effects of contagion from the global crisis. In the years ahead, the economy will rely on the ability of financial markets to allocate resources adequately and efficiently towards productive purposes. With a wider range of instruments and market players in the financial sector, it needs to be ensured that development takes place in an efficient and orderly manner. In recent years, the financial sector in Oman has undergone major structural transformation leading to greater deregulation, financial innovations, tailor made credit products, advances in technology, risk–based supervision and most modern payment and settlement systems. If we look at prospects for the banking sector in 2010, economic recovery is expected to aid in improved credit addition. The higher fiscal spending will enhance private sector investments and employment generation will benefit the personal segment.

OER DOSSIER February 2010 19


F INANCIAL PERFORMANC E

BANKMUSCAT

CORE BUSINESS INCOME STABLE The Bank’s core business income during 2009 was strong and stable in spite of the global financial crisis THE BANK’S GROSS LOANS AND ADVANCES PORTFOLIO GREW BY 199 MILLION RIALS OR 5.2 PER CENT TO 4,052 MILLION RIALS AS ON 31 DECEMBER 2009 COMPARED TO 3,853 MILLION RIALS AS ON 31 DECEMBER 2008

AbdulRazak Ali Issa BankMuscat, Chief Executive

B

ankMuscat has proposed a payout of 45 per cent dividend. Subject to approval of the Annual General Meeting and regulatory authorities, the Board of Directors have recommended 20 per cent cash and 25 per cent bonus stock for shareholders. The cash dividend works out to 20 Baiza per ordinary share of 100 Baiza each aggregating to 21.54 million rials on the Bank’s existing share capital and stock dividend in the proportion of one share for every four ordinary shares.

UP Operating Profit

36.9%

Net interest income

7.6%

Impairment for credit losses on loans portfolio

98.2 million rials

Gross loans and advances portfolio

5.2%

Savings and demand deposits

9.6%

DOWN Net profit

73.7 million rials

Customer deposits

3,068 million rials

20 OER DOSSIER February 2010

The Bank achieved a net profit of 73.7 million rials in 2009 as against 93.7 million rials reported in 2008. The operating profit stood at 208.9 million rials for the year ended 31 December, 2009 as against 152.6 million rials for the year ended 31 December 2008, an increase of 36.9 per cent. During 2009, the Bank disposed of its investment in HDFC Bank, India and recognised a pre-tax profit of 60.5 million rials. Operating profit excluding the gain on HDFC Bank investment was marginally lower by 2.7 per cent in 2009. This demonstrates that the Bank’s core business income during 2009 was strong and stable in spite of the global financial crisis. Net interest income increased by 7.6 per cent from 162.1 million rials in 2008 to 174.4 million rials in 2009 supported by a combination of asset growth and improvement in net interest margin. Noninterest income grew from 74.7 million rials in 2008 to 116.7 million rials in 2009 mainly on account of the gain on sale of HDFC Bank .investment during 2009.


F INANCIAL PERFORMANC E

NATIONAL BANK OF OMAN

NET INTEREST INCOME UP The bank has taken impairment provisions against its investment portfolio of 4.1 million rials and provisions of 8 million rials against three specific bank exposures THE BOARD HAS RECOMMENDED A CASH DIVIDEND OF 0.175 RIAL PER SHARE THIS YEAR BASED ON THE DIVIDEND POLICY APPROVED BY THE BOARD OF DIRECTORS

T

he National Bank of Oman achieved a net profit after tax of 26.1 million rials for the twelve months ended 31 December 2009 compared to 45.4 million rials for the same period in 2008. Notwithstanding very testing global market conditions, the Bank’s operating income was down only by 7 per cent to 81.9 million rials compared to 2008, the latter reflecting a significant one-off gain on investment sales of 6 million rials. On a like for like basis, operating income was broadly flat. The Bank successfully grew its net interest income by 20 per cent to 56.8 million rials from 47.5 million rials in the prior year period through focused balance

UP Net interest income

19.5%

Operating expenses

3%

DOWN Total Assets

9.1%

Loans & Advances to Customers (net)

2.5%

Customers’ Deposits

6%

Net profit after tax

42.5%

22 OER DOSSIER February 2010

sheet management. Net spreads have also improved to 3.24 per cent in 2009 up from 3.08 per cent in 2008, reflecting an improved return from existing assets. Trade related activities and investment income were both lower than in the comparative period in 2008 and contributed to the decline in the ratio of non interest income to total income from 46 per cent to 31per cent as a result of lower volumes of lending related fee income and investment related revenue, which was largely attributable to factors associated with the global financial downturn. The cost to income ratio for the period increased to 42 per cent from 38 per cent in December 2009 mainly as a result of the decrease in non interest income and also as a consequence of a significant amount of investment in the business as the Bank substantially increased its distribution footprint and rebranded the bank. The investment in its distribution network will deliver long-term benefits for the bank and its customers by bringing the bank closer to where its customers live and work.


F INANCIAL PERFORMANC E

BANK SOHAR

FOCUS ON BANKING FUNDAMENTALS Despite global financial crisis, Bank Sohar was able to overcome many of the obstacles and achieve favorable results BANK SOHAR IS FOCUSSED ON IMPROVING THE YIELD ON ASSETS, CONTROLLING THE COST OF FUNDS AND OPERATING EXPENSES AND PROTECTING THE LENDING PORTFOLIO FROM IMPAIRMENT

Dr Mohamed Abdulaziz Kalmoor, CEO, Bank Sohar

B

ank Sohar achieved a Net Profit of 8.022 million rials for the year 2009 compared to a Net Loss of 2.264 million rials for the year 2008. This is a clear turning point and a shining milestone for the bank for achieving net profit for the whole year despite being in operation for less than three years. The operating profit for the year was 11.916 million rials which was 131.47 per cent higher than 2008. The net interest income during the year 2009 of 22.858 million rials was 111.47 per cent higher than 2008. The Operating Income for the year 2009 increased to 29.131 million rials which was 64.31 per cent higher than 2008. The Cost to Income ratio has improved from 71 per cent in 2008 to 59 per cent in 2009.

UP Total Assets

21.6 %

Net Loans & Advances

24%

Deposits from Customers

51.9 %

Operating Income

64.3 %

24 OER DOSSIER February 2010

Net loans and advances grew by 24 per cent during this year to reach 787 million rials at the end of the year, while customer deposits grew by 52 per cent to reach 832 million rials during the same period. The bank’s market share of Private Sector Credit stood at 8.33 per cent while the Private Sector Deposit share was 6.86 per cent as at November 2009. Despite the challenging economic environment that the global economies are facing as a result of the global financial crisis, the bank was able to overcome many of the obstacles and achieve favorable results. The bank has taken a string of precautionary measures during this period to protect the shareholder and depositor interests and avoid any negative repercussions emanating from the continuing global financial crises. In addition to that, the bank has focused on improving the yield on assets, controlling the cost of funds and operating expenses and protecting the lending portfolio from impairment.


F INANCIAL PERFORMANC E

BANK DHOFAR

HEALTHY PERFORMANCE Bank Dhofar has posted a very healthy net profit after tax of 28.06 million rials, an increase of 18.5 per cent over 2008 figure of 23.68 million rials

THE CUSTOMER DEPOSITS RAISED BY THE BANK RECORDED A GROWTH OF 13.3 PER CENT AND INCREASED FROM 971.59 MN RIALS TO 1,101.267 MN RIALS. THE BANK PERFORMED WELL ON OTHER FINANCIAL INDICATORS ALSO

Kris Babicci CEO, Bank Dhofar

B

ank Dhofar continued to achieve good results during the year 2009 despite the global financial crisis. The financial indicators reflected decent growth as the total assets increased from 1,323.82 million rials at the end of 2008 to 1,489.99 million rials in December 2009, a growth of 12.6 per cent. The net loans and advances to customers improved by 17.6 per cent from 1,018.44 million rials to 1,197.31 million rials. Also, the customer deposits raised by the Bank recorded a growth of 13.3 per cent and increased from 971.59 million rials to 1,101.267 million rials. Further, the Bank performed well on other financial indicators also. The operating income increased by 15.8 per cent from 56.16 million rials to 65.02 million rials. However, the operating expenses also went up at the same time by 12.1 per cent from

21.10 million rials to 23.65 million rials. Overall, the Bank posted a very healthy net profit after tax of 28.06 million rials, an increase of 18.5 per cent over 2008 figure of 23.68 million rials. The Bank has proposed a cash dividend of 15 per cent amounting to 11.09 million rials and bonus share issue of 10 per cent amounting to 73,958,653 shares of 0.100 rial par value each.

UP Total Assets

12.6%

Net Loans and advances to customers

17.6%

Deposits from Customers

13.3%

Total Shareholders’ Equity

9.7%

Operating Income

15.8%

Operating Expense

12.1%

Net profit after Tax

18.5%


F INANCIAL PERFORMANC E

OMAN INTERNATIONAL BANK

MIXED BAG The total income of the Bank reduced marginally from 44.92 million rials to 43.05 million rials

THE DEPOSITS FROM CUSTOMERS SHOT UP A BIT FROM 729.31 MILLION RIALS TO 729.88 MILLION RIALS. THE BANK HAS PROPOSED A CASH DIVIDEND OF 22 PER CENT TO BE DISTRIBUTED IN 2010

O

man International Bank achieved a Net Profit of 21.52 million rials in 2009, down from 29.47 million rials in 2008. The Bank’s Interest Income decreased to 40.23 million rials but as a result of lower interest expense, the Net Interest Income grew from 29.75 million rials to 31.85 million rials. The total income of the Bank reduced marginally from 44.92 million rials to 43.05 million rials. UP Net interest income

31.85 million rials

Total Assets

1,039.33 million rials

Deposits from customers

729.88 million rials

The Bank has proposed a cash dividend of 22% to be distributed in 2010 The loans and advances went down marginally from 626.78 million to 614.61 million rials. However, the total assets of the Bank increased slightly from 1,018.19 million rials to 1,039.33 million rials.

DOWN

Net Profit

21.52 million rials

Total Income

43.05 million rials

Loans and Advances

614.61 million rials

26 OER DOSSIER February 2010

The deposits from customers shot up a bit from 729.31 million rials to 729.88 million rials. The Bank has proposed a cash dividend of 22 per cent to be distributed in 2010.


F INANCIAL PERFORMANC E

AHLI BANK

ON THE GROWTH PATH Ahli Bank’s loan book continues to be of high quality as reflected in its NPL ratio

THE BANK’S EARNING PER SHARE (EPS) FOR 2009 HAS RISEN TO 12.6 BAIZAS FROM 8.7 BAIZAS DURING 2008. THE BANK HAS RECOMMENDED 7 PER CENT CASH DIVIDEND AND 5 PER CENT BONUS SHARES

Abdul Aziz Al Balushi CEO, Ahli Bank

A

hli Bank’s customer deposits have grown year over year by 46 per cent in line with its strategy to build a stable low cost deposit base. Asset growth, under the new business model, has been managed with a prudent risk management approach undertaken in view of the prevailing global financial crisis and its implication. The loan book continues to be of a high quality as reflected in its NPL ratio of 0.32 per cent in 2009 (2008:0.19 per cent).

Net Operating Income has increased year over year by over 26 per cent to 17.90 million rials and Operating Expenses (excluding loan impairment charge/recoveries) were controlled at 7.92 million rials resulting in a lower cost to income ratio of 44.3 per cent (2008 : 54 per cent). Overall, the Net Profit after Tax rose by 44 per cent to 8.54 million rials (2008: 5.93 million rials).

The Tier I Capital as at year end 2009 amounted to 83.50 million rials up from 81.21 million rials in 2008 and the Capital Adequacy ratio is at 17.62 per cent (2008 : 23.36 per cent), well above the mandatory 10 per cent minimum requirement of Central Bank of Oman. The Bank’s Earning Per Share (EPS) for 2009 has risen to 12.6 Baizas from 8.7 Baizas during 2008.The bank has recommended 7 per cent cash dividend and 5 per cent bonus shares.

UP Loans and advances

18%

Customer Deposits

46%

Total Assets

35%

Net Operating Income

26%

Profit after Tax

44% OER DOSSIER February 2010 27


V IE WPOINT

Is recovery sustainable? 2010 will be not only a decisive year for the global economy, but in particular for the GCC

T

he powerful cyclical recovery triggered in H2 2009 by unconventional monetary policies and fiscal policy stimuli should continue into Q1 2010. Nonetheless, this economic recovery will peter out in H2 2010. The recovery will only turn into a sustained upswing in 2011, with the support of further fiscal stimulus. This is the conclusion of the latest report on the economic outlook, Global View, published by Bank Sarasin’s Research team for Q1 2010. Given this economic backdrop, Bank Sarasin expects equities, commodities and corporate bonds to post a positive performance in Q1 2010. However, the risk of setbacks will increase as the year progresses. Bank Sarasin therefore does not predict a significant rally in equity markets over the full year and anticipates marked regional differences, particularly in Europe. With companies facing economic uncertainty, skilful stock picking will be crucial for investment success in 2010. Various structural hurdles are blocking a sustainable growth cycle. The reduction of debt in the banking system, a process known as deleveraging, will rein in lending volumes. The mid-term economic outlook is also overshadowed by the need to manage public deficits and restore the trade balances. The pattern of various leading indicators, including the German ZEW Economic Expectations Index, as well as the Consumer Sentiment and Economy Watchers Index in Japan, indicate with a usual six-month lead time the possibility of slowing growth and 28 OER DOSSIER February 2010

Philipp E. Baertschi, Chief Strategist at Bank Sarasin a cyclical relapse as early as H2 2010. This slowdown, which is expected to occur by the end of 2010, will need to be cushioned

by further fiscal stimuli to lay the foundations for a sustainable upswing from 2011 onwards.


Jan Amrit Poser, Head of Research and Chief Economist at Bank Sarasin said: “2010 will determine whether or not the recovery is sustainable. Even though Sarasin confidently expects a positive answer, we are still a long way from seeing a positive economic trend with the power to sustain itself without external assistance. We are convinced that the economy will therefore still need support in the form of monetary and fiscal policy measures. With capacity utilisation so low, deflationary risks will prevail over the next two years.” Philipp E. Baertschi, Chief Strategist at Bank Sarasin added, “We expect a good first quarter, so are starting 2010 overweight in equities. But the stock market rally is likely to run out of steam quite quickly. We prefer shares in companies from industrialised nations which have a strong presence in emerging markets. In our stock selection we focus on well-capitalised blue chips that offer a high dividend yield and higher than average growth. Bonds offer only limited opportunities for returns because of low interest rates, although they will become more attractive over the course of the year.”

Low interest rate policies With the economy likely to slow down in Q2 2010, central banks should maintain expansionary monetary policies through existing interest rates. The rise in long-term interest rates will only be temporary and rates should fall back below the current annualised level by the end of the year. This suggests a switch from short- to long-duration bonds. In 2009, the correction of the credit market anomalies caused by the collapse of Lehman Brothers was the main driver for the corporate bond market. Now that the credit market is stabilising, the focus is shifting back to fundamental data such as expected default rates. As the economy recovers, credit conditions become less restrictive, and corporate earnings improve, Bank Sarasin expects the default rate to ease slightly. This decline promises some upside potential for corporate bonds in the first half of the year. Based on positive corporate profits and generous liquidity combined with lower interest rates, stock markets should also rally in the short

term. This is likely to tail off again from the second quarter onwards. There will be no dominant trend during 2010. It is therefore important to review asset allocation continuously in a critical light. In their regional and sector allocation, equity investors should take a defensive stance and avoid high individual risks.

jump, which in terms of GDP growth could partly offset the first effect. Macro and micro risks within GCC may dampen investor’s risk appetite for the region in 2010. Sarasin is cautious for emerging markets as a whole and think that the potential for stock markets in the GCC region is limited.

GCC: on the consolidation path While the year 2008 conveyed the impression that there is no limit to GCC growth thanks to surging oil prices and GCC’s ambitious efforts to diversify from oil, the year 2009 brought two heavy dampeners for the region. First oil prices temporarily fell to 35$ per barrel (down from 145$ in mid-2008) and secondly Dubai World, the most prestigious project in the region, appeared to nearly default. 2010 will be not only a decisive year for the global economy, but in particular for the GCC. Though Sarasin’s outlook for Dubai is on the cautious side it is more optimistic for the region as whole. One has to keep in mind that Dubai only adds 10 per cent to GCC’s gross domestic product, while the lion’s share of around 45 per cent comes from Saudi-Arabia. The major driver for GCC GDP growth remains the evolution of the oil price. Sarasin expects oil prices to overshoot Sarasin’s estimated medium-term price band of 75$ to 85$ per barrel in the first half of the year as the current global recovery fuels demand for oil. However, in the second half of the year Sarasin sees oil prices dropping slightly below the mentioned price band due to the global cooling towards the end of 2010. This in turn bodes well for the region in 1H10, but points to a slight downturn in 2H10. While the GCC itself benefits from a stable political environment we have to keep in mind that it is surrounded by geopolitical hot spots. While it is nearly impossible to forecast the eruption of one of these hot spots, Sarasin analysts predict that in such a case, the impact on the region will be limited. On the hand, Sarasin would expect some capital outflows due to a rise in risk aversion, on the other hand oil prices could

The heavy weighting of the financial sector is a clear negative for the region. However, a consolidation for equity markets in 2010 may set the stage for a more broad based and sustainable recovery in 2011.

India: a bright 2010 India weathered the deepest global recession since 1929 surprisingly well. GDP growth is expected to advance by a healthy 7.9 per cent in Q3 2009. Strong long-term fundamentals, a robust banking system and fiscal impulses by the government kept the Indian economy on a stable growth trajectory. Furthermore, the receding inflation allowed the Reserve Bank of India (RBI) to cut key rates significantly in the last 12 months, thereby shoring up the Indian economy. The economic prospects for 2010 look bright as well. As traditional markets for consumption goods (US, UK, Spain) are losing importance as households in these economies have to pare consumption in order to restore their budget balances new markets are taking centre stage. India, the economy with the largest population, is in a pole position. This is likely to fuel net capital inflow this year despite a possible global downturn in the second half of this year. The inflow of capital in turn should propel fixed capital investment. Low interest rates are also likely to help consumption. With consumption and investment in good shape, domestic demand is expected to be the major driver of Indian GDP growth in 2010. According to Sarasin, net exports is an area of concern for India. With a cooling of the global economy towards the end of the year and the Indian economy growing, Sarasin expects net exports to deteriorate significantly and to exert a drag on India’s GDP growth. OER DOSSIER February 2010 29


V IE WPOINT

Robust domestic demand in combination with a further increase in commodity prices in the first of half of this year, which will translate into higher prices for food and oil, are likely to lead to a rebound in wholesale price inflation in the course of 2010. However, as the slowdown of the global economy will also drag commodity prices down in 2010 inflationary dangers in India are clearly limited. Healthy GDP growth and a rebound in inflation will force the RBI to tighten its monetary policy in the course of 2010. According to Sarasin, a sharp tightening is not expected, however, as the global downturn towards the end of 2010 will bring (at least for the RBI) a welcomed cooling of economic activity and prevent India’s economy from overheating in 2011.

Caution advised for emerging markets Given the likelihood of a mixed and by and large not particularly dynamic share performance, Bank Sarasin believes that regional differences will become more important in 2010. Average earnings growth in excess

of 30 per cent seems possible for the overall market in Europe. Sarasin’s forecast here is significantly higher than the market consensus. European shares are looking increasingly attractive to international investors because the euro is expected to depreciate. In the US market, Sarasin favours exportdriven companies who generate a large portion of their sales in emerging markets. Although global investors are still enthusiastic about emerging markets – despite or perhaps because of their strong performance in 2009 – they have the biggest potential for a setback according to Sarasin. There are already signs that the upturn in the manufacturing industry is gradually fizzling out in China and India. The relative performance of emerging markets is therefore likely to falter significantly. At the same time, however, a significant setback could present the ideal opportunity for re-entering emerging markets. Sarasin favours markets with a significant exposure to commodities – especially Brazil. Demand for energy sources will continue to drive earnings forecasts upwards. Sarasin is taking

a cautious stance towards Asian emerging markets in 2010.

Investors favour blue chips 2010 will be a difficult year for companies. They will need to find further cost savings. Bank Sarasin sees very little evidence to suggest that repeating the cyclical sector allocation would be a promising bet. Skilful stock picking will therefore be crucial for investment success in 2010. The bank identifies the following criteria for success: large cap companies with attractive returns in the form of dividends and/ or share buy-back programmes, companies with attractive valuation ratios and realistic earnings forecasts, and firms focusing on products and services in sectors that are currently prospering. Infrastructure projects, energy efficiency and ecology, meeting new safety requirements, efficiency improvements through technology, and service and maintenance will be the prominent themes of 2010. This means that companies in cyclical sectors, where caution is advised from the macroeconomic perspective, should outperform the market.

Focus on skilful stock picking In its global sector allocation, Bank Sarasin’s favourites include the Consumer Staples sector, where demand is very steady, Industrials, where specific thematic drivers are creating demand for new products, and Energy and Technology. The Bank has a neutral weighting in Healthcare, Commodities and Basic Materials, Telecoms and Utilities. Bank Sarasin thinks that Consumer Discretionary will be one of the losers in 2010. Equally unattractive is the Financial Industry which, as highlighted by recent events in Dubai, suffers from persisting uncertainties and is likely to underperform. While Bank Sarasin advises underweighting banks in a global portfolio, the climate for insurance companies looks more positive and they should therefore be given a neutral positioning versus the benchmark. Based on Bank SarasinÕs Global View report

30 OER DOSSIER February 2010


V IE WPOINT

Fees and deals plummet Sovereign, government-related and investment grade corporate issues dominated the Middle East debt capital markets which soared in 2009 to $38.3 billion There has been a dramatic decline in fees and deal activity according to an analysis of the 2009 performance of the Middle East investment banking industry by Thomson Reuters. At the height of the 2007 boom, Middle East mergers and acquisitions exceeded $40 billion. In 2009, they fell to less than $13 billion. The Middle East equity capital markets, peaking in 2008 at more than $36 billion, plummeted to only $6.89 billion in 2009. Overall fees of $599 million paid to investment bankers and advisers in 2009 almost halved compared with 2008.

mergers and acquisition fee ranking with $27.3 million and Calyon topped the syndicated loan fee ranking with $11.3 million.

Sovereign, government-related and investment grade corporate issues dominated the Middle East debt

“These have undoubtedly been tough times worldwide with the investment banking business feeling the effects,” said Basil Moftah, Managing Director of Thomson Reuters, Middle East and Africa. “The Middle East investment banking industry saw its fair share of pressure in 2009 and will be looking now for a period of consolidation.” Thomson Reuters’ fourth quarter 2009 review of the Middle East investment banking industry covers the region’s debt and equity capital markets, both conventional and Islamic. With the close of 2009, the analysis showed HSBC holding the top spot in Middle Eastern debt and equity capital markets’ fee rankings with $13.4 million and $8.1 million respectively. Credit Suisse came first in the 32 OER DOSSIER February 2010

capital markets which soared in 2009 to $38.3 billion and were the one bright spot for investment banker fees In mergers and acquisitions with any Middle Eastern involvement, Morgan Stanley topped the rankings, advising on deals worth $16.3 billion. Rothschild came second with $15.42 billion. The top Middle Eastern targeted M&A deal for 2009 was an equity carve-out transaction in which the government of Iran planned to divest its 50 per

cent interest, plus one share, in Iran Telecommunications to the public for $7.7 billion. The top Middle Eastern acquisition of the year at $9.5 billion was Qatar Investment Authorities’ acquisition of an increased stake in Volkswagen. In much-reduced equity issuance, the top three spots in terms of deal activity were taken by Riyadh Bank, HSBC and Qatar National Bank respectively. The largest equity issue of the year was the Gulf Bank follow-on deal worth $1.3 billion. Sovereign, government-related and investment grade corporate issues dominated the Middle East debt capital markets which soared in 2009 to $38.3 billion and were the one bright spot for investment banker fees, which increased compared with 2008. But in the Islamic sector, debt issuance of 38 issues worth $14 billion represented a fall of 44 per cent over the previous year. Top Islamic issuer was Malaysia with 31.2 per cent of activity, with the United Arab Emirates second with 27.2 per cent. Goldman Sachs with five issues worth $3.55 billion topped the overall Middle East debt rankings, while HSBC headed the Islamic financed bond ranking for the year with nine issues worth $1.88 billion. With loan activity falling dramatically by more than 80 per cent, Middle Eastern issuers and borrowers managed to raise a total of only $17 bil-


lion. In the overall Middle East loan ranking, Standard Chartered topped the league with eight deals worth a total of $1.91 billion. Al Rajhi Banking and Investment Corporation, Calyon and Banque Saudi Fransi, all ranked first in the Islamic loan ranking with $833.3

million each, due to their work as book runners on the top Islamic loan of 2009 – the Zain Group loan of $2.5 billion. Islamic financed loan activity reached only $5.4 billion in 2009, with Bahrain accounting for 46 per cent of issues and the UAE second with

Highlights:

• Investment banker and adviser fees at $599 million - down 46%

• Mergers and acquisitions stood at $12.7 billion - down 40%

• Equity issues dropped to $6.89 billion – down 81%

• Loans fell to $17.1 billion - down 81.5%

• Debt issues rose to $38.3 billion – up 151%

38.5 per cent of activity. A detailed breakdown of the Middle East investment banking fee rankings showed HSBC rising from third place last year to first place in 2009 for debt capital markets. Samba Financial were second, with Citi third. Credit Suisse jumped from seventh last year to first in M&A fees in 2009. Morgan Stanley came second followed by Goldman Sachs. Similarly in the equity capital markets’ fee rankings, HSBC rose from third place in 2008 to first in 2009, followed by Riyadh Bank and Citi. In the syndicated loan fee league table, Calyon rose from seventh last year to first in 2009, with Standard Chartered and Mitsubishi UFJ Financial second and third. Looking ahead, Moftah said: “As we begin a new year, the road may remain bumpy for a while. For a sustainable return to growth we need to see an increase in investment banking activity with a revival in mergers and acquisitions as well as renewed interest in both initial public offerings and bond issues.” Source: Thomson Reuters Deals Intelligence Middle Eastern Investment Banking Analysis OER DOSSIER February 2010 33


PROJECT FINANCE

Pragmatic Approach Local banks have done considerable financing for large projects in the Sultanate in the infrastructure and oil sector and have played a major role in attracting banks from abroad to invest in these large projects

O

ver the past five years, project financing has been on the rise in Oman as well as the rest of GCC. The reason lies in the government’s thrust on infrastructural development and the supportive role played by local and foreign commercial banks, and specialized banks. The Central Bank of Oman (CBO) plays a pivotal role in the entire process. Though the global financial and credit crunch has an important bearing on the global project financing market, the Gulf and the Sultanate in particular, remained relatively unaffected due to the Sultanate’s level-headed approach to economic growth. Banks in Oman were well capitalized to brave the economic downturn and the credit goes to CBO for ensuring compli34 OER DOSSIER February 2010

ance with stringent measures at this point of time.

areas for investment being infrastructure, oil and gas, large scale industry and shipping and aviation.

Extending a helping hand Later, to ensure greater flexibility for banks in their credit deployment, the CBO in Oman not only reduced the reserve requirements for banks, it also eased the lending ratio limitation for banks from 85 per cent to 87.5 per cent with effect from January 2009. The credit growth in recent times is suggestive of the fact that banks are not wary about corporate lending, as the growth of the economy is sure to ride piggy-back on this lending exercise. Projects of national importance in construction, manufacturing, hospitality and service sectors are mainly considered for funding, the most crucial

Major projects of national importance like Sohar Port project and the Salalah power project with large funding requirements evoked good response from banks and financial institutions. The development of Duqm Port and the expansion of Muscat International Airport have also generated interest among bankers and funding agencies. Oman Arab Bank (OAB), BankMuscat, NBO, Bank Sohar, BankDhofar, Ahli Bank, OIB and a few others play active role in Oman’s project financing market in funding various government-sponsored as well as private-sponsored projects.


As global markets are gradually emerging out of the crisis of 2008/2009 economic downturn, banks in Oman are now gearing up in altering their terms and condition for financing projects to suit the current market environment. At this juncture, banks, in general maintain a flexible stance for projects, offering longer tenure of repayments. Banks play the role of an advisor and support these projects in various stages in different capacity during the lifecycle of the project. The local banks have one obvious advantage over their international counterparts. They have a better understanding of local environment, laws and regulations and other critical aspects of the market. With the largest underwriting capacity amongst the local banks as well as strong corporate relationships in the region, BankMuscat does considerable value addition to projects through long-term project financing.

Snapshot of some of the projects financed by banks recently Bank Sohar: Steady approach X

Sohar Port Special Projects – Development of marine infrastructure

X

Sembcorp Salalah Power and Water Company SAOC (Salalah IWPP) -- Gasfired Greenfield power generation (430 MW) and seawater desalination plant in Salalah.

X

Oiltanking Odfjell Terminals Oman LLC – Construction of storage tanks in Port of Sohar

X

Sohar Aluminium SAOC – Greenfield Aluminium Smelter project with associated power generation facility in Sohar

X

Larsen & Toubro Heavy Engineering – Sole Bankers to Global sized fabrication unit for local and re-export market.

National Bank of Oman: Primary focus

Apart from commercial term loans, the local banks also provide working capital facilities, needed for post-commercial operation. This multi-layered participation in projects puts the banks in a pre-eminent position in project financing in the Sultanate. All the banks have a dedicated project finance desk with experienced staff to operate in this niche segment.

X

However, in this situation, not all banks have modified their terms and conditions. An OAB spokesperson says: “Our bank has made no major changes in overall policy to suit the current market environment and continues with a conservative lending policy to which we owe our growth and success.”

BankMuscat: Multi-layered participation

the project which is to construct marine infrastructure in the port for exclusive use by Vale of Brazil which is putting up a iron ore pelletisation and distribution facility in the Sohar Freezone. X

Three major projects in power and petrochemical sectors: These financings are expected to fructify in the early part of 2010.

Oman Shipping Company’s Very Large Crude Carriers (125 million rials) -Acquisition financing as a sole lender. X

Salalah IWPP (100 mn rials term loan) --- as a mandated lead arranger, onshore account bank.

X Stringent Measures Though banks are altering their terms and condition for financing projects to suit the current market environment, the very process for evaluation of projects has become stringent now. The importance of the project for the national economy, the technical expertise of the promoters and the financial viability of the project from a long term perspective are the criteria to judge the strength of a project proposal. The evaluation also considers the underlying cash flow of the project or financial returns as a means for repayment of the

The Sohar Port project: NBO a major lender and Security Agent for

Sohar Port Special Projects (76 million rials term loan) - As a financial adviser and then as mandated lead arranger, facility agent and account bank.

OAB: Sustainable performance X

Sohar Power Company

X

Sohar Refinery

X

Barka Power Plant

X

Oman Shipping (vessels),

X

Al Sharqiyah Water projects,

X

SIPC- jetty project

X

Barr Al Jissah Resort

X

Duqm Port

X

Sohar Aluminum

X

X

Oman Methanol

Expansion of Muscat International Airport

OER DOSSIER February 2010 35


PROJECT FINANCE

loan. Needless to say, the creditworthiness of the sponsor or promoter is of utmost importance. The other key areas evaluated from risk management perspective are: commercial and environmental viability of technology transfer, offtake arrangements, generation of jobs, criticality of the project viewed from the import substitute angle to preserve Sultanate’s the foreign exchange. The key risk related to the industrial project financing, however, lies in delay in project completion, cost overruns, performance short fall at completion, etc. To guard against risks, commercial banks may not deviate from the basic criteria of evaluation unless it gets considerable support from established promoters and government for mitigation of project risks, particularly in green field areas of national interest.

Hard Times Given that the real estate sector came under pressure during this time, there were no major launches of real estate projects during the first three quarters of 2009 and therefore hardly any new real estate projects were financed by the local banks. The year 2009 saw slower activity in this sector due to the general global sentiment. When it came to real estate and construction, due to asset price deflation, banks have reacted swiftly by curtailing credit growth and reducing loan to value (LTV) proportion to 60-70 per cent which was earlier above 80 per cent. Most of the banks are experiencing a slowdown in credit offtake as borrowers are affected due to market circumstances and are reviewing their debt raising and funding plans. Banks are also treading cautious path and the number of new projects has also plunged.“But viable projects will continue to be financed as we have seen recently with some projects reaching financial closure in the last quarter of 2009,” assures a BankMuscat official.

banking resources are roped in for projects where stakes and financial requirements are high. “Most of the nationally important projects seek funding in US Dollar to hedge their currency risk and for better pricing. These funding requirements are requested for long tenor,” says Dr Mohamed Abdulaziz Kalmoor, CEO, Bank Sohar. Last year, CBO has stepped in to give a US dollar line up to 50 per cent of the networth of Bank Sohar, when the foreign banks withdrew the same due to global economy facing a downturn. It needs to be mentioned here that it has been a very daunting task for banks to provide long term dollar-based financing for major infrastructure projects like power and water, the dollar resource in the region being anticipated to be lean in the

play an active role

Locally, tie-up is happening between private and the national bank. The government’s main goal is that the private sector play an active role in spurring growth in Oman’s economy. Therefore national bank and private banks joint ventures play a major role in boosting the economy by making credit available in the form of project financing. In current circumstances, many feel, project financing in local currency is likely to be more preferable. As a major bank in the country, BankMuscat is successfully closing for the first time a long-term RO project financing.

in spurring growth

Going strong

The government’s main goal is that the private sector

in Oman’s economy coming months.”The recent events triggered by property and asset valuation problems in Dubai may affect the sentiment among foreign institutions in the short term but the impact, if any, cannot be quantified at this stage,” says an NBO official.

Power of partnership

To create a balance, Oman’s upcoming projects, therefore, is likely to have a blend of Omani rials and US dollar funding. There are possibilities for big ticket project financing in Oman from EXIM, the World Bank, the Arab Development Bank, financial institutions and bi-lateral aid programs of other GCC members and some European and Japanese development organizations.

Local banks have done considerable financing for large projects in the Sultanate in the infrastructure and oil sector and have played a major role in attracting banks from abroad to invest in these large projects. International

The banks in GCC often approach banks in Oman, which has an excellent brand image in the region, to give lead for participation in Omani based companies. Oman’s economic

36 OER DOSSIER February 2010

situation is perceived to be quite stable and conducive for GCC companies. Omani banks also receive some reciprocal offers from these banks to participate in government associated companies in GCC. Such an arrangement mitigates the exposure of concentrated risks, apart from benefiting the clients by getting cheaper resources of funds from overseas banks. Oman government is following the privatization path decisively to encourage foreign investors to generate surplus for domestic project financing and share international technology know-how.

In line with Vision 2020, many infrastructure developments are planned which would boost Oman's economy by bringing in more industrial activities, foreign investments and generating employment. The situation may not be picture perfect, but the effort and the resources that Oman’s banks are deploying for focusing on future projects and for supporting the same together with the government, will bode well for Sultanate’s economy in coming years. Whatever may have been the market opportunities, banks maintained a sustainable performance in 2009, especially in project financing, which is becoming an important source of both fee and interest income for these banks. But there are issues involved that need to be resolved. Project Finance involves long term exposure whereas commercial banks’ major resources are, by way of deposits, mostly at a tenor of two years. Thereby the banks have to take deliberate mis-match in funding, which poses a challenge in their endeavour towards maturity matching of funds.


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P.O. Box 1522, Ruwi, Sulatante of Oman Tel: 2447 7300, Fax: 2447 7323 E-mail: info@omanutd.com

Al Khuwair: 2469 6509 Al Qurum: 2456 2105 Barka: 2565 0105 Darsait: 2470 3990 Ibra: 2557 2386 Nizwa: 2541 0330 Salalah: 2329 5040 Seeb: 2442 1771 Sohar: 2684 1533 Sur: 2554 3229 Suwaiq: 2686 0498


NBF C OV E RVI E W

Under pressure 2009 had been a tough year for the six finance and leasing companies in Oman

T

here are currently six finance and leasing companies operating under the license of the Central Bank of Oman. They mainly operate in three market segments, namely, retail financing, where the financing is to individual customers for purchasing automotive and electronic goods; equipment leasing, where the financing is to small and medium enterprises (SMEs) for expansion, modernization and replacement requirements; and factoring and working capital financing to SMEs for domestic as well as cross-border trade or for the execution of projects, usually against assignment of receivables.

Historical Perspective The retail vehicle financing industry continues to be the most competitive segment of the market. The SME equipment finance market also witnessed significant growth and strong business confidence. FLCs continued to pursue their geographic expansion plans with the number of branches increasing to 33 in 2008 from 31 in the previous year. Total combined assets of finance and leasing companies increased to 577.1 million rials in 2008 from 413.8 million rials in 2007, constituting a rise of 39.5 per cent. The continued government thrust on economic diversification and development of infrastructure to meet the needs of industrialization, tourism, commercial projects etc. opened up opportunities for diversified growth and further credit outlays. Total outstanding credit (net of provisions) extended in the form of hire purchase, lease financing and factoring rose by 40.3 per cent, from 398.2 million rials in 2007 to 558.5 million rials in 2008. Further, the overall performance of FLCs improved in 2008 with profits and asset qual38 OER DOSSIER February 2010


Al Omaniya Financial Services (Rial thousand) Total Assets

2009

2008

116,861

123,584

Net leased assets

114,518

119,001

Total Revenue

12,472

11,700

Profit after Tax

3,675

3,302

Muscat Finance (Rial thousand) 2009

2008

Gross income

8,651

7,427

Total Expenses

5,948

4,867

Net anticipated profit after tax

2,703

2,560

Total assets

77,501

71,056

NaĆ&#x;onal Finance (Rial thousand) 2009

2008

Total Assets

72,150

80,359

Income from financing activities

8,539

7,837

Total Income

5,224

5,166

Net profit

2,321

1,995

Oman ORIX Leasing Company (Rial thousand) 2009

2008

Net investment in leases

62,557

66,735

Net assets

18,031

16,028

Net lease income

3,908

4,457

Net profit for the year

2,003

2,437

Taageer Finance (Rial thousand) 2009

2008

Net Investment in Finance Leases

72,451

71,082

Net Assets

18,823

17,251

Gross Income

8,786

7,583

Net Profit

2,202

2,401

United Finance (Rial thousand) 2009

2008

Total Assets

111,831

160,908

Loans & Advances

104,260

154,854

Total Income

13,758

16,719

Net profit

937

4,478

ity indicators showing significant improvements. Net profit after tax of FLCs amounted to 17.2 million rials in 2008 as against 13.1 million rials in 2007, reflecting an increase of 31.3 per cent. The quality of FLCs loan portfolio also improved during 2008 with gross non performing loans (NPLs) declining to 24.5 million rials or 4.1 per cent of the gross loan portfolio compared to 25.7 million rials or 6 per cent of gross loans in the previous year. Further, the level of loan loss provisioning earmarked for finance and leasing activities stood at 30.8 million in 2008 as against 24.4 million in 2007. On the liabilities side, the FLCs have been steadily increasing their paid up capital primarily through stock dividends and right issues in order to meet the minimum paid up capital requirement of 10 million rials before the end of June 2009 as stipulated by the CBO. The consolidated paid up share capital of all six FLCs amounted to 73.3 million in 2008 as compared to 57.5 million in 2007, up by 15.8 million rials (27.5 per cent). The aggregate capital and reserves as at the end of 2008 increased even faster at 40 per cent, from 87.9 million rials in 2007 to 123.1 million rials as at the end of 2008. The deposit base of the industry also rose from 40.5 million rials in 2007 to 63 million rials in 2008 but was still within the limit within which FLCs are authorized to accept deposits from corporates. It may be noted, however, that while FLCs have sought new avenues for diversifying borrowing portfolios and optimizing interest costs, borrowings from banks and other financial institutions continue to remain the main source of funding for the sector, increasing from 223 million rials in 2007 to 325.8 million rials in 2008. As regards the annual interest rate charged on credit, the weighted average rate of interest charged per annum moderated to 11.1 per cent during 2008 as against 11.4 per cent in 2007. The institutional and regulatory framework of the financing and leasing industry has been strengthened over the past few years with the phased introduction of strengthened capital norms and stricter provisioning requirements. FLCs were mandated in 2008 to raise the minimum paid up capital to 20 million rials before the end of June 2012 with OER DOSSIER February 2010 39


NBF C OV E RVI E W

FLC INDICATORS ΈRIAL MILLIONΉ 2004

2005

2006

2007

2008

Total Assets (Liabilities)

189.0

219.7

277.6

413.8

577.1

Loan/Lease Portfolio (net of provisions and reserve interest)

175.3

201.2

267.3

398.2

558.5

8.7

13.0

2.8

4.7

5.9

19.6

22.1

24.1

24.4

30.8

Cash and bank balances Loan Loss Provisions (net of reserve interest) Loan loss Provisions (net of reserve interest) as % of Gross Financing and Leasing Activities (net of reserve interest)

10.1

9.9

8.3

5.8

5.2

Borrowings from Banks and Financial Institutions

97.7

113.4

115.3

223.0

325.8

Paid Up Capital

39.3

48.0

49.6

57.5

73.3

Capital & Reserves *

57.8

69.9

73.5

87.9

123.1

6.5

7.7

8.6

13.1

17.2

Weighted Average Rate of Interest Charged (% per Annum)

12.0

11.1

11.3

11.4

11.1

Number of Branches (Including Head Office)

24

27

27

31

33

Net Profit After Tax

* Includes proposed cash dividends Source: FLC Annual Reports, 2008

a view to strengthen the financial stability of the industry.

Performance in 2009 It has been a tough year for the six finance and leasing companies in Oman. Sometime back while talking about his concerns for the industry, a senior person from a large finance and leasing firm said: “Low liquidity and high lending rates by banks are a matter of concern to NBFC’s due to the limited availability of non bank sources of funds. The impact of liquidity crunch and slow recovery of the economy could increase the delinquencies resulting in dilution of the NPA coverage and 40 OER DOSSIER February 2010

sharp decline in margins and profitability.” If we take the performance of each of the six players, it has been a year of mixed bag. Al Omaniya Financial Services, the largest in terms of assets in its segment, experienced a contraction of its total assets from 123.58 million rials in 2008 to 116.86 million rials in 2009. The company however managed to increase its total revenue and profit after tax. Taageer Finance registered growth in net assets (9.11per cent) and gross income (15.86 per cent) but its interest expenses went up by 48.26 per cent. The net profit was also hit by

a negative growth. In a recent development, the company has signed a three year management and technical agreement with Arab Leasing, a new company in Sudan. Taageer has committed an investment of 5 per cent in the new firm. Muscat Finance managed to grow its net profits and total assets though its total expenses increased by 22 per cent. On the other hand, Oman Orix Leasing faced a negative growth in its net profits. United Finance was hit hard in 2009. The company’s total assets and net profit suffered badly. National Finance’s total assets shrank by 10.2 per cent but its net profit increased by 16.3 per cent.


E X HIBITION

Interiors & Buildex 2010 Highlighting the Growth of Oman’s Building & Construction Industry

A

large number of companies from within Oman and from other countries worldwide have once again signed up for the next edition of Interiors & Buildex, which will be held on 15-17 March 2010 at the Oman International Exhibition Centre. With still over a month to go before the threeday exhibition, more than 150 companies have already confirmed their participation to showcase their range of products and services, which are now in high demand with the implementation of multimillion-dollar development projects in many parts of the sultanate. Among the major Omani companies that will be taking part include the Al Sulaimi Group, Windows 2000, Dosteen Doors & Engineering Services, Kehlan Trading, Al Anwar Ceramics, Al Turki, OMASCO, Nuhas Oman, and Darwish ast.

In addition to the strong presence of leading local companies, a large number of international firms will also be taking part in the event to take advantage of major opportunities in Oman’s building and construction industry. Leading the list of international participants are the national pavilions of Turkey, Egypt, Italy, UK, and the UAE. Other countries that will be represented at Interiors & Buildex 2010 include Belgium, Germany, India, Jordan, Korea, Lebanon, Malaysia, Malta, and Saudi Arabia. “Now on its 7th edition, Interiors & Buildex has truly become an international trade event with the participation of many local and foreign companies that serve the growing needs of Oman’s building and construction industry,” said Nasser Diab, general manager of Omanexpo LLC, the leading organiser of trade shows in the sultanate. Interiors & Buildex 2010 is officially supported by the Oman Chamber of Commerce 41 OER DOSSIER February 2010

& Industry (OCCI), Oman Society of Contractors, Oman Society of Engineers, UK Trade & Investment, and the Embassy of the Republic of Turkey. For the third straight year, the event is also being supported by Windows 2000 as the platinum sponsor. The gold sponsors are Panorama Windows and Dosteen Doors & Eng. Services, while Darwish AST Services, V-Kool Oman and IQue serve are the silver sponsors. The event’s visitor badge sponsor is Mohammed Riaz & Partner LLC. The media sponsors of the event include Arab Construction World as the official magazine, Construction World as the international offi-

cial magazine, and Al Maskan Magazine, OER Dossier – Construction, Times of Oman and Al Shabiba as the media partners. For stand reservations or for more information, please contact Omanexpo at +968-24660124, or Mr. Abdullah Beg, project manager, at mobile no. +968-95140104 or e-mail abdullah@omanexpo.com.

OER Dossier is the Strategic Media Partner of Interiors & Buildex 2010


S PONS OR ED FEAT URE

NATIONAL BANK OF OMAN

AL KANZ 2010 – 3.6 MN RIALS TO BE WON The overwhelming success of Al Kanz in 2009 has encouraged NBO to improve the existing scheme and to offer its customers even more opportunities to win mega prizes

N

ational Bank of Oman (NBO) has launched the new Al Kanz Savings Scheme for 2010. The new savings scheme offers total prize money of 3.6 million rials in a span of 12 months. The Sultanate’s most popular scheme, Al Kanz, has been spreading cheer amongst thousands of families, since it was launched last year, with the offer of a half a million rials, which was the biggest prize money in Oman in 2009. It has also helped many families during the recent harsh economic times to transform their lives. During the final quarter of 2009, the Bank commissioned an in depth customer research survey, across the Sultanate, to better understand what Omani residents were looking for from a prize linked savings account. Based on the market feedback, the new proposition is structured to appeal to all income segments in the country with the following prize structure: David Power, General Manager and Chief Retail Banking Officer, NBO

10 weekly prizes of 1000 rials each with two winners per region guaranteed; thereby ensuring that the customers in every region have an equal chance of winning irrespective of where they live.

• Two additional prizes of 50,000 rials every month.

• •

Grand prizes every quarter that keep doubling every quarter. These start from 200,000 rials in the first quarter going up to 600,000 rials in the third quarter. Come December, the scheme culminates with one million rials of prize money that will be distributed equally to four winners.

42 OER DOSSIER February 2010

The most unique feature of the new Al Kanz Scheme is the popular Loyalty Programme. This feature gives every Al Kanz customer more chances of winning for every month they stay in the scheme. For example, a customer who deposits 1000 rials in month one will have 10 chances of winning the monthly prize in that month, 20 in the next month, 30 in the next, going up to 60 chances for the December Mega Prize. David Power, NBO’s General Manager and Chief Retail Banking Officer said:“The response to our unique and successful Al Kanz Savings Scheme during 2009 was fantastic and way beyond our best expectations. The Al Kanz

2010 scheme is even more powerful than last year and we are confident that our customers will be even more enthused to increase their savings with Al Kanz 2010. Our intent is to continue to provide customers with the opportunity to transform their lives and we believe that the 2010 scheme will reach out to an even wider cross section of the community and continue to touch the lives of many. We are also pleased to announce that the scheme has been designed after an exhaustive customer research process which has incorporated all of our client’s suggestions”.

Contact: Tel- 80077077 www.nbo.co.om


S PONS OR ED FEAT URE

THE COLLEGE OF BANKING AND FINANCIAL STUDIES

IN SEARCH OF EXCELLENCE The Annual Training Plan of the College for 2009-10 envisages conducting about 100 courses for the banking and financial sector

H

Sciences, Jordan, for offering specialized training and Executive Development programs suitable for all sectors.

uman capital is the key element in banking and financial sector. There is a strong demand for academic and training courses to meet the emerging developmental needs of the Sultanate in the financial services industry. The College of Banking and Financial Studies (CBFS), a government organization established by a Royal Decree in 1983, is here to fulfil that requirement. With the chief objectives of education, training and encouraging research in banking and financial subjects, CBFS is under the jurisdictional supervision of the Central Bank of Oman (CBO) and is supported by all banks operating in the Sultanate. The College has been an active partner in the country’s thrust towards Omanization of the banking sector. The College presently has about 1600 students pursing various courses in English Language Centre, professional and graduate studies and post graduate studies. Academic and Professional Affiliations:

• Strathclyde University, UK (MBA) University of Bradford, UK (Bachelor in • Accounting & Finance and in Business & Management)

• ACCA, UK (CAT and ACCA) CSI, Canada (Associate, Institute of Cana• dian Bankers) • IIA, USA (Certified Internal Auditor)

In addition, the College sponsors the following professional bodies in their initiatives to develop professionals in Oman in their respective areas through periodical seminars/workshops. ISACA (Information Systems Audit and • Control Association), Muscat Chapter

Dr Ashraf Nabhan Al Nabhani, Dean, CBFS

Edexcel, UK (Higher National Diplomas in • Business, Computing and Management) CIMA, UK (Management • Certificate).

Accountants

Corporate Training Another focal area of the College is corporate training. The Annual Training Plan of the College for 2009-10 envisages conducting about 100 courses for the banking and financial sector, covering a wide variety of topics in functional and managerial (soft) skills. For the first time, the training plan also includes courses on insurance for the benefit of banks and insurance companies in Oman. These courses are designed and delivered by faculty with immense operational and training experience across various regions/ markets. The College has also tied up with Queens School of Business, Canada and the Arab Academy of Banking and Financial

(Institute of Chartered Accountants • ofICAIIndia), Muscat Chapter IIA (Institute of Internal Auditors), Muscat • Chapter All the activities of the College are operated from its well-equipped campus at Bausher, which houses over 38 classrooms and seminar halls, four computer labs with Internet connectivity, wi-fi facility, a well stocked library with over 10,000 books, periodicals and subscriptions to online search engines, and a multipurpose hall, atrium and a cafeteria. According to Dr. Ashraf Nabhan Al Nabhani, Dean, CBFS, the College is committed to partnering with the banking and financial sectors and is looking forward to engaging more in supporting their human development strategies for an ever changing operating environment.

Contact details: Tel: 2450 2288/ 2450 5843 Ext.104 Email: Fairouz@cbfs.edu.om Website: www.cbfs.edu.om OER DOSSIER February 2010 43


S PONS OR ED FEAT URE

TAAGEER FINANCE COMPANY, SAOG

CONSISTENT GROWTH Since 2001, Tageer Finance has shown a steady growth in its asset base, income and profitability Q. What is your product portfolio? At Taageer Finance Company, we believe in offering a wide array of products to suit the needs of various customer segments. More broadly speaking, the products offered by us are Retail Financing for finance of vehicles, Corporate Financing for finance of heavy equipments, Al Hal Financing which are basically consumer loans, Working Capital, Factoring, Bill Discounting etc. Our clients include individual, SME and Corporate segments. Taageer caters to the ever increasing needs of the business segment / consumers thereby playing an active role in contributing to the socio-economic development of the Sultanate of Oman by offering the following products :

Auto Finance for passenger cars, commercial vehicles (Prime movers, trucks, trailers & pickups, etc.)

• Home appliances, furniture, computer • and other electronic items Heavy Plant & machinery • (dozers,Equipment, shovels, cranes, crushers, etc.) Capital through Debt Factoring • Working / Bill Discounting of receivables. • Corporate Deposits. Industrial Equipment and Machinery

What are your specializations? Taageer offers the following specialized financial products:

• “Al-Tayeb” Structured Finance. Hal” Consumer Loans for financing of • “Alhome appliances, furniture, computers and other electronic items.

• “Al Sahal” Insurance. 44 OER DOSSIER February 2010

Sanjeev Kumar Chadha, Chief Executive Officer Mohammed A. Al Kharusi, Chief Operating Officer What are the features that set you apart from other players in the industry? Taageer Finance Company offers schemes that are tailored to suit the requirements of various customer segments. We have five branches which are strategically spread across the Sultanate of Oman providing a greater reach for our customers. Taageer is the first NBFC and market leader in "Al-Tayeb" Structured Financing in the Sultanate of Oman. What growth have you achieved since establishment? Taageer is a non-banking finance company operating in Oman, licensed by the Central Bank of Oman in 2000, underwrote its first lease in September 2001. Since then shown a steady and consistent growth in its asset base, income and profitability. The Company currently has a book size of USD 200 million as on 31st December 2009.

Resources : The Company has available credit lines to meet its business commitments as per the

budgeted projections and is continuously working on sourcing new credit lines and Corporate Deposits to optimize the cost of funds.

Convertible Bonds : In line with requirements of the Central Bank of Oman to increase the paid-up capital to RO 20 million, Taageer came up with the issue of RO 5 million unsecured compulsory convertible bonds on rights basis, which was subscribed for RO 4.316 million, with conversion due in June 2010.

Strategic Tie-up A new “Non Banking Finance Company” has been set up in Sudan along with The Arab Investment Company (TAIC), and Taageer is offering advisory services and investment of upto 5% of the capital of the new leasing company.

Contact: Tel: (968) 24839806 Website: www.taageer.com


Insurance Sector

Minimal Impact The impact of the global financial crisis on Oman’s Insurance market is negligible


INS U R A NCE OVERVI E W

Protected from risks around 10 per cent of premiums. Their markets are however growing at a quicker pace.

Insurance in Oman The insurance market in Oman is regulated by Capital Market Authority (CMA). The industry has achieved remarkable progress in the regulatory supervision through the application of international standards and continued enhancement of legislative infrastructure and building institutional capabilities of the sector, diversification of the services provided to the participants of the sector, easing the processes and upgrading the skills and efficiency of the employees. According to ‘Insurance Market Review’ published by CMA in 2009, the impact of the global financial crisis on Oman’s insurance market has been minimal and far less than the financial markets, banking and real estate sectors because insurance companies have diversified investments. The companies maintained their solvency that enabled them to continue their business without any exposure to the credit crunch.

The impact of the global financial crisis on Oman’s insurance market has been minimal Global insurance premiums grew by 3.4 per cent in 2008 to reach $4.3 trillion. For the first time in the past three decades, premium income declined in inflation-adjusted terms, with non-life premiums falling by 0.8 per cent and life premiums falling by 3.5 per cent. The insurance industry is exposed to the global economic downturn on the assets side by the decline in returns on investments and on the liabilities side by a rise in claims. So far the extent of losses on both sides has been limited although investment returns fell sharply following the bankruptcy of Lehman Brothers and bailout of AIG in September 2008. The financial crisis has shown that the insurance sector is sufficiently capitalised. The vast 46 OER DOSSIER February 2010

majority of insurance companies had enough capital to absorb losses and only a small number turned to government for support. Advanced economies account for the bulk of global insurance. With premium income of $1,753 billion, Europe was the most important region in 2008, followed by North America $1,346 billion and Asia $933 billion. The top four countries generated more than a half of premiums. The US and Japan alone accounted for 40 per cent of world insurance, much higher than their 7 per cent share of the global population. Emerging markets accounted for over 85 per cent of the world’s population but generated only

Total gross direct insurance premium increased in 2008 to 212 million rials compared to 168 million rials in 2007. The figure was pegged at 184 million rials towards the end of the third quarter of 2009 and the total 2009 figure is expected to be much higher than 2008 figure. Total assets of insurance companies hiked up in 2008 by 18% to 423 million rials and investments of over 251 million rials. To boost the insurance services provided by insurance companies and to enhance competition which would lead to the provision of better insurance services and benefits, the number of insurance companies increased to 23 companies comprising 11 national and 12 foreign insurance companies, according to the CMA report. Despite a good progress made by the sector, there is a need of mass awareness of the necessity of insurance and insurance products in Oman.


DATA MONI TOR - I NSUR ANC E

All Figures in Rials

Source: CMA OER DOSSIER February 2010 47


DATA M ONI TOR - I NSUR ANC E

All Figures in Rials

Source: CMA

48 OER DOSSIER February 2010


DATA MONI TOR - I NSUR ANC E

All Figures in Rials

Source: CMA

For Advertising in OER Dossier Please Contact : ShivKumar Gaitonde GSM - +968 9926 7159 OER DOSSIER February 2010 49


G U E S T COLUMN

Insurance – A Growing Industry A growing industry indeed but has its own complexities making it harder to earn decent returns to investors

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he Insurance sector has been steadily growing in the Sultanate. Total assets of Insurance companies have grown from 175 million rials in the year 2004 to 424 million rials in the year 2008. Gross premium increased from 102 million rials to 208 million rials during the same period. The industry provides employment to 1600 people of whom about 1000 are Omani nationals. These figures do not include employees of agencies of Insurance companies and insurance advisors employed by various companies. Considering these total number should reach to about 1700. Insurers paid claims amount to 491 million rials in the five years commencing from 2004. Claim payout was particularly high during the years 2007 and 2008 due to widespread damages caused by Tropical Cyclone Gonu that hit the Sultanate on 6th June 2007.

Walter Pereira, MD, Prudent Loss Adjusters

Classwise Premium Growth 100 90

50 OER DOSSIER February 2010

Million Rials

80 Motor is the highest premium earner as compared to other classes of business. Gross motor premium for 2007 and 2008 amounted to 154 million rials. Claims paid during this period was 142 million rials. After considering costs and expenses, Insurers suffered a loss of 27 million rials. In the year 2007 out of 13 companies writing motor business 11 suffered losses. In the year 2008 out of 15 companies writing motor business 11 suffered losses. There is no much reinsurance support for this class of business and hence losses hit the bottom lines of insur-

70 60 50 40 30 20 10 0

2004

2005

Life

Property

2006

Miscellaneous

2007

Motor

2008

Marine


ance companies operating in Oman directly. Results for 2009 are expected to be equally damning and this will result in hardening of premium rates in the year 2010.

Number of Employees 1200 1000

Property insurance premiums for 2007 and 2008 was 63 million rials; claims paid amounted to 130 million rials. After considering costs and expenses loss sustained by companies operating in the Sultanate worked out to 57 million rials. Bottom lines of those companies who have high retention capacities were hurt badly during this period. Tropical cyclone Gonu inundated this class of business. Favorable results are expected in the year 2009.

800 600 400 200 0 2004

Marine and Miscellaneous classes of business has been profitable during the year 2007 and 2008. However profits earned in these classes is 9 million rials, miniscule compared to the losses sustained in Motor and Property classes.

2005

2006

Omani

2007

2008

Expeatriate

Premiums in all classes of Insurance during 2007

Life insurance sector has shown steady and decent returns to Insurers. Premiums have grown from 17 million rials in 2004 to 41 million rials in the year 2008. There has been a consistent profit since the year 2005. In the year 2009 the industry attracted three new entrants. There is severe competition in the market due to which insurers are finding it difficult to earn underwriting profits. Insurers cannot depend on investment income as past experience has proved that such income is not steady. Insurers have to revert to generating healthy profits from their core activity. Insurance companies are neither charitable institutions nor companies incorporated by Government to provide subsidy. These are business organizations established to earn profits by the investors and sooner or later the investors will pressurize the managements to earn returns on their investments. This is likely to bring about hardening of premium rates and imposition of stricter terms especially on motor and property classes.

Marine

Motor

Property

Others

Life

Premiums in all classes of Insurance during 2008

Marine

Motor

Property

Others

Life

OER DOSSIER February 2010 51


S PONS OR ED FEATURE

RSA INSURANCE COMPANY

STEADY GROWTH One of the leading non-life players in the world and also in Middle East, RSA’s big portfolios are property, marine, motor and construction engineering insurances

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At RSA, employees, Omanis and expatriates are motivated to learn and develop, and give their best to the customers. Its reputation to ensure prompt and efficient claims settlement along with an experienced and efficient teamwork make RSA ‘the most preferred insurer’ in Oman. RSA’s rating by global credit rating company Standard & Poor’s has been raised to an ‘A’ (A stable) from a previous rating of ‘A’ which is a clear indication of the vertical mobility of RSA.

uite interestingly, the history of Royal & Sun Alliance Insurance Company dates back to early 18th century with modest beginnings in London’s coffee shops. This company today is rebranded as RSA. In keeping with the changing times, this shift was necessary to develop a new brand strategy for supporting the company’s growth plans. RSA now has over 20 million customers across the globe, operating across the world in about 130-odd countries. In Oman, RSA had a branch office since 1972. In 2004 a new joint venture company, RSA Oman was instituted. With a 67 per cent stake RSA is the majority shareholder, while the remaining lies with leading business houses including W. J. Towell & Company and Oman Holdings International.

Customer Proposition

Sanjeev Jha, Manager Director, RSA

A wide range of products RSA offers a wide range of insurance products. Both commercial and personal insurances are included in the RSA repertoire to meet the requirements of a growing number of commercial and personal lines clients. One of the leading non-life players in the world and also in Middle East, RSA’s big portfolios are property insurance, marine insurance, motor insurance and construction engineering. Others are project insurance, group insurances like personal accident, workmen’s compensation, medical Insurance and travel. Crafted and aligned to the culture and tradition of the Sultanate, RSA’s products are most importantly tailored to give the best value for money. 52 OER DOSSIER February 2010

Core strengths RSA is operating in the Middle East over five decades and prides in a strong lineage. One of the most active commercial insurers in the region, first class security, a strong corporate governance structure, underwriting excellence and strong risk management capability have led to RSA’s involvement with many of the leading enterprises in Oman. It is noteworthy that the professional expertise and high service standards, coupled with extensive local knowledge and vast experience enables RSA to mitigate any technical risks arising in this market. Its position is further bolstered by concrete support from group corporate office in London and by the vast network of offices across the globe.

It is important to understand that at RSA, a customer proposition goes beyond mere product features and benefits. RSA believes in offering a total ‘service-wrap’ that includes relationship management, unique products, service, price and communication which result in total customer satisfaction. The Oman business of RSA witnessed steady growth despite stiff competition in the market. Sanjeev Jha, managing director, RSA, is optimistic about RSA. “We are very excited about our future as we are operating in a young economy like Oman. Despite economic downturn we managed to do well and grow in our chosen segments. RSA has been awarded the Middle East General Insurer of the Year title for 3 years in succession. A testimony to the progress we have made in this region,” says Jha.

Contact: Tel: 24478318 Website: www.rsa.com.om


SPONS OR E D FEAT URE

AL AHLIA INSURANCE CO. SAOC

PRACTICAL WISDOM No matter how small or big a business entity is, Al Ahlia offers a one stop shop for its 25 products to suit individual industry’s requirements

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he market leader in industrial insurance, Al Ahlia Insurance Co is a predominantly general insurance company, which also transacts group life insurance. Established in 1985 as a public joint stock company, it is the oldest amongst national insurance companies in the nonlife insurance sector in Oman. Revamped in 1988, Al Ahlia Insurance Co enjoys a substantial growth in invested funds. A 100 per cent insurer of the major prestigious companies like Sohar Aluminium, Sohar Urea, Aromatics Oman, Al Ahlia is also the insurer for companies like OMIFFCO, OLNG, Oman Cement, Oman Mining, Al Khaleej Polypropelyne, the world’s biggest producer of polypropylene film, and medium-scale enterprises like Nabil, National Detergent, etc.

branches, eight sole agents and brokers all over the Sultanate. The company is also looking at the possibilities of expanding beyond the borders of Oman. For its interiors and towns, Al Ahlia’s has launched the first mobile branch recently.

Multi-qualified workforce

Khalil Ahmed Al Harthy, Asst General manager, Al Ahlia Insurance Co. SAOC

Product portfolio No matter how small or big a business entity is, Al Ahlia offers a one stop shop for its 25 products to suit individual industry’s requirements and provide the best possible response to managing business risks at affordable premium. Al Ahlia historically has been strong in the corporate insurance category, for which it enjoys the largest market share; this category is suitable for large, commercial and industrial risks, helping to protect buildings and contents in case of direct physical loss or damage. In general, fire/industrial All Risks insurance, marine insurance for imports and exports and goods in transit, auto insurances, personal accident/ workmen compensation, medical and life insurances, public liability, money–in– transit insurance, plant and equipment insur-

ances, professional indemnity insurances and travel insurances are offered.

Branch network and expansion Al Ahlia’s emphasis in the past four years had been to grow its retail business and currently operates through its head office in Muscat and a network of 24

One of the unique strengths that make Al Ahlia the leading player in the market is its human capital.

One of the unique strengths that make Al Ahlia the leading player in the market is its human capital. In the insurance sector, it has the largest concentration of multi-qualified workforce, like engineers, accountants, legal professionals, etc. The training imparted comprises in-house courses on insurance and management. The employees are also sent for trainings abroad with reputed reinsurers. The ministry of manpower has awarded Al Ahlia for excellence towards employment and training initiatives implemented for Omani nationals in the private sector. Al Ahlia’s long exposure to the market has helped it to harness clients and develop a good network. “We have a strong knowhow of the insurance craft. We have a solid name in the market which people can bank on. We would like to offer the clients a wide realistic applicable gamut of options which they actually require and enjoy being their trusted advisor,” says Khalil Ahmed Al Harthy, asst general manager, Al Ahlia Insurance Co. Even in a market where competition is scaling down margins, Al Ahlia is enjoying 25 per cent growth—which by any standard is a healthy growth.

Contact: +968 2476 6910 www.alahliaoman.com OER DOSSIER February 2010 53


S PONS OR ED FEATURE

AL MADINA GULF INSURANCE

BUILDING LASTING RELATIONSHIPS Gautam Datta, the new CEO of Al Madina Gulf Insurance, talks about how the three-year old company is making a difference to the insurance sector in Oman When the market still sees insurance as a commodity to a large extent, how Al Madina Gulf Insurance is creating a differentiation for its products? Insurance in certain segments are commoditized especially when it comes to retail but what drives the business is the promise that we sell. As the industry doesn’t have set standards or benchmarks, we are focusing on the issues which are not addressed by other market players. Our endeavour is to set a certain standard of excellence and set-up a process that could deliver it. We have been fairly successful in this direction but there is a lot more that we need to achieve as we move forward. We are not in the business of generating short term sales, we are here to create and build long-term relationships. On the corporate solutions, we have the ability to listen to our customers, the experience to understand their needs and the skill-set to devise the right solution that they require. That’s the key differentiator for us. The insurance industry can do a lot more in improving standards of service to its customers. The insurance companies have relied on the reinsurance market to support their solutions as the industry doesn’t have the scale to allow them to do everything on their own. We also understand that we can’t have expertise in everything but our focus on the above two points is helping us to carve a niche for our self and set new benchmarks by providing the right solutions in the best way. On the retail side, we are pleased with our performance so far as we understand that it 54 OER DOSSIER February 2010

Gautam Datta, CEO, Al Madina Gulf Insurance takes some time to build this segment as it requires a certain level of penetration which happens over a period of time. We have to build on our success. In which verticals you are stronger? We are stronger in life, medical and property side if I talk purely from the ability perspective. From the business perspective, we have been fairly successful in life and medical segments. On the property side, I think we need to grow and develop it further. What is going to be your focus area in 2010? We provide a decent range of standard products addressing the insurance needs of the broad spectrum of the market. We will focus on realizing the full potential of the market in alignment with our overall business objectives. On the new products front, we will focus

on an interesting product – professional indemnity for financial institutions and D&O liability. I‘ve worked closely on this product with Chubb in my previous assignment. Chubb is one of the leading financial risk insurers in the world. With growing stress on corporate governance, the senior management is being held responsible for all the management decisions. A company’s directors and officers can be sued over their management decisions by a whole host of constituents – shareholders, employees, customers, suppliers, competitors, and even the government. Apart from the D&O and professional indemnity products and other verticals, we will also be looking at tailor-made solutions for small-to-medium enterprises by building a product around their specific requirements.

Contact: Tel 24771888 www.amgioman.com


SPONS OR E D FEAT URE

LEBANESE INSURANCE COMPANY (S.A.L)

MEASURE OF GOOD PERFORMANCE Right now Lebanese Insurance Co is concentrating on consolidation. It has survived the recession which is no mean achievement for a company which is only a year old

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ince its inception in 1950 in Lebanon, Lebanese Insurance Company (S.A.L) has come a long way and has successfully established itself throughout the insurance market in the Middle East and GCC Countries, achieving a pride of place in the insurance sector in the region. The Company writes all classes of Insurance and Reinsurance through a Network of 20 branches in Lebanon, one branch in Kuwait and four branches in United Arab Emirates. In 2009, the Company opened its first outlet in the Sultanate of Oman. Middle East operations Lebanese Insurance Co provides professional and prime quality services in the field of insurance, offering wide range of insurance products on Property, Financial, Engineering, Marine, Professional and various other classes of insurance to meet the specific requirements of the customers. The Company’s Management Team comprises reputed and well-connected professionals in insurance and reinsurance industry in Lebanon and Middle East, whose commitment in providing security of the highest standards on the products offered by the company is well-appreciated by the customers. The well experienced and efficient team also plays an advisory role for their benefit on all insurance matters, in line with the latest developments in international insurance industry. The Company’s “All Risks” Policy is designed to cover the valuables and personal belongings against accidental loss or damage from any

From L-R: Mahdi Al Harthy, Business Development Manager; Kasim Srinivas,Branch Manager & Abdullah Al Hatmi, Finance Manager cause, anywhere within the territorial limits. It runs with a fully paid-up capital of Lebanese Pounds 22.5 Billion. With a huge potential of marketing and an actual growth rate averaging 30 per cent, Lebanese Insurance Company (S.A.L), is bound to go places. The Oman office In Oman, though the company’s first year target was Rial 1mn, it has surpassed its target long before the year–end. Lebanese Insurance Company covers all kinds of general insurance products, including medical and group insurance. SMEs form the major clientele of Lebanese Insurance Co in Oman for whom the Company plays an advisory role through its brokers. Complete solution on insurance is given to the enterprises. It deals with majority of brokers across the Sultanate. 40 per cent of the business comes from motor insurance, 30 per cent from medical insurance. And the rest comes from property,

engineering insurance, etc. Now that the new avenue for business is shifting towards Duqm and Sohar and Salalah, Lebanese Insurance will also expand in this direction in future. But right now the Company is concentrating on consolidation. It has survived the recession which is no mean achievement for an enterprise which is only a year old. The standard of service is worth-mentioning. The credit for this goes to the team which is young and energetic and to the leadership that has clear understanding of the rules of success. “People believe us and we deliver to their expectations. So far the Company does not keep any claims pending. This is the measure of our good performance,” says Kasim Srinivas, branch manager, Lebanese Insurance Co, Oman.

Contact: Tel: 2470 5030 Website: www.lebaneseinsurance.com OER DOSSIER February 2010 55


S PONS OR ED FEATURE

OMAN UNITED INSURANCE CO. S.A.O.G

COVER FOR ALL AND SUNDRY Insuring with OUIC has manifold advantages. First, all insurance solutions are available under one roof, second, customers get quick claim settlement and the third, customers have easy access through branches and agents

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ne of the leading national insurance companies in the Sultanate, Oman United Insurance Company (OUIC) is reputed for the knowledge and understanding of the day- to-day insurance needs of the general public, and also that of the industrial, commercial and medical sectors. Needless to say, the company has undergone a steady business growth since 1986 in the insurance market.

Offerings in the basket In keeping with the modern business demands and the individual’s interests and safety, OUIC has designed new insurance packages with wide coverage for industry and commerce, lenders and individuals alike. Its categories of coverage are varied. Some of its preferred industry sectors are property ownership, clinics and medical facilities, professions, enterprises, marine, transit and life. For small & medium enterprises, OUIC offers All Risks covers that include shops, hotels, office etc. Both SMEs and commercial establishments benefit from OUIC as it offers individual attention to customers’ needs, does personalized claims handling, offers products to suit individual needs. OUIC is one of the largest insurers of personal property in Oman. The reinsurance program, supported by global leaders enables the professional OUIC team to write feasible business in a flexible way with minimal referral which has helped it to earn the goodwill of its clients.

Competent team work OUIC has an experienced and dedicated team of professionals, who are able to make a quick 56 OER DOSSIER February 2010

S.F. Fernandes, Acting Chief Operating Officer decision to serve the clients with complete protection. With good reasoning and valued advice, they provide the customers with the best insurance, keeping in mind their safety at all times. As OUIC’s growth curve has moved up the trajectory, its premium increased manifold, the staff strength multiplied and reached 210, in addition to 13 branches and 22 agents. The company has experienced financial growth leading to an enhanced stature. Insuring with OUIC has manifold advantages. First, all insurance solutions are available under one roof, second, customers get quick claim settlement and the third, customers have easy access through branches and agents. What sets OUIC apart from its competitors is its customer-friendly approach. Customised offerings, a top-down risk appraisal by professionally qualified team of chartered Insurers and risk managers for designing the right

Nassir Bin salim Al-Bussaidi, Chief Executive Officer program of insurance protection and playing the role of an advisor – all this attributes to the visibility of OUIC in the Oman market. Its physical presence across the length and breadth of the Sultanate and its deep penetration through branches, agents, brokers and marketing staff, has helped to meet needs of all types of customers, individuals, corporate, government, SMEs, industries and non-profit organizations. And as mentioned before, there is something for everybody in OUIC portfolio. Herein lies its strength to compete in the insurance market. Though the company bigwigs do not anticipate major changes in insurance industry, the company has strategy and appropriate policy in place to deal with the dynamics of a changing market.

Contact Details: Tel: 2447 7322 Website: www.omanutd.com


SPONS OR E D FEAT URE

PRUDENT LOSS ADJUSTERS LLC

IMPARTIALITY IS THE KEY Walter M. Pereira, Managing Director of Prudent Loss Adjusters, tells us why loss adjusters play a crucial role in settlement of insurance claims Kindly tell us a little about Prudent Loss Adjusters LLC. The company was established as per laws prevailing in the Sultanate on 23rd June 2004. Before this date we were providing loss adjusting services through a well respected multifaceted Omani company since 1990. Our range of services comprise of survey and claims related operations in both marine and non-marine insurance fields. We handle preshipment/discharge surveys, accident investigation, damage surveys and loss adjustments of fire and allied perils, theft, accidental damage, engineering, marine and surface transport, money, fidelity guarantee and business interruption claims. What is the role of loss adjusters? In the case of insurance claims, instead of employees of insurance companies assessing the losses, an unbiased, third party involvement is preferred. We act predominantly, but not exclusively, on the instructions of insurance companies. Our first task is to investigate the facts in order to ascertain if there is policy liability. We then check the accuracy of the claim and negotiate equitable settlement of the claim with the policyholder. Where found necessary we guide the claimant in presentation of the claim and in protecting his rights against third parties. Where is your firm based and where all are your services available? We operate from Muscat and handle claims throughout the Sultanate. Our associates Charles Taylor Adjusting have operations in major cities across the Globe. Through our membership with International Institute of Loss Adjusters we can help in finding surveyors across the Globe.

TESTIMONIALS: “We’ve worked with Prudent Loss Adjusters for over 10 years now and I can genuinely say that they are extremely hard working and professional. The team, with diverse specialisations, has the ability to handle all kinds of claims and their standard of work is unparalleled. We look forward to maintaining a positive and productive relationship in the future with them.” - Maurice Shaheem, Manager, Arabia Insurance Company (Muscat Branch) “I was thoroughly impressed with their quality of work and attention to detail. The entire team was extremely professional and forthright during the entire process. I would like to extend my best wishes to Mr. Pereira and his entire team and commend them on a job well done.” - Sadiq Al Azzawi, Diamond House “Our company has been working with Prudent Loss Adjusters for 15 years, and I personally have been working with them for 5 years. Not only do they try and resolve all issues proficiently and quickly but also provide invaluable guidance to their clients regarding the claims. They handle everything impartially and are always ready to go an extra mile to get the job done.” - A. Mohan, Assistant General Manager, Claims Department, Royal Sun Alliance Our first interaction with Prudent was in 2003 when our insurance company appointed them to assess the losses incurred during a fire. Right from the beginning, Walter was empathetic and polite but at the very same time, extremely professional. Over the years we have worked with him on other claims and have grown to develop a lot of respect and regard for him. - S. Gopalan, Reem Batteries and Power Appliances Co. SAOC Tell us about the team at Prudent. We are a unique team of individuals hailing from diverse backgrounds. We have a mechanical engineer, a civil engineer, pecuniary loss experts and general surveyors all with considerable knowledge in their

respective fields and insurance. It is a team work at Prudent.

Contact: Tel: 24700383 Fax: 24705637 e-mail: prudent@omantel.net.om Website: www.prudentadjusters.com OER DOSSIER February 2010 57



Dossier