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Segment Performance
Bank Muscat's net profit for the year 2002 was RO 22.9 million, which is higher
by RO 15.1 million or 194% as compared to the net profit for the year 2001 at RO
7.8 million.
The Bank's business activities are split into segments, which are Corporate
Banking, Retail Banking, Treasury & Investment Banking and International
Operations. The support functions of the Bank mainly comprise Information
Technology, Human Resources, Finance & Risk Management, Administration and
Operations.
Corporate Banking
Net Operating Income of the Corporate Banking segment was RO 28.4 million in
2002 as compared to RO 21.3 million in 2001. The increase in overall income was
a result of the Bank's sourcing of low cost corporate funds and comprehensive
products and services provided to its corporate customers by Corporate Banking.
The central thrust of the Corporate Banking strategy during 2002 was
consolidation in the local market as well as de-risking of the Corporate Banking
portfolio. The focus of Corporate Banking was also to strengthen customer
relationships while at the same time pursuing credit opportunities selectively
and paying close attention to credit risk evaluation. The Bank continued to lead
the Sultanate's market in the corporate banking business while increasing its
market share of corporate business during 2002. This success is a reflection of
its image as a provider of financial solutions rather than just a lending
organization.
The Moody's risk evaluation system has been fully implemented, including
corporate risk rating for credit proposals, and this is proving to be an
effective credit tool. The credit portfolio now reflects the outcome of these
developments.
The Bank's emphasis on project finance continued with the Bank being involved
with all major privatization and infrastructure projects. The Bank was one of
the Lead Arrangers for the Oman India Fertilizer project as well as financier
for acquisition of Boeing aircrafts for Oman Aviation Services Co. and a lender
to Oman Airports Management Company, the concessionaire for the Seeb and Salalah
Airports.
Retail Banking
Net Operating Income of Retail Banking segment was RO 39.4 million in 2002 as
compared to RO 31.6 million in 2001. The net loans and advances of the Retail
Banking segment registered a growth of approximately 21% by tailoring its
products and services to the needs of individual customers. Lack of quality
lending opportunities on the corporate front, coupled with excess
liquidity, has put tremendous downward pressure on the interest rates both for
deposits and loans. The effect of this has percolated to the Retail
segment also and the strain on the lending rates is expected to intensify in
2003 with the resultant effect on the margins. Still, retail business in Oman
will continue to be the most profitable segment, albeit with lower margins in
the short to
medium term.
The rationalization and consolidation of branches over the last two years,
post-merger, has endowed the Bank with substantial distribution capability and a
current network of 90 branches spread across the country. The Retail Banking
segment has also been successful in achieving an impressive growth in the low
cost deposit area. Savings deposits of the Bank have recorded an
impressive growth of 45% in 2002. The Bank's Direct Sales Unit has played a
stellar role by providing invaluable support for expanding the customer base
during the year 2002.
The acquisition of HSBC's credit card merchant acquiring facilities in Oman in
2001 has given a boost to the Bank's credit card business and has helped
increase the Bank's market share in Oman. As part of the Bank's continuous
efforts to meet and exceed the very highest expectations of discerning
customers, the Bank has introduced a Private Banking Center during 2002, which
will provide the Bank's valued customers with exclusive and personalized wealth
management services.
The Bank has launched Internet Banking services and customers have begun using
these services to make utility payments, on-line enquiries, fund transfers
within the Bank's branches and a host of other transactions. A separate
e-banking department has been created to service the customers which includes
the Internet, ATMs, Kiosks and Call Centre. With the upgrading of its ATM
network to the 5th Generation ATMs, the Bank has the latest and the largest
network of 145 ATMs in the country. The Oman Switch, which the Bank is a part
of, has also been connected to the UAE Switch.
Treasury & Investment Banking
The Bank's Treasury is actively involved in interest rate management and
liquidity management and closely looks at avenues to effectively manage these
risks under the guidance of the Asset Liability Committee (ALCO). It has been
actively involved in developing long term funding products and has been
successful in introducing derivative products for customers. During 2002 the
Bank issued Certificates of Deposit of RO 21.7 million of which RO 11.9 million
represented US Dollar Certificates of Deposit, in order to effectively manage
the Bank's assets and liabilities maturity mismatches. The net operating income
of the Treasury and Investment Banking segment for 2002 was RO 7.2 million as compared
to RO 7.6 million in the previous year. The acquisition of Al Ahlia Securities
during 2002 has provided the Investment Banking Segment of the Bank with a
brokerage license to deal in the MSM. Trading volumes in the MSM increased in
2002 after nearly four years of decline. The Investment
Banking segment has benefited as a result of such
increase in volumes during 2002. The Bank launched the
Muscat Guaranteed Fund Series 2 during the second
quarter of 2002 and received an overwhelming response
to this product. The Bank has also set up an Asset
Management Unit, which will manage funds and
portfolios for its customers.
International Operations
During the year, the Bank acquired the Bahrain operations of ABN Amro, resulting
in the creation of the Bahrain branch of Bank Muscat. The Bank has thus taken a
step forward in strengthening its regional presence. The Bank is also trying to
gain an entry into the United Arab Emirates and develop operations through
strategic acquisitions. Both the overseas branches of the Bank, viz. Bangalore
and Bahrain, have performed well during 2002. Bank Muscat shares were listed in
the Bahrain Stock Exchange during 2002. The Bank is looking at opportunities to
expand its international operations in India by converting it into a local
entity. The net
operating income arising out of the international operations of the Bank for
2002 was RO 4.5 million as against RO 1.4 million for the year 2001.
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