National Bank of Oman (NBO), which has worked its way up to proudly take the second slot in terms of financial performance, expects to continue its meteoric rise, with stellar growth expected, both this year and next.

Stating this, the NBO CEO, Andrew Duff, added

to OmanVistas that by the end of this year, the bank would have a 100-strong direct sales force that will
further enhance its stride to attain numero uno status
in the future.

“We should be looking at 10 or 15 percent of our profits in three to five year’s time because we have got an undeveloped franchise there.

“And, here in Oman, as far as our core business is concerned, we are in a very good position because of our undeveloped business, relative to the strength of our brand and the market place.

Excerpts

We are more than half way of 2007. How does it look this year for NBO?

Very promising! We have embarked on a growth strategy fuelled by a growing economy. Yes, the cyclone has been a bit of a setback for a number of people. But, nevertheless, the overriding macroeconomic environment is very good. In such an environment, banks usually do well because there are always corporate customers investing into the growth to make money and they need funds for investments and thus, our services.

We are growing and by 2009, if the economy continues to prosper we should be rapidly growing again. So there will be a little bit of a growth trajectory, in the sense, it will flatten itself in 2008, and then it will grow again.


NBO’s net profits for the three months of this year reported a 73 percent jump, which clearly indicates a growth trend. Is this the first time in the bank’s 30-odd years’ history, or is there any other significance to it?

It was a jump over last year. We have had a very strong corporate recovery in the first half of the year. The cost of credit, which is provisioned, is also positive in the third quarter. So, if you are comparing quarter on quarter, from first quarter 2006 to first quarter 2007, it looks spectacular! But, I think it is more of an aberration, rather than a reality. Our core business is growing at 40 percent.

Let us take a look at the strategic alliance with Commercial Bank of Qatar – are there any moves to form further alliances of this sort?

Well, no, there aren’t any other alliances. This (the alliance with Commercial Bank of Qatar – (CBQ) is the primary alliance for us. There is a management contract between CBQ and NBO. Our biggest way is an independent board and so the management contract still cannot override the board, but such things like product development can be done. We are introducing a new internet banking channel in the course of the next three or four months and we have modified our look and feel.


What are the other new developments in general and detail the key methods employed to increase shareholder value?

Growth! That is the only strategy! If you look at what creates value for shareholders, it is growth in the organization, and growth in financial performance, which is the bottom line. And, everything else is nice to have. The whole strategy is predicated around a vibrant economy, growing rapidly, and we are going along with the risk framework, which doesn’t allow us to repeat the mistakes of the past.


Would new foreign banks be giving competition
to NBO?

Well, in some form or the other, they will. If we acknowledge that the competition is here, we will improve our products and services to compete with any international operator that comes here. If we don’t improve and we stay still and international banks come here with better products and services, then of course, we will lose market share. That is what is good about competition. It forces all the sleepy, large, local organizations to lift their game and improve, otherwise, they lose.
And who wins out of all these? The customers!


So, NBO is not sleeping?

No, definitely not! We are putting in new technologies throughout all our branches, which will give us a customs’ management system that is equal to the best in the world. We have a new, unique, training curriculum by overseas experts. Everything we are doing is about lifting the bank to international standards.

Is there a problem with new banks poaching on experienced staff from existent banks?

There was a strain in the new entrants coming in, which was based on staffing. Any new player that comes into town or anyone who is expanding, look at two largest banks here. That is where they would like to get their staff from. And so the head hunters approach our staff with very large offers and attract them into the expanding new entrants. So far, we have been protecting our staff very well, but it is not easy. And so you are going to get cost increasing as this goes on.

What is your vision for the future?

With respect to the physical infrastructure, I see roughly the same size in Oman, because increasingly we will use other channels to deal with our customers. We will be building a direct sales’ force, which would be in excess of 100 people by the end of the year; we will be introducing new Internet channels and putting more ATMs in service stations. We currently have 80 ATMs, and I could see them trebling in the course of the next two to three years, thereby creating more channels for people to touch the bank without putting in more branches.

Our UAE operations will be expanded dramatically. I think in the UAE, we should be looking at 10 or 15 percent of our profits in three to five year’s time because we have got an undeveloped franchise there.
Here in Oman, as far as our core business is concerned, we are in a very good position because of our undeveloped business, relative to the strength of our brand and the market place. We were the number one bank, if you may recall, but we didn’t invest from 2002 to 2005 and we dropped back to number three in terms of financial performance in 2005. Now, we are solidly placed at number two, in terms of pure financial performance. I think in many other areas, we are probably number one. For example, in the top 1000 banks in the world, we jumped over 200 places this year. We had at one point of time been number one, and we had this very, very solid image. But, we will be refreshing our brand, during the course of this year. We will also be experimenting with new concepts in pilot branches and probably by 2007, we will redo our whole branch infrastructure! So we will have a very different look in three to five years.

Let us look at the various awards that NBO has won, especially the ‘Best Bank in Oman 2006’, which it had won?

Yes, we have won ‘Best Bank in Oman 2006’ award from the Banker Magazine and Financial Times Business, UK.

We think that we won that through a combination of things. As far as NBO is concerned, we are looking at the sheer percentage growth in performance rather than absolute terms.

What are the other areas you are targeting for improvement?

All around the world, emotional intelligence seems to be more important than anything else in getting people in. Now, I don’t think that there is any bank that has really managed to achieve that, except in different pieces or various levels. We are focusing very heavily on

emotional intelligence to see how we can get customer loyalty to the point where we become a premium brand in the marketplace. But, it is a big transition and make no mistake, I think it is an important thing to understand that we are still a bank in transition. We didn’t invest for three or four years. And three or four years in the Gulf isextremely important, probably, an easier example to look at is Dubai. Between 2002 and 2005, the whole face of banking changed in Dubai.

We are also changing the culture of the people – from a command and control culture to a performance-managed culture. These are huge changes for an organization of our size to go through. At the same time, in the last few years, we have not forgotten the community. We have increased dramatically our spend on community and we are also trying to get more and more of our staff engaged in community service, rather than the bank and just the money.