Investors Presentation - Sep 2012

Report
www.bankmuscat.com
Investor Presentation
September 2012
Agenda
Introduction
Omani Economy
BankMuscat Overview and Strategy
Financial Performance and Capital
Appendix
Note:
• Financial figures are as at 30 Sep 2012 unless otherwise stated.
• All numbers in this presentation have been translated from the respective local currency into US$ for convenience of the
readers. Exchange rate used: 1$ = 0.385 RO. BankMuscat follows IFRS.
2
Introduction
3
BankMuscat Summary

#1 bank in Oman

#1 Omani bank with a 37.80% market share with assets of ($19.8 billion) as at
30 Sep 2012
Established and well-recognised domestic brand
Well-positioned to
benefit from growth
opportunities in Oman



Significant infrastructure development expected to contribute to banking sector growth
Substantial product cross-sell opportunities
Sizeable “unbanked market”; over 49% of population less than 25 years old

Expansion in Gulf Co-operation Council (GCC) countries – direct presence in Bahrain, UAE,
Saudi Arabia and Kuwait. In direct presence in Qatar.
Presence in India leveraging customer links and market’s growth potential
Focused geographic
diversification
Financial Strength
Strong shareholder
support
Stable and experienced
management team









Return on average equity of 15.31% - Sep 12
Net profit CAGR 2003 – 2011 of 20.1%
Investment grade credit ratings
Only Omani bank to have the largest shareholding by Royal Court Affairs (Omani
Government)
Financial investment by Dubai Financial Group with 13.21%
Members of existing senior management team in place for over 10 years
Proven track record of successful organic growth and acquisitions
Re-energized management team with new organisation chart to enhance synergies
between various business functions
4
Omani Economy
5
Sultanate of Oman

Total size: approx. 309,500 square kilometres

Population: 2.77 million*

Political system: Monarchy (Sultanate) advised by
Council of Ministers

Constitution: Basic Law of the State issued in 1996

Oman is a member of GCC, UN, IMF, IBRD, Islamic
Development Bank and WTO

Well-regulated banking and capital markets through
Central Bank of Oman (CBO) and Capital Markets
Authority (CMA)

Credit ratings: A (S&P) and A1 (Moody’s)
Source: Ministry of National Economy (MONE). Omani population per 2003 Census 2.3 mn.
6
* Preliminarily 2010 Census
GDP Growth
50.0%
22.7%
70,000
44.9%
22.7%
S million
60,000
(20.5%)
50,000
19.0%
40,000
59,151
24.8%
30,000
7.2%
20,000
10,000
72,585
13.8%
21,756
299
40.0%
300
30.0%
250
20.0%
10.0%
60,653
0.0%
13.7%
24,740
350
mn barrels
80,000
Increasing Oil Production
36,756
30,883
48,205
-
282.6
269
297
103.0
0
76.6
65.2
50.3
100
-20.0%
27.8
61.7
56.7
34.4
•** Preliminary
7
60
0
Prodcution
•Provisional
80
20
-30.0%
GDP - growth nominal
120
40
2003 2004 2005 2006 2007 2008 2009*2010*2011**
GDP in current prices (USD mn)
323
100
101.1
150
-10.0%
316
259
200
50
41,846
285.4
277
Oil Price
$ / barrel
GDP growth driven by Oil price
A New Omani Economy by 2020
GDP components under “Vision 2020”
GDP components at the end of 2011*
Agri. & fishing Financial inst.
1%
4%
Others
12%
Others
17%
Transport &
communication
5%
Petro activities
19%
Manuf., mining &
construction
15%
Agri. & fishing
5%
Financial inst.
8%
Transport &
communication
8%
Trade, tourism
and real estate
12%
Trade, tourism and
real estate
26%
Manuf ., mining &
construction
17%
Petro activities
51%
Source: Central Bank of Oman’s Annual Report 2010 .
* Preliminary
8
BankMuscat Overview and strategy
9
BankMuscat – Oman’s #1 Bank









Market capitalization
$2,912 million
Retail customers
1,230,654
Market share by assets
37.80%
Branches
135
Employees
3,182
Total customer deposits
$12.9 billion (Customer deposits and CD’s)
Total assets
$19.9 billion
Net loans and advances
$13.9 billion
Major shareholders
Royal Court Affairs (Omani Government)
Dubai Financial Group

Strategic investments
49% in BMI Bank, Bahrain
43% in Mangal Keshav Holdings Limited, India

Other regional locations
Dubai RO (UAE), Riyadh Branch (Saudi Arabia), Kuwait
24.89%
13.21%
branch, Muscat Security House (subsidiary in Saudi
Arabia) & Singapore RO

Long-term credit ratings
A- (S&P – Sep’12), A1 (Moody’s – Sep’12), A- (Fitch – Sep’12), A
(capital intelligence Sep 2012)
Note: Market Capitalization as on 30 Sep 2012.
10
Diverse Income and Asset Base ...
Net Profit by Group
Assets by Group
Wholesale,
28.5%
Corporate
38.3%
Corporate,
33.4%
Wholesale
24.7%
Intl, -3.5%
Consumer,
41.6%

Intl.
8.5%
Consumer
28.6%
International group include associate operations in India and Bahrain, branch in Kuwait and branch and subsidiary in Saudi Arabia
As at 30 Sep 2012
11
Loan and Deposit Portfolio Breakdown
Loans and advances by segment
Government
0.4%
FI's and Others
6.9%
Deposits by segment
Construction Import &
Export trade
2.9%
4.2%
Manufacture
5.6%
Financial
institutions
1%
Mining and
quarrying
7.6%
Private
Commercial
Sector
28%
Real estate
4.3%
Personal /
Housing Loans
40.4%
Services
11.9%
Wholesale &
retail trade
4.5%
Ministries
and other
government
organisations
35%
Transport
5.4%
Utilities
6.0%
As at 30 June 2012.
12
Individuals
and others
36%
BankMuscat Strategy

Consolidate leading position in Oman


Capitalise on growth opportunities in Oman
–
Infrastructure development projects and Government focus on economic diversification and
developing tourism
–
Omanis entering the workforce; over 49% of the population less than 25 years old

Leverage large network of branches and other delivery channels to target the growth potential
and cross-sell opportunities

Focus on fee based income by scaling up businesses such as Credit Cards, Investment
banking, asset management, private banking and others
Islamic Banking Opportunity - Meethaq (subject to regulatory approval)

Full fledged product and service offerings, standard of excellence, customer centric approach
and transparency

Leverage on investments in new technology and state of the art head office building to
further increase efficiency, improve customer service and support growth plan

Strengthen regional presence through focused and controlled expansion in GCC countries


Presence in Bahrain, UAE, Saudi Arabia, Kuwait and Qatar
Leverage the regional presence and scale up business growth
13
Corporate Banking
Overview




Market leader in corporate
banking
Extensive and expanding range
of products and services
Project finance of prime
importance; BankMuscat plays
a prominent role in the
financing of nearly all major
Omani projects
Technology-led developments
Commitment to maintain strong
control over asset quality




Opportunities

Leverage the leading position
and expertise to benefit from
large infrastructure and
industrial projects in Oman
Utilize the presence in regional
markets
Focus on non-fund business
and fee income
Target all segments in value
chain


Large number of infrastructure
/Industrial projects in the pipeline
Privatisation and diversification
drive by Government
Increasing business flows
between Oman and regional
countries
3,000
79.5
2,500
62.4
2,000
RO million

Strategy
1,500
81.9
80.0
68.0
70.0
60.0
50.7
50.0
40.1
40.0
1,000
30.0
20.0
500
Corporate Banking
Financial Performance
1,021
1,417
2,139
2,193
2,325
2,736
2006
2007
2008
2009
2010
2011
-
10.0
0.0
Total assets
14
90.0
Operating income
Retail Banking
Overview





Over 1.1 million customers
Customer-focus and serviceoriented approach
Largest delivery channel
network in Oman
Innovative products have been
successful
Substantial low cost retail
deposit base
Front-runner in card services
segment, Bancassurance,
remittance etc.
Merchant acquiring market
share of over 60% by volume in
2011




Opportunities

Leveraging the large customer
base and achieving cross sell
Technology-led product
development and service
offerings
Enhance process efficiency
Focus on development and
utilization of e-delivery
channels


Total retail credit in 2010 amounts
to approx. 18% of GDP of 2011.
Favourable demographics; over
49% population less than 25
years old
Housing finance
2,500
160.0
140.0
2,000
RO million


Strategy
137.4
116.6
1,500
115.5
114.7
120.0
100.0
84.8
80.0
66.9
1,000
60.0
40.0
500
20.0
Retail Banking Financial
Performance
930
1,187
1,872
1,907
1,997
2,347
2006
2007
2008
2009
2010
2011
-
-
Total assets
15
Operating income
Wholesale Banking Group





Treasury: Manage funding and
asset and liability management
requirements and offer structured
solutions (e.g. derivatives,
commodity) to corporate clients
Brokerage: Leadership position
on Muscat Securities. Strong
client base.
Corporate Finance: Leader in
corporate advisory with a series of
successful transactions. Able to
build track record outside Oman.
Asset Management: Largest
Omani mutual fund manager with
potential for growth. Expanding
fund management outside Oman.
Private Banking: Banking and
investment solutions for high net
worth individuals
Strategy





Opportunities


Strengthen the leading position in
specialised areas
Utilize the presence in regional
markets to expand business
Leverage specialised product
expertise in other markets
Focus on fee income
Inorganic growth


Significant cross-sell opportunities
Leverage transaction experience in
attracting new corporate finance
mandates
Leverage regional expansion to
introduce new products
Strong growth potential in the high
net worth market segment
65.9
2,000
1,800
66.3
1,400
50
42.6
36.4
1,200
70
60
52.7
1,600
RO million
Overview
40
1,000
800
30
23.6
600
20
400
200
Wholesale Banking
Financial Performance
10
971
1,457
1,616
1,453
1,281
1,783
2006
2007
2008
2009
2010
2011
-
0
Total assets
16
Operating income
Islamic Banking – Meethaq (subject to regulatory approval)
Overview





Experience in Islamic Banking
through overseas operations
Leverage service excellence
and infrastructure
Assigned a capital of up to
RO 150 million
Dedicated branches with
Meethaq branding
Established the Sharia Board
Strategy



Full fledged product and service
offerings
Customer Centric approach and
transparency
Plan to have 7 branches in the
first year and expand
17
Opportunities

New business opportunity with
unexplored market potential

Large net worth size to leverage
business

Potential to target existing customer
base of over 1 million

Leverage on strong BM brand
International Group
Overview






Footprint in all GCC countries,
Southeast Asia and the Indian
Subcontinent region.
Overseas branches in Riyadh,
KSA and Kuwait
Representative Offices in UAE
(Dubai) and Singapore
49% owned commercial bank
in Bahrain (BMI Bank).
97% owned subsidiary in
Riyadh, KSA (Muscat Capital
LLC)
43% owned securities company
in India (Mangal Keshav
Securities Ltd)
contd...
Strategy




Focus on existing GCC operations
and improve profitability
Drive synergies within the group
Scale up business volumes to
attain desired return
Capture trade/business flows
between GCC and Asian region
through Representative Office in
Singapore
18
Opportunities

Increasing interdependence and
trade between GCC countries

Large banking markets in Saudi
Arabia and Kuwait

Efficiency; rationalization of backoffice costs

Leveraging presence in all GCC
countries
International Group
contd...
Riyadh Branch, KSA
Overview




Operational since 2007
Focused on mid-market for corporate and
treasury businesses
Credit losses in 2009 and 2010, and a
marginal loss in 2011. However, posted net
profit for the first half of 2012.
As on 30 June 2012, Net Loans & Advances
of USD 477 mn and Customer Deposits of
USD 999 mn; Net profit of USD 269k during
the period YTD June.
Short-term Strategy




Focus on corporate and treasury
businesses
Prudent credit growth with
improvement in credit quality and
monitoring
Focus on bulk deposits from large
corporate and HNI clientele
Cost containment and increase
shared resources with HO
Medium-term Strategy

Enhance scale through continued
focus on corporate and treasury
Kuwait Branch
Overview
•
•
•
•
•
Operational since 2010
Focused on corporate, trade and treasury
businesses
Healthy pipeline built, however credit
utilisation is low due to delays in project
implementation
Operating profit of USD 374k (before
provisions) for the first half of 2012; break
even at net profit level
As of 30 June 2012, Net loans and
advances of USD 51 mn and customer
deposits of USD 124 mn; Non-funded
exposures of USD 141mn.
Performance as at 30 June 2012
Short-term Strategy




Short term, working capital lending and
trade finance to corporates as well as
contract financing for Govt./ Oil & Gas
sector
High net worth clients for liabilities
Launch internet banking
Leverage off low operating cost base
19
Medium-term Strategy

Scale up business volumes with
a focus on quality lending
International Group
contd...
Muscat Capital, KSA
Overview




A subsidiary of BankMuscat with
97% stake
Operational since 2009
Focused on brokerage, asset &
wealth management and corporate
finance/advisory
As of 30 June 2012, net loss of USD
1.4 mn for the year to date
Short-term Strategy




Aim to leverage institutional
relationships in brokerage in Oman
Leverage expertise built in Oman
on Corporate Finance/Advisory
Focus on retail and institutional
brokerage business
Low cost of operations sharing
back office activities of Oman
Medium-term Strategy


Scale up business volumes
Leverage BankMuscat presence in
other markets
Mangal Keshav, India
Overview




Acquired 43% stake in this
securities house in India in 2007
Network of 150 branches/
franchises across India
Focused mainly on brokerage
business
As of 30 June 2012, Net profit of
USD 890k (3-m)
Performance as at 30 June 2012
Short-term Strategy



Diversify from mainly brokerage
business to commodities
brokerage, insurance and mutual
fund distribution
Focus on institutional and NRI
brokerage business
Leverage BankMuscat GCC
network for NRI business
20
Medium-term Strategy

Scale up business through organic
and inorganic growth
International Group
BMI Bank, Bahrain
Overview








BankMuscat holds 49% stake in BMI
Bank
Operational as independent bank
since 2005
Full-service bank across corporate,
retail, private banking and treasury
businesses
Network of 10 branches and 30
ATMs, resulting in a strong retail
presence in Bahrain
Holds strategic stake of 21.3% in
Gulf African Bank, a green field first
Islamic Bank in Kenya
Holds a strategic stake of 50% in an
offshore bank in Seychelles and an
office in QFC, Qatar
As on 30 June 2012, Net Loans &
Advances of USD 1,265 mn,
Customer deposits of USD 1,273 mn
and Shareholders Equity of USD
221mn
Net profit of USD 766k for the first
half of 2012
Performance as at 30 June 2012
Short-term Strategy




Focus on Bahrain business to build
scale and market share
Strengthen existing presence in
international markets
Improve operational efficiency and
reduce cost to income ratio
Leverage on investments in
technology and infrastructure to
scale up business volumes
21
Medium-term Strategy


Establish franchise in Bahrain
Inorganic growth in markets where
already present and with strategic
advantage such as East Africa,
Indian Ocean region.
Financial Performance and Capital
22
Financial Highlights – 9M-2012

Achieved a Net Profit of US$ 270.6 mn as against US$ 226.3 mn , an increase of US$ 44.3
mn or 20% over 2011

Annualized Basic EPS of US$0.176 for every US$ 0.260 share of Bank

Annualized ROAE of 16.3%; Annualized ROAA of 1.9%

Capital Adequacy Ratio of 15.77% (as per Basel II)


Net Interest Income (NII) at US$ 437 mn, higher by US$ 21.7 or 5.23% over 2011

Cost to Income ratio of 42%

Growth of US$ 2,136 mn (18.13%) in Net Loans over Sep 2011

Growth of US$ 563 mn (5%) in customer deposits and CD’s over Sep 2011. (Includes
increase of US$ 1,058 mn (25%) from demand deposits, US$ 477 mn (18%) from savings,
decrease of US$ 358 mn from term deposit and certificate of deposits (-17%)
Revenue mix of 71% : 29% (NII : Other income)
23
Revenue and Cost Control
Cost-income ratio
Revenue growth
48.0%
900
800
46.0%
764
756
44.0%
690
700
423
42.0%
615
42.0%
28%
600
40.8%
41.1%
40.7%
29%
449
38.8%
30%
32%
38.0%
400
340
300
40.0%
40%
500
36.7%
28%
36.0%
34.6%
24%
34.0%
200
32.0%
100
30.0%
0
2006
2007
2008
2009
2010
2006
2011 Sep-12
Other income
Investment Banking income
FX income
Commission income
Net interest income
24
2007
2008
2009
2010
2011
Sep-12
Loan Growth and Asset Quality
Gross Loans and advances growth
16,000
Coverage ratios
50%
600
14,442
14,000
45%
12,977
US$ million
10,000
30%
7,261
8,000
6,000
25%
20%
5,073
15%
4,000
2,000
4.8%
2.7%
2.3%
5.0%
10%
4.2%
3.0%
2006
2007
2008
2009
Gross loans and advances
2010
138.8%
522
481
457 458 118.5%
126.8%
387
400
326106.0%
308
US$ million
35%
NPL / Gross Loans %
10,009
10,525 10,894
524
484
500
40%
12,000
160%
555
145.9%
105.9%
80%
235
243
60%
193
200
40%
100
5%
3.0%
0%
20%
-
0%
2006
2011 Sep-12
2007
Provisions
NPL/Loans
25
120%
108.6%
100%
282
300
140%
2008
2009
2010
NPLs
2011
Sept12
Prov/NPLs
Strong Capital Growth with Stable Returns
Robust capitalisation
Capital growth with stable returns
3,000
2675
Tier 2 and 3 ratio
2,500
Tier 1 ratio
2.56%
14.78%
3.63%
2.93%
13.02%
11.97%
12.00%
15.2%
4.56%
3.98%
2.27%
1.93%
1,856
2,000
15.77%
US$ mn
15.14%
16.00%
10.00%
15.93 %
24.0
2,068
1,848
1,630
20.0
1,500
14.8
1,000
28.0
2,262
22.0
18.00%
14.00%
25.8
14.6
831
15.4
15.3
16.0
8.00%
12.58%
6.00%
4.00%
10.04%
12.0
500
11.85% 11.37% 11.79%
10.75% 11.57%
10.9
-
2.00%
8.0
2006 2007 2008 2009 2010 2011 2012
0.00%
2006
2007
2008
2009
2010
2011
Sept'12
Shareholders equity
CBO requirement of CAR of minimum of 10 % (12% by Dec 2010) is stricter than BIS requirement of minimum 8%
26
Return on equity
Thank You
27
Appendix
28
Balance Sheet
Balance sheet
$ (million)
Cash and bank (incl. placements)
Loans and Advances
Non trading investments
Tangible fixed assets
Other assets (incl. invt in associates)
Total assets
30-Sep-12
3,605
13,920
1,484
179
705
19,893
31-Dec-11
4,403
12,518
891
186
777
18,774
31-Dec-10
3,315
10,410
694
194
584
15,198
31-Dec-09
4,218
9,969
375
68
566
15,197
Bank deposits / FRNs
Customer deposits (incl. Bonds & CDs)
Other liabilities
Subordinated debt
Total liabilities
2,316
13,014
1,138
749
17,216
1,914
12,741
989
869
16,513
2,014
9,705
934
477
13,129
3,665
8,474
720
490
13,349
Share capital and premium
Convertible bonds
Total reserves
Cumulative changes in fair value
Retained profits
Shareholders' equity
Total liabilities + shareholders's equity
1,538
42
583
8
507
2,677
19,893
1,185
84
591
3
397
2,261
18,774
1,133
84
493
24
335
2,069
15,198
1,063
84
373
13
315
1,848
15,197
Key ratios
Loans and advances / customer deposits
Shareholders' equity / total assets
Subordinated debt / (debt + equity)
BIS total capital ratio
107.0%
13.5%
21.9%
15.10%
98.2%
12.0%
27.8%
15.93%
107.3%
13.6%
18.7%
14.78%
117.6%
12.2%
20.9%
15.20%
29
Profit and Loss Account
Profit and loss account
$ (million)
Net interest income
Other operating income
Operating income
Operating costs
Recoveries from impairments
Credit loss impairments
Other impairments
Gain/(loss) from associates
Profit before Tax
Taxation
Net Profit
Key ratios
Cost/income ratio
Return on average assets
Return on average equity
Basic EPS (US$)
Share price (US$)
30-Sep-12
437.1
175.1
612.2
(257.0)
355.3
69.9
(106.2)
(1.6)
(3.9)
313.5
(42.8)
270.6
30-Jun-12
282.8
118.9
401.7
(172.2)
229.4
41.2
(65.1)
(1.2)
0.8
205.2
(27.6)
177.6
31-Dec-11
551.0
213.3
764.3
(314.0)
450.3
67.3
(145.9)
(8.8)
(9.2)
353.8
(48.5)
305.3
42.0%
1.80%
16.30%
0.197
1.519
42.9%
1.80%
16.30%
0.197
1.519
41.1%
1.80%
15.37%
0.197
1.990
30
31-Dec-10 31-Dec-09
486.2
452.9
203.4
303.1
689.6
756.0
(267.3)
(213.3)
422.3
542.6
44.6
28.6
(121.0)
(255.2)
(7.2)
(60.4)
(32.8)
(27.2)
306.0
228.5
(42.1)
(37.0)
263.9
191.5
38.8%
1.74%
14.64%
0.171
2.514
28.2%
1.24%
10.90%
0.178
2.140
Omani Banking Sector
Local and specialised banks
Foreign banks
Branches
(in Oman)
Est.
133
1982
1. Habib Bank Limited
8
1972
90
1979
2. Bank of Baroda
3
1976
3. Nat. Bank of Oman (NBO) 69
1973
3. Standard Chartered
1
1968
4. Bank Dhofar (BD)
59
1990
4. Bank Saderat Iran
1
1976
5. Oman Arab Bank (OAB)
51
1973
5. National Bank of Abu Dhabi 7
1976
6. Bank Sohar
25
2007
6. Bank Melli Iran
1
1974
7. Ahli Bank
12
1998
7. State Bank of India
1
2004
8. Bank of Beirut
2
2006
9. Qatar National Bank
1
2007
1. BankMuscat (BM)
2. HSBC Oman**
439
1. Oman Development Bank
2. Oman Housing Bank
13
1977
9
1977
Branches Est.
(in Oman)
22
**HSBC Bank Middle East Limited (Oman branches) merged with and into Oman International Bank (OIB) and
the combined listed entity was renamed as HSBC Bank Oman S.A.O.G
31
25
Relative Loan and Deposit Volumes
Total customer deposits & FRNs
Net loans
14.0 BM
BM
NBO
HSBC Oman
NBO
($ billion)
($ billion)
14.4
14.0
12.5
2.0
8.0
6.5
7.0
6.0
4.0
3.6
2.4 1.8
1.5
2.6
1.6
3.5 3.2
1.6
3.5 3.2
1.6
4.3 3.9
6.0
5.1 4.5
3.4
3.5
4.0
1.8
2.4
2.1
1.8
2.0
2007
2008
2009
2010
2011
Sep-12
43%
40%
40%
Source: CBO and Annual report of Banks.
38%
2.5
1.9
4.2 3.9
3.3
2.9
5.04.9
4.2
3.4 3.2
2.6
1.9
2.1
2009
2010
2007
BM
market
share
8.5
10.4
10.0
9.7
10.0
8.0
9.6
10.0
8.8
12.0
BD
13.0
12.8
BD
12.0
16.0
HSBC Oman
38%
36%
32
2008
36%
33%
2011
34%
Sep-12
33%
Relative Asset and Equity Bases
Shareholders’ equity
Total assets
BM
25.0
NBO
HSBC Oman
BD
BM
NBO
HSBC Oman
BD
($ billion)
($ billion)
3.00
19.9
18.8
20.0
2.68
2.50
2.26
2.07
15.7
15.2
15.2
1.86
2.00
15.0
1.85
1.63
1.50
11.0
10.0
5.2
5.0
3.8
2.82.5
3.4
2.6
4.7
3.9
2.7
4.7 4.3
3.0
5.8
5.1
3.2
1.00
6.56.0
5.5
0.50
-
0.64
0.49
0.45
0.69
0.65
0.59
0.53
0.44
0.44
2007
2008
2009
0.73
0.60
0.45
0.77
0.76
0.65
2007
BM
market
share
0.60
0.42
0.29
2008
41%
2009
42%
Source: CBO, Annual report of Banks.
2010
41%
2011
39%
Sep-12
38%
33
2010
2011
Sep-12
BankMuscat Organisational Structure
34

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