Monday 21 / October / 2024
Muscat: Oman's banking system has weathered recent shocks relatively well and its financial indicators appear healthy, benefiting from prudent oversight by the Central Bank of Oman (CBO), according to an industry expert.
“The country is going in the right direction and the banking sector is key to supporting the country’s growth,” said Hussain Al Yafai, CEO of Standard Chartered Oman, in an exclusive interview with the Times of Oman.
“Banks have the potential to harness digitalisation to upgrade customer experience and improve cost efficiencies and digitalisation in Oman's banking sector is moving forward carefully. The CBO continues to develop the Fintech ecosystem by launching the Fintech Regulatory Sandbox Framework and testing the use of blockchain technology for trade finance,” he further added.
Given the opportunities across the Oman economy, aligned with Vision 2040, it is positive to have a diverse range of banks operating in the country – who each provide their unique advantages and competition that contribute to a vibrant banking system, Hussain Al Yafai said.
Oman’s 2040 Vision aims to create a competitive business hub underpinned by strong regulation and environmental, social and governance (ESG) goals. Progress has been impressive, said Hussain Al Yafai.
Oman’s total non-oil exports jumped by 50 per cent from January–September last year driven by increased demand from key markets in the region and around the world. The economy is on a strong post-Covid recovery path and higher oil prices, alongside the government’s economic stimulus measures, are translating into resilient gross domestic growth (GDP) growth. The Ministry of Finance expects the national economy to grow by 5.5 per cent, he said.
“This presents many opportunities for growth in corporate banking, given the increased demand for financing from businesses in various industries. The same is true for institutional banking, as the government continues to develop its infrastructure and invest in key sectors such as tourism, healthcare, and education,” he added.
“Taken together, these are exciting times for a bank like Standard Chartered that serves the broader Omani economy,” said Hussain Al Yafai.
Regarding the GCC banking sector's performance last year, he said that according to an S&P report published in November 2022, the GCC’s banks were forecasted to ‘almost reach’ pre-pandemic profitability levels by the end of the year, driven by higher oil prices, rising interest rates and new public projects.
“This has proven correct, as most GCC banks posted strong earnings growth in the full year, with net profit lines growing double digits in most cases. Good cost performance also contributed to growing net earnings, with several peers reducing their cost-to-income ratios during the year,” he added.
Hussain Al Yafai said that 2022 was a year of volatility and uncertainty for markets globally, with risks ranging from geopolitical to economic. The GCC banking industry showed resilience amid this crisis, in large part due to government support and favourable macroeconomic factors.
In the years to come, the global economic slowdown is expected to potentially have a spill-over effect on the region. Oil prices may continue to fluctuate, and taking recent forecasts into account, this could result in lower growth for Gulf Cooperation Council (GCC) economies.
“Despite these challenges, GCC economies have taken numerous positive steps and are accelerating structural reforms and enhancing policies to increase diversification and grow the economy. Additionally, the banking industry in the GCC must remain cognisant of rising operating costs, increased competition, and changing customer expectations,” he added.
“Digital transformation, increased competition from new entrants in the market, including fintech and digital-only banks will continue to be a challenge, and banks must continue to innovate and adopt new technologies to improve operational efficiency, customer experience, and risk management practices,” he said.
