Maintaining sound capital buffers

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Customer centricity, service, innovation and a diverse range of products and services will continue to be the focus areas for National Bank of Oman

Despite the challenging market conditions and the overall global uncertainty, including in the banking industry, NBO’s performance in Oman was very satisfactory, with a 3.6 per cent growth in operating profit and a solid 15 per cent growth in net profits. This is due largely to a significant increase in fee income and better cost management and stabilisation of the bank’s UAE operations which have been a drag on overall performance for the past two years. Funding costs have risen sharply from 1.97 per cent in 2017 to 2.32 per cent in 2018. Despite the strong franchise and powerful brand in Oman, and the ability to mobilise low-cost deposits and maintain the highest ratio of savings and current account deposits in the market, net spreads still reduced by 20 bps.

Pressing ahead
One of NBO’s business goals for 2018 was to return to profit growth and in case efficiency and the bank did so successfully with the cost-to-income ratio falling by almost one per cent from 48.8 per cent to 47.9 per cent. NBO was able to reach this goal on the account of two drivers: one, the bank pressed ahead in launching new products and services which bolstered its non-funded income to attain the highest growth among its larger peers and secondly, the bank had dedicated teams focused on optimising costs while still allowing for key investments into important business development areas.

The bank is well capitalised, which positioned it to grow its balance sheet whilst maintaining sound capital buffers. The bank’s capital adequacy ratio as at December 2018 stood at 16.3 per cent, against the regulatory requirement of 13.50 per cent, and its core equity ratio stands at 11.7 per cent, against the regulatory requirement of 8.875 per cent. NBO’s return on equity rose sharply return for 2018, ending the year at 9.6 per cent from 8.2 per cent in 2017.

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