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The other banks

These banks may not be in the spotlight as often as the big banks but they know their business and go about it in a clinical fashion. Here is a look at the significant others  

BusinessToday reports

The multinationals

Size, clout and a balance sheet to match, these are the big brothers of international banking.

HSBC

“The year 2006 was better than 2005 and we have had a good Q1 in 2007,” says Richard Groves, CEO, HSBC. This is an understatement as the bank’s profits grew by 40.29 per cent in 2006. HSBC, traditionally seen as a corporate bank, has been getting aggressive in the retail business. It launched a mortgage product and tied up with The Wave to provide housing loans. “It shows that HSBC is well placed to serve both local customers and expatriates.” 

It has re-branded its privilege banking product ‘Premier’. The re-branded offering will guarantee customers personalised service across its branches. “As the economy grows, there is more affluence and individuals will require more advice to manage their wealth. This is going to be the focus area for us.” It opened a new branch in Sohar, taking its branch network to six. It has 27 ATMs. With a presence in 82 countries, 10,000-odd offices and 130mn customers, the bank realises that it needs to benchmark itself against the best in the world.

In 2008 HSBC will complete 60 years in Oman. Starting out as British Bank in 1948, it was renamed after HSBC acquired the former in 1959. It was the first foreign bank to commence operations in the sultanate and has since built upon that legacy. The market now boasts of a number of foreign banks, with more to follow. “Healthy competition is good for customers as long as there is no lowering of standards,” says the CEO.

Standard Chartered Bank

“At the end of the day you cannot beat scale, but there are numerous instances when a niche player comes in and takes away market share by offering great products at lower prices,” says Ravneet Chowdhury, CEO Oman, Standard Chartered Bank. The bank is looking at pulling off a similar feat. A year and half ago it decided that salary transfer would not be mandatory to get a credit card from Standard Chartered. It also introduced lower annual fee and freebies like a movie show every week. The strategy worked, and the product has been attracting a number of customers. The bank is planning to refurbish its branch in Muscat to enhance customer experience. Standard Chartered counts its global network, spanning 56 countries, as one of its biggest strengths. “We bring a number of companies from the world to Muscat. It is easy to bring them to Oman as they have a history with us.” Its product suit includes all its international offerings. The bank’s product development takes place globally though the product is then tailored to suit local requirements. However, being a niche bank does have its limitations. “As we have a limited presence in this market, we lack visibility here. In most other countries, owing to our size, we enjoy a high degree of recall,” says Chowdhury.

The lone ranger

Alliance Housing Bank may be in a state of transition now, but it definitely deserves applause for proving the potential of a niche bank in the market.

AHB

Alliance Housing Bank (AHB) worked hard since it started operations in 1998 to become the premier housing finance bank in the sultanate. The bank has grown in assets, profits, interest income and shareholder value since then. In 2006, AHB surprised the market by getting an in-principle approval from the Central Bank of Oman (CBO) to convert itself from a vanilla housing finance bank to a full-fledged commercial bank. The bank hired consultancy firm KPMG to carry out a feasibility of the option. Says Abdulaziz al Balushi, CEO, AHB, “When there is no competition, one does not strive to be the best. You tend to become complacent.” The competition that Balushi is speaking about came in the form of CBO’s decision in April 2006 to allow commercial banks to lend up to five per cent of their retail lending as housing loans. As other banks introduced home loan products, AHB loan approvals fell during Q3, 2006. The bank finished the year with an 11 per cent fall in its net profit. “The bank which enjoyed a lot of comfort, suddenly had a lot of competition to contend with,” says Balushi. The bank is presently looking at a number of possibilities like going ahead as a commercial bank on its own, bringing in equity participation or an outright sale. The last on AHB is yet to be heard.

Comfort in numbers 

A huge South Asian expatriate community gives these banks captive business and a definite headstart

Habib Bank

Ahmed Qadir al Balushi, general manager, Habib Bank, says the bank has set an ambitious target for 2007 – to double its sales (loan book) during the year. Its eight-branch netw-ork is the largest amongst all foreign banks and it is looking at adding two more branches. It is also looking at adding two new ATMs this year, increasing its network to seven. The bank has just finished putting in place a state-of-the-art IT system from IBM. Says Balushi, “In the banking industry, the products on offer are the same, and being a small bank we are in a position to offer a more personalised service.” With service being its prime differentiator, the bank realises that the way it looks after its internal customers (employees) has a bearing on the way they treat external customers. Keeping this in mind, the bank has been reworking its HR policy. Habib Bank is the biggest private bank in Pakistan with a 1,400 strong branch network. Globally, its operations span 28 countries. In Oman, the bank is now looking at attracting customers of all nationalities. “If I can offer better remittance service than State Bank of India or Bank of Baroda, we can most definitely attract a substantial number of Indian expatriates as well.”

Bank of Baroda

Bank of Baroda, which has 60 offices spread across 21 countries, was originally set up here to cater to the needs of Indian expatriates serving in Oman. Over the years, it has diversified its services to serve all the communities in the sultanate. V J Santhanam, chief executive, (UAE and Oman operations), Bank of Baroda, said in an earlier interview with BusinessToday (Issue 98, November 2006), “The growth of the bank has been reasonably good and the momentum has picked up during the last few months. The market here has good potential for growth and, in our considered view, every foreign bank has got its own core strength and will grow.” 

State Bank of India

When State Bank of India wanted to set up a full-fledged branch in the Gulf in May 2004, it zeroed in on Oman. Says Lalit Mehta, CEO, SBI (Oman), “The Indian diaspora in the sultanate is over 350,000. This is a source of strength for SBI.” The bank turned its first profit in 2005. The year 2006 saw SBI upgrading its infrastructure and expanding its product range. It acquired an investment-banking licence from the Central Bank of Oman. The investment banking division will carry out its functions as a subsidiary of SBI Mutual Fund, giving customers a chance to participate in the Indian capital market. An instant money transfer facility was also introduced towards the end of the year. “It guarantees the transfer of money to the account of the intended beneficiary on the very same day, including holidays,” says Mehta. The bank’s IT infrastructure has been upgraded by installing the Finacle package from Infosys. Having gained critical mass, SBI is looking at consolidating its presence. “We have no plans of expanding our branch network (it has one branch and a single ATM) right now.” SBI has a presence in 30 countries and a global balance sheet of US$150bn.

Regional players

The growth in intra regional-business presents a tailor-made opportunity for banks from the Middle East

Bank Melli Iran

Bank Melli Iran has over 3,500 branches globally and is the largest bank of Iran, but its advantage in Oman comes from speed of service as opposed to size of operations. Says Karim Deravi, general manager of the Muscat branch, “Even during rush hour, you will not find long queues here. Bigger banks may take a month to process a loan, we process it in less than ten days.” Bank Melli Iran has just one branch and one ATM in the sultanate at present, but they are planning branches in Sohar and Khasab in the near future. The approval process for this, involving institutions in Oman as well as Iran, is underway. Adds Deravi, “Hopefully, we should be ready to start in about a year and a half.” With the economic activity in Oman on a high, the bank has seen good growth in business. Its income in Oman increased 84 per cent from 2005 to 2006. “We are involved in financing everything from large electricity projects to real estate to food businesses, and providing personal loans,” he says, adding that the bank is focused on diversification. Its customers are mainly businessmen with operations between Oman and Iran, but the bank hopes to expand its customer profile. Until recently, the bank did not advertise very much. But they have started now. “We have to increase our visibility. This is also necessary to compete with the bigger banks that have a lot more branches and provide a wider range of services than we do.” Bank Melli Iran also plans to increase its capital here very soon.  
                                   
Bank Saderat Iran

The year 2006 proved to be a windfall one for Bank Saderat Iran (BSI) – its operating profit for the year (after impairment allowance) jumped by a phenomenal 80 per cent. The bank’s total assets have grown by over 39 per cent (see table). A large part of this growth comes from the sudden surge in infrastructure projects in the sultanate. “We are relatively more focused on corporate lending and have a product suite to meet all their demands,” says Mohamed Raziuddin Faheem, customer service manager, Bank Saderat Iran. With a number of industrial and infrastructure projects taking off in Sohar, the bank is looking at establishing a branch there to service its customers. The bank is upgrading its IT network to offer Internet banking, telecom banking etc. BSI is the second largest bank in Iran (Bank Melli Iran being the biggest). It has 3,300 branches in the country and employs 36,000 people. The bank has 22 branches abroad and holds strategic investments in four independent banks in the UK (Bank Saderat PLC), Bahrain (Future Bank), Uzbekistan (Bank Saderat Tashkent) and Afghanistan (Arian Bank). BSI is confident about its future prospects. “Like other banks we will also do better in the coming years,” says Faheem.

Oman Housing Bank

Established in 1977 to meet the increasing housing requirements in the sultanate, the Oman Housing Bank currently has eight branches. In 2005, it recorded a net profit of RO8.5mn, a 59.5 per cent increase over 2004. To comply with bank policies, 656 loans were granted by the full utilisation of subsidised loans allotment for the year amounting to RO12mn, of which 475 loans, amounting to RO7.27mn, were allotted to limited-income citizens. The bank is also adopting IT procedures that will lead to quicker exchange of data.

The new entrants

Fresh and raring to go, these new players are looking at rewriting the rules of the game

Bank Sohar

Bank Sohar, the first new local bank in the country in 12 years, has generated a lot of interest amongst analysts, bankers and investors. The bank launched an initial public offering (IPO) of RO20mn, divesting close to 40 per cent of its initial capital base. The issue was oversubscribed six times. The bank launched its first savings product Al Mumayaz on May 21, 2007. Apart from offering conventional banking products, the bank plans to target untapped niches in the market, the foremost among them being small and medium enterprises (SMEs) as it feels that the segment has not got the service that it deserves.

It plans to offer lifestyle products that takes a customer all the way through from a young boy to a retired individual. The bank will launch credit cards in the next three to six months along with debit cards. It is looking at opening six branches by the end of 2007 which will be further grown to 15 or 20 in 2008. The bank plans to be transparent in its dealing with the customers and prudent in its lending policies. “At banks and financial institutions there are two things that serve as the foundation – one is the trust that you have to earn along the way and the other is financial soundness. If you compromise on either of these, you can get into serious trouble,” says Nani Javeri, CEO Bank Sohar, (See BusinessToday, May 2007).

Bank of Beirut

Bank of Beirut commenced operations in the sultanate on December 18, 2006. Though is still early days, the bank is pleased with the progress that it has made in the last few months. Says Ramy Zambarakji, managing director, Bank of Beirut, “In the last two months we have tied up with ten major companies for providing banking services.” The bank plans to leverage its strengths to make inroads in the sultanate’s market. Foremost among them is its ten-country network. “We have a strong presence in Africa and Europe.” The bank has a US$400mn global balance sheet and it was the first to start retail services in Lebanon and has built up a vast experience over the years. “We have a strong treasury, which enables us to carry out complicated and sophisticated deals in an efficient manner,” says Zambarakji. The bank is a strong believer in following prudent banking policies. “For some reason there is an environment in which customers are offered a number of loans at low interest rates. This is good neither for the customer nor for the bank. Banks need to realise that there are other ways of attracting customers like providing value-added services.”