Economic overview and outlook
The economic environment remained challenging throughout the year predominantly due to declining oil prices. As with other GCC countries, oil and gas revenues remain a significant contributor to Oman’s economy accounting for more than 75% of government revenues. In previous years, Oman’s economy benefited from significant budget surpluses and increased government spending, though fiscal restraint may be a theme in the short to medium term.
As part of the 2016 budget, the government has announced a number of initiatives to enhance non-oil revenue sources which include raising corporate tax rates, limiting tax exemptions, revising the tariffs for utilities, revising real estate transactions and municipal fees, regulating allocations of commercial, touristic and industrial lands and revising fees of various other government services. Measures have also been announced for the rationalization of expenditure which include reducing the subsidy of fuel and delaying non-essential projects. With these measures, the budget deficit for 2016 is estimated to be OMR3.3 billion (US$8.54 billion), which is expected to be financed through local and international borrowings, capital receipts and withdrawals from prior years’ reserves.
With an expected decline in government revenues and reduced government spending, the banking sector may need to contend with challenges in the short to medium term. Alizz Islamic Bank (Alizz) will continue to pursue sustainable growth through strong and innovative product offerings, service excellence and operational efficiency and enhanced risk management.
Financial overview
Alizz’s gross financing receivables crossed OMR200 million (US$517.75 million) to reach OMR201.9 million (US$522.66 million), registering a growth of 185% from the end of 2014 while customer deposits increased to OMR161.4 million (US$417.82 million) from OMR15.3 million (US$39.61 million) at the end of 2014. Such phenomenal growth has resulted in an increase in net operating income by 210% to reach OMR5.99 million (US$15.51 million) for the year 2015 from OMR1.93 million (US$5 million) for the year 2014.
The bank achieved all its strategic targets in terms of growth, cost and profitability.
Growing in Oman
Alizz continued to expand its distribution network by opening two more branches in Muscat (Wattayah) and in Dhofar (Salalah), enhancing the network to six branches, in addition to a kiosk in Muscat Grand Mall which houses the Sultanate’s first-ever interactive teller.
Alizz is the first bank in Oman to introduce the interactive teller technology with NCR, the global leader in consumer transaction technologies. With the interactive teller, customers can complete a majority of typical branch transactions right at the ATM with the assistance of a live, remote teller. The bank has also introduced some new innovative products and services for retail customers, while significantly enhancing the security of card operations by introducing 3D secure services. The bank is one of six banks in the Sultanate that achieved EMV compliance status from the Central Bank of Oman, which indicates the level of strength and security of the bank’s network.
In line with the bank’s strategy, the following key initiatives and developments took place during 2015:
- The bank was assigned a long-term credit rating of ‘omBBB-’ (investment grade) on a national scale by Capital Intelligence. Alizz is the first Islamic bank in the Sultanate to be rated by an international agency and has achieved a strong investment grade rating at the outset. This demonstrates the bank’s competence as well as the commitment and support from the bank’s shareholders.
- Furthermore, the bank has signed strategic agreements with corporate customers for large projects expected to commence in the near future. This included an agreement with Shaden Development Company to provide long-term Shariah compliant financing facilities for the implementation of Phase 2 of the Shaden Al Hail Project. In addition, the bank signed a master Wakalah agreement with Oman Shipping Company (OSC) to invest in a number of the company’s projects. The financing agreement with OSC is the largest and first of its kind to be carried out by a fully-fledged Islamic bank in the country.
- On the governance front, Alizz was ranked among the top five Islamic banks in the GCC and the only Omani bank on the basis of financial disclosure score by the Middle East Global Advisors. The financial disclosure rating measures the extent to which customers and stakeholders are protected through disclosure of ownership and financial information. At Alizz, we value the trust placed in us by our shareholders and completely believe in the importance of corporate transparency.
Investing in our people and community
Our aim is to make Alizz a great financial institution for our customers; an organization that will earn their trust, and in turn win more of their business. It is a strategy that provides the fundamental building blocks to make Alizz an attractive investment, a great place to work for our people, and an Oman-focused bank that the country can truly be proud of.
To date, the bank continues to work hard to recruit talented and ambitious young Omani nationals, and by the end of 2015 we had 183 Omani nationals working across all divisions, representing an Omanization rate of over 88%, exceeding the percentage fixed by regulatory bodies for a newly established bank.
We also continue to invest in a wide range of activities that benefited the community at large, including sponsorship of local activities and events. The commitments set out in our 2015 Corporate Social Responsibility Plan were organized around areas where we believe we can have the greatest social impact.
Awards
Alizz has emerged as a well-known and highly respected brand in the marketplace by pursuing a clear strategic mission, maintaining a disciplined viewpoint and instilling enduring values in a team that is committed to excellence.
During 2015, the bank received several awards for its noteworthy performance across various business and financial parameters. The prestigious awards for its innovative products and services include the ‘Best Retail Bank in Oman 2015’ by Islamic Business & Finance. The bank is also the recipient of the ‘Best Customer Service in Oman 2015’ award from The Banker Middle East.
These awards and recognition are particularly valuable, as they acknowledge the merits of the bank’s successful business model. Alizz continues to transform itself as it faces the challenges and competes with being the newest entrant in the market. The renewed focus on customer and customer experience will make this a better organization for all stakeholders, especially customers, staff and shareholders.