Bank Dhofar SAOG (BKDB) Earnings Call Transcript & Summary

And good afternoon, everyone. I would like to welcome you all to the MSX discussion session where we'll be discussing the financial statement financial performance for the first half of 2025. Joining me today is our acting CEO, Mr. Gopakumar, our Chief Executive Officer; our Chief Islamic Banking Officer, Mr. Kamal Uddin Al Marazza; and our Chief Dhofar Financial Officer, Mr. Vikesh Mirani. And now with me today, I have our Investor Relations team, our Head of Investor Relations, Hilal Al-Yarabi, Sundus Al Lawati and myself, Maram Al-Hadhrami. As the bank continues to focus on expansion opportunities through the increase of footprint, our branch network has now reached to 141 branches combined with the expansion of our digital channels. Bank Dhofar is a fully fledged commercial bank, including an Islamic window of over 700 with serving over 700 retail customers. and the wholesale corporate customers of 4,700,000 with a robust capital position and strong financial performance. With this and to discuss our financial performance in detail, I will now pass it to our Chief Financial Officer, Mr. Vikesh Mirani, to take us through the investor presentation.

Thank you, Maram Al-Hadhrami, and good afternoon, everyone. Welcome to our first half of 2025 earnings call. We will be covering, as you can see on the slide deck on agenda would essentially there already highlights and the key financial performance for the first half of 2025. We will look at the operating environment where we operate in we deep dive into our business strategy, looking at the digital banking and some of the ESG initiatives that the bank has undertaken. We will then be looking at the financial performance in detail, both for the conventional as well as the Clomid banking. And with that, we'll conclude the presentation and open it up for Q&A. I will immediately jump to Slide #4, which shows our bank so far at advances at the end of 30th June 2025. Our total income stood at OMR 84.46 billion, which is an increase of almost 8.1% as compared to the same period last year. same period last year June 2024. Our total income stood at OMR 78.1 million. Our net profit for the first 6 months of 2025 stands at OMR 23.67 million which is higher by 7% as compared to the same period last year. Our net loans and advances and financing to the customers stood at OMR 4.17 billion, which year-on-year grew by 11.8%. And if I am to compare it to December 2024, grew by almost 6.1%, deposits at OMR 1.03 billion is higher as compared to last year same time by 13.6%. And if I have to compare it to December 2024, it grew by almost 7.18% and continues to be a growth story. Most of the deposit growth comes from the increase in savings deposit, which has grown by almost 19.9%, and we'll be covering that subsequently in my slides. Total assets stood at OMR 5.32 billion. Cost-to-income ratio stands at 48.9%. Our ECL coverage ratio as of the end of June 2025, stood at 95.6%. This has increased as compared to the last year. Last year same time, it was end of the year 2024, it stood at 94%. Capital adequacy at 16.2% and fee-to-income ratio continues to be a good story, and I'll throw some more light and context around it in my subsequent slide, stands at 29% in the first half. Our return on average shareholders' equity stood at 8.32%. And if I am to adjust this for the additional Tier 1, which is at OMR 155 million, my return on equity adjusted for AT1 stood at 6.55%. We have 15 nationalities working for time employees with our bank. 44% of that our women employees. We have 1 of the fastest growing branch network in Oman. As Maram-Al mentioned, we are now at 141 branches, 112 branches for conventional and 29 branches for some. We are rated by both Moody's and Fitch. Moody's very recently upgraded us at investment grade at BAA3 and Fitch rates are to rate us at BB+. Moving on. Next slide shows the geographic expanse of our branch network. As I said, 141 branches spread across the country in an which is conventional 29 some. Our branch expansion of branch growth journey has been phenomenal from 64 branches in 2022 to almost 141 branches now. This is an increase of almost 58 branches, both conventional, which saw an increase of 58 branches and, which saw an increase of 19 branches over the last 3 years. Our total ATM network, CDM and MFK network stood at [ OMR 356178 ] for cash deposit machines and 4 multifunction costs. Our market share in terms of assets, loans and deposits stands at 12% for assets, 13% for loans and 12% for deposits. We service almost 747,000 customers. This, again, has been a significant growth story for the bank somewhere close to 2022. We were a shade about 200,000 customers. Now we stand at 747,000 customers with 600,000 customers in our retail business 47,000 in corporate and SME or Dhofar Islamic services 99,000 customers totaling to 747,000 customers. Some of the awards, et cetera, that we have won in the first 6 months of 2025, the fastest-growing branch network in Oman from world business outlook. Best Bank MELA 2025, Gazeta International and Best customer-centric banking brand by Global Brands Magazine U.K. Moving on. Next slide shows the balance sheet, the P&L as well as the key ratios. Our balance sheet, what you can see on the top left, our net loans and advances, as I just mentioned, from 3.7% to 4.174%, an increase of 11.8%. And Investment securities from OMR 530 million to OMR 672 million, an increase of almost 26%. Customer deposit continues to be a good story, an increase of almost 13.6% from to OMR 4.33 billion as of the end of June 2025. Looking at some of the P&L income statement numbers. Operating income from OMR 78.2 million to OMR 84.5 million and increase of almost 8%. Operating expenses from OMR 37.8 million to OMR 40.7 million, an increase of 7.8%. And profit before impairment and tax was at OMR 43.8 million, an increase of 8.3%. Impairments increased by 8.4% at OMR 16.2 million net profit as a summation of all this at OMR 23.7 million, an increase of 7%. Some of the key ratios, total capital adequacy at 16.4%, which I just briefly touched upon in my previous slides. Our core capital CET1 ratio stood at 11.9% as against the regulatory requirement of 9.5%. NPL ratio at 4.75% and improved as compared to the same period last year by 36 basis points. Return on shareholders' equity at 8.32%, adjusted for Tier 1 additional Tier 1 at 6.5% and return on assets at 0.92%. Our net interest spreads marginally declined by 5 basis points, if I'm to compare it to the same period last year. last year, June 2024, the net interest spread was at 27%. As at the end of June 2025, when net interest rates stood at 2.2%. Cost-to-income ratio continues to improve at 48.19% and net loans to customer deposits stood at 103%. Next slide shows the performance trajectory over the last 11 years, particularly if I were to focus on period post COVID, the bank continues to increase all 3, which is total income, operating profit as well as net profit and the first half of results is what the first half of 2025 results is what we are discussing today in our earnings call.

Moving on, this slide shows the shareholder structure and our asset composition. We continue to be owned by both government and protection funds to the extent of 28%, creating a good, strong, sticky relationship with our German entities. In terms of total asset split as well as operating income split, we have a well-diversified business streams across all our 4 businesses, which is retail banking at 26% in terms of Google Assets. Wholesale Banking, treasury and financial institutions at 14 and to at 19%. Pretty much the same gets mirrored as far as my operating income is concerned. Corporate Banking, generating an income of 39% retail treasury and financial institutions at 14 and for at 17% in the first half of 2025. Next slide shows the key historic enrollments for Bank of since inception in 1990. I'll just focus on the first half of 2025. We raised OMR 31 million enter to subordinate debt earlier during the year. As we just mentioned, we now have 141 branches set across the country. We also did a successful acquisition of the Bank of Baroda Oman branch share in the first half of 2025. This presents a significant strategic partnership opportunities at the fashion institution stage for us with Bank of Baroda as well as some of large acquisition in terms of NRI customers that are now banking with us. In terms of overall customer numbers, if I had to look at retail, we acquired almost 6,500 customers. And if I look at corporate and assume over 700 customers were onboarded through this acquisition. Moving on some of the key strengths, we continue to be a leading fits in Oman, offering all banking business, including retail, corporate, treasury, sonic, private banking, wealth management and corporate advisory services. We work very closely with government and production fund, providing us to the strong government solvent support. We operate out of a stable, growing operating environment in Oman. We clearly enjoy a solid, robust capitalization at 16.4%, while our total capital adequacy and 11.9% for our CET ratios. As I mentioned, a very well diversified and smart distribution channel with a very expanded geographic footprint of 141 branches and experienced and seasoned management and or start to support the growth of our business. Looking at the overview of South Oman and again, I'll very quickly run through this. We are the second largest country in the GCC with the state political system population of 5.5 million. working towards the Vision 2040, which is the vision of government of Oman. In terms of our real GDP growth estimated for 2025 is expected to be 27% -- the sovereign is rated by all Moody's, S&P and Fitch and BAA3, BBB and BB+. Moving on, looking at the Omani banking sector, the banking sector comprises of 20 licensed banks, 16 of which are conventional, 2 state-owned specialized banks to full-fledged Islamic banks the total banking assets as of the end of May 25, stood at OMR 46 billion. Deposits at OMR 32 million and loans at $34 billion if I look at Islamic Bank, Islamic bank assets stood at OMR 9 billion, Islamic Bank continues to be the fastest growing in terms of overall growth in assets over the last 5.5 years. it has achieved a CAGR growth of 10.53% I'll spend some time on our strategy and give you some perspective and the thought process behind what we are doing. In terms of a purpose, we are a bank that is very relationship let. With over 141 branches our RMs, our customer service representatives, our management has a very broader reach to our customers. We are a bank that we believe we are easy to deal with. Over 95% of our customers, which are serviced at the branch channels are serviced within 10 minutes and 98% as far as Islamic banking is concerned. We do offer extended time in some of our branches to allow our customers to extend the time to bank with. Thinking long term, of course, we have been in business in 1990 and clearly working with our customers over a longer period of time is clearly one of the key aspects of our strategy. responsible and secure bank Fundamentally, this is quite critical to us, both in terms of the information technology, the information security spend, ensuring customer privacy as well as data security for our customers. With expanded branch network, some of our key strategic pillars includes digital engagement or Internet banking, mobile banking offers a very different experience. In terms of changing of debit credit content, if you are to use our digital channels, even changing our credit and debit card limits is what something that you can do on our digital banking channels. Customer centricity is at the heart of our decision-making is just not a buzzword over 95%, 99% of our customer complaints are resolved and address within the given time, promoting strong performance culture and delivering strong operational excellence continues to be one of the key focus areas for the bank adopting future-proof technology, and I can give you some examples. We are investing in our digital engagement help to continue to improve the customer experience we are looking at a new core banking solution for our salami business, investing in cloud-based technologies to improve the turnaround time and customer service continues to be a key focus area. In terms of our priorities, I talked about we enhanced digital engagement through our omnichannel as well as other digital channels. This continues to improve our customer experience acquiring more customers, I talked about the expanded branch network, the digital channels that we have now we are offering to our customers is something plus the improved customer service experience, which has allowed us to expand our overall customer numbers from a shade about 200,000 to 747,000 as of the end of June focus on simplifying operational processes as well as improving and achieving a healthy cost-to-income ratio continues to be our desire. You would have seen whilst we have expanded our branch network and invested significantly into new businesses, new departments. My cost-to-income ratio over the last 3 years continues to improve and now stands at it was at 57% just 3 years ago. We continue to prioritize our ESG initiatives across our businesses. Some of the key items or areas that we are focusing on. For example, we would have brought us the introduction of hybrid electric cars in our Muscat region, again, ensuring our environment-friendly initiatives. This is something that we will expand to our other regions as well slowly. Other CSR initiatives as well as environmental and social cause initiatives is what the bank continued to look at and invest in use of data, analytics and technology to improve both customer service experience and performance continues to be an area that the bank focuses on, our voice of customer program enables us to deliver a better customer experience for our customers. We follow our disciplined risk management approach, investing in information security, as I talked about, as well as improving and increasing awareness within the organization is again an important area that the bank continues to focus on. Our people and HR practices are again the center stage when it comes to operational excellence. Over the last 6 months, we have completed almost 5,000 e-learning for our stock over 1,757 million instructor-led training sessions were conducted by our HR department. Our reward program attracts and onboard so fresh graduates -- we have also launched 4G our leadership program to develop our upcoming leaders in the organization. So there's 1 slide that I would like you to focus on it is just the slide any single word that's put out in this slide is really what drives our business and drives our strategy, price our actions. So I to start, I'll let you know that. The second.

Thank you. Moving on to, I talked about technology. I talked about data relationship management performance, our operational excellence. And as Mr. Gopakumar mentioned, these are not just words, but clearly, strategy that we are adopting and applying. And this is what it really translates into. We are able to know with the use of technology and operational excellence, et cetera. are able to serve our customers within 10 minutes. Over 96% of our customers were the conventional branches and over 98% of our customers were served within 10 minutes in our stomach banking business. And this is a statistic that we follow every week and continue to improve on this as far as our customer experience is concerned. Moving on -- this slide shows the ESG initiatives that the bank has adopted. We have formed a sustainability office within our strategy setup, and this continues to be an important focus area for the bank. We have published and you can see that on our website, sustainability reports for the year 2023 and 2024. We continue to prioritize our sustainability initiatives, and this is again in line with the 2040 vision, an important area that the bank is focusing on. Moving on, this slide shows the segmental split of my net profit, operating revenues as well as some of the key segment highlights. As I mentioned in my previous slides, my retail banking at 30%; corporate and wholesale at 39%, treasury at 14%, Islamic banking at 17% was the overall contribution to the top line. In terms of retail business, we served 600,000 individual customers, offering them a diverse range of products, serving priority banking, private banking, premier banking, which includes Alberto Wealth Management, on ladies and student banking over 47,000 SME corporate banking customers are serviced through our wholesale banking, corporate banking business. were in which we are offering tailored services to our large corporate customers, project finance, syndication and other corporate banking facilities. Our government banking unit focuses on deposit mobilization from German and quasi government entities. -- treasury and financial institutions manages funding, liquidity and offers various products to our clients, which includes money market, currency swaps, interest rate actions and plan well-do currency transactions. So far, Islamic services over 99,000 customers, offering them Sharia-compliant products and again, covering all parts of business, which includes retail corporate treasury and investment banking services. I have broadly touched upon some of the key digital banking initiatives that the bank has undertaken. So whilst we invest in expanding our geographical footprint. Digital banking is again a space where the bank continues to invest. We have launched multifunctional costs which allows us -- which allows our customers the statement printing, checkbook issuance as well as debit card issuance facilities, launch of Dhofar Pay, Samsung, Apple Pay from our mobile devices new soft parts for customers allowed us to expand our cost network very quickly to various merchants, a new mobile banking app, WhatsApp banking services as well as digital onboarding of customers is, again, an area that we have invested in direct API integration with ICICI and Internet banking for international, again an area that the bank has invested in I talked about enhanced card management services on our digital banking platforms which includes setting resetting debit and credit covenants as well as changing the debit card limits that can be achieved towards digital banking channels. we now deep dive into our financial performance. Our consolidated P&L, our net interest income stood at 59.94% marginally, very marginally lower as compared to the same period last year. As I mentioned, our net interest margins have marginally declined from 27% to 22% as of the end of June 2025, this is on account of the 100 basis points cut that was seen in the last year in the first -- the last quarter of 2024. Some of the asset yields have declined slightly ahead of the overall reduction in the cost of funds. Fees and other income continues to be a brilliant story with a growth of almost 37% this growth in its entirety is coming from our core businesses as well as transactional businesses, and I've got a separate slide that touches upon that. Staff, my overall cost has increased by 7%. Now you would have seen the cost increase in prior periods was ahead of the market. In fact, last year, it was at 14%. This was clearly because of the investment that the bank was doing or has been doing over the last 3 years, both in terms of branches as well as new businesses. This increase in pace has not slowed down to 7% and not pretty much in line with the market. Our operating profit stood at OMR 43 million, an increase of 8%. Net provision, which is the cost of risk stood at OMR 16.19 million. My overall cost of risk is at 80 basis points it continues to be higher as the guidance that we had given in our previous call. We expect this to be in the same range of 70 to 80 basis points as we did some of our legacy exposures after which we expect this to decline. Our net profit assertion of all this stood at OMR 23.67 million as of the end of June 2025. Looking at Islamic banking numbers, our operating income, again, pretty much mirrors the same story as conventional an increase of 21%, stood at OMR 14.47 million. Fees and income, other income at 22.2% or OMR 3.61 million Net impairment losses on account of some of the legacy exposures that I talked about, which is also having a bearing on my overall cost of risk essentially emanates from our clonic banking, and we continue to make prudent provisioning in our Islamic banking business at OMR 5.25 million. because of which my overall profit net profits declined as compared to last year, particularly in Islamic business at OMR 1.93 million. In terms of overall balance sheet growth, our financing increased from OMR 730 million to OMR 810 million, an increase of almost 10% with both wholesale and retail banking business growing. My customer deposit continues to be a very good story as far as Islamic banking business is concerned. The Islamic banking branches went up from 10% to 29%, which is almost 3x over the last 3 years. This is clearly getting reflected in the overall increase in my CASA balances. This is again something that's a wonderful story because balances in some business stand-alone went up from 40% to 53% year-on-year in the last 1 year. Most of the growth, again, in my overall CASA comes from both savings deposit and conventional and overall cost selling crease and my lame business. Maybe you can ask if.

Yes. It's will just give the short day about the pain set being established 200 there at that time that Maserati services. So until December 2023, we will have decided to rebranding to the pari passu and the branches network grown from 10 branches as to the branches. So regarding as because of the expansions and the branch expansion in the country we increased the as our CFO mentioned, we each deposits, but we stand today 800 and 3, and this is the which is the successful story of the part is remit in terms of increasing deposits as overall Italia and all in other deposits are good in terms of corporate and SMEs and we have the replicates as overall. Thank you.

Thank you for the sights. I will now take you to the overall gross loans and advances. I did touch upon this 11.8% is the overall growth. You can see the growth is coming from both wholesale as well as the retail business. Some of the key areas where we've grown in the businesses or the segments where we've grown in retail at [ 140 million ] trading, manufacturing, even government and institutions so we've seen an increase in our overall loans and advances across all our businesses and segments. This slide, which is Slide #21, covers the credit quality. What you see on the top left is the NPL, both in terms of absolute numbers as well as the NPA percentage. NPL percentage gross stood at 4.75% as of the end of June 2025. It peaked at 5.8% as of the end of 2022 and has since declined to 45%. Our Stage 2 exposure stood at OMR 776 million. as compared to OMR 840 million in 2023. Again, in terms of the overall coverage on stage 2 stood at 10.21% at the end of June 2025. My nonperforming coverage stood at 95.6% and my Stage 3 coverage ratio and 52.83%. We did write off some of our NPLs last year and earlier during this year. which has resulted in a coverage ratio of 2.83% as far as Stage 3 is concerned. And as I mentioned, with an elevated cost of risks associated with my book at 70 to 80 basis points. We plan to improve this in the next 3 to 4 quarters. Moving on funding and liquidity. Again, as a good story at 13% increase year-on-year coming both from CASA and largely from CASA and that flow from our savings deposit, which went up by 19.9%. We also saw market share gain as far as our savings deposit is concerned, and we continue to aggressively pursue our strategy on improving our CASA in the coming quarters. This slide shows our profitability and the chart that you see on the top left gives a split of NII coming from conventional or profit income from as well as the fee income from all our businesses. As I mentioned, our fee income continues to be a good story -- this is something that we continue to aggressively push for I have given this guidance in my earlier calls. Our fee to total income ratio was low of 14.5% earlier in 2022. The fee income continues to be our top focus areas and now stands at as of the end of June 2025. We retail, corporate, treasury, financial institutions, Islamic Bank or trade business continues to contribute to our fee income. We started -- or we started with some new business opportunities such as private banking, wealth management, corporate advisory in the last 1.5 years, and that also has started contributing to my overall fee income. As I mentioned, the increase has largely come in from my core businesses, and that is reflected in the table on the bottom left of the slide, our net fees and commission income last year, which is 2024 for the full year stood at $28.5 million, which again is my core business stands at OMR 16 million in the first 6 months of 2025. Miscellaneous income, which is largely the other income at OMR 1.2 million last year and OMR 1.1 billion for the first 6 months in my overall FX, which is largely transactional fees and investment income stood at OMR 7.2 million in the first 6 months as compared to OMR 8.8 million for the full year 2024. Moving on operating expenses, while in terms of operating cost-to-income ratio peaked at 57% as of the end of 2024 continues to decline and stands at 4.2%. And clearly, whilst we made significant investments into our business and technology, including some of the new businesses that we had set up required investments into the business. which led to a higher cost to income ratio, which has now slowly coming down. We expect this to gradually come to market levels in the next 3 to 5 years as we continue to improve our operational efficiencies as well as gain top line momentum. Looking at our cost of funds and net interest margins. If I compare it with December, to June 2025. My asset periods have declined by 24 basis points. This is on account of some of the pressures, of course, that we are seeing on asset which has come after the reduction in our overall interest rates, fed rates over the last quarter of 2024, which were in which we saw 100 basis points decline. In addition to that, our loan growth that's coming from mostly government sovereign and sovereign businesses as well as retail businesses, leading to a 24 basis point decline in need this is, in fact, also being seen in our overall cost of funds, if I compare it with December 24 to June 25, my cost of funds in that period has declined by 37 basis points from 4.4% to 3.7%. Clearly, it's not only the reduced cost of funds on account of repricing of term deposits, given the increased saving deposits and cost as well as the increased CASA in some banking is driving down the cost of funds. Overall, net interest spreads, if I compare it with December and June, there is an increase of 13 basis points. However, if I have to compare it with June of last year to June of current year, it's a margin 5 basis points decline, as I mentioned, in material slides. Looking at the capital position. The bank enjoys a healthy capital adequacy ratio of 16.4% and a CET1 of 11.9%. By total risk-weighted assets as of the end of June 2025 stood at OMR 4.4 billion. And the bank has a history of dividend payout last year, which is probably at 2024, the bank declared a dividend of 8%, which included 1.45% of stock and 6.5% of cash dividend. With this, I'll conclude my presentation, leaving you with some of the key thoughts, which I broadly covered in my presentation. And with that, I will open this for Investor Relations team. So my fee-to-income ratio a wonderful story this is a guidance that we have given to the market over the last 2, 3 years, continues to be a focus area, and we continue to grow on this. Our net profit increased by 7% year-on-year -- our CASA ratio continues to be, again, as I said, the key focus area stood at 48%. The growth coming both from savings deposit as well as Islamic business. Our geographic footprint expansion through expanded branch network stood at 141 branches, 12 conventional 29 Islamic. We continue to have an experienced management team focused on driving performance along with a very experienced staff, which is delivering operational excellence for our businesses. With that, I will pass this back to my Investor Relations team and we'll open this up for of your questions.

Thank you, Chief. [Operator Instructions] I have just a few questions. My first question is that the net loans that you mentioned have increased by 11%, 7.8%. So what are the key segments contributing to the growth? And can we expect a similar pace of growth to continue in the second half as well?

Thank you, Maram. Thank you for your question. And as I had covered in my slides, the net increase in the loans which is at 11.8% as compared to June of 2025, for 2024 and almost 6% from the start of the year is broadly coming from our retail business. Our retail business saw an increase of OMR 114 million. Trading manufacturing also contributed to an increase of OMR 48 million and OMR 49 million, respectively. But our low growth has also come in from some of the government and government initiatives that we have participated into, in fact, almost $153 million of increase came from that sector. In terms of our outlook, as I had mentioned earlier during the year, we do expect this to be in the high single digits. So while I look at June 24 to 25, it's 1.8% plus 6 months, it's been around 6.1%. The end of the year, we would expect this to be upwards of single-digit high single million growth.

Just 2 more questions. As you mentioned, Islamic financing has been growing steadily. So what proportion of the new loan growth is expected to come from the Islamic side?

Islamic banking is overall book is at OMR 3.9 billion. If you look at slam business, same business stands at around in terms of absolute numbers stood at -- sorry, OMR 736 million. So it's coming from a small from a smaller base. So overall, we would expect the comic business to slightly outpace the overall growth in conventional book. But in terms of absolute numbers, we will continue to see higher numbers coming from the convention business. Clearly, in terms of the opportunity and give us we operate both the commission business as well as, we look at customer requirements and then are able to provide both the conventional as well as some business solutions to our customers, expanding both the product reach as well as the nature of products that our customers are really require.

Okay. Understood. And also in the first half, the other operating income also was high. It has increased from 3.2% to 4.4%. So what was the reason for this? What was the other operating income?

As I mentioned, other operating income includes some of the miscellaneous ties, which again forms a small part of around OMR 1 million. In addition to that, we also have FX income, which is shown as at, which is largely transaction-related. So with the expanded customer numbers that we currently work with of 47,000 largely the FX income, which is getting generated from our SME corporate and Islamic business is what is leading to the reason the operating other operations. This is going to be sustainable. Yes, we do believe so. As I mentioned, since most part of it is FX, we expect this to be sustained. That's it promise.

Our next question. Go ahead, please.

Yes, congratulations on a good set of numbers. Just a few sort of observations comments from my side. You spoke about loan growth, and it's interesting you mentioned one of the key areas was retail. If I look at the segmental breakup as of June, and I'm talking of retail banking, if I look at Y-o-Y basis, you've seen a 6% growth in loans and a 21% growth in deposits. And on a YTD basis, I think that number is on a slight decline. Can you just comment on that?

In terms of retail business, we clearly over the last 6 to 12 months vision, our strategy as far as branch expansion was broadly focused on lability led growth and that's why I mentioned we have grown our savings deposit by over 19.9%. But again, whilst we continue to focus on our liability led growth, -- we have also now takes on it. We are also now focusing aggressively or rather focusing on our retail loan growth as well. So the overall growth on the liability continues to be a key focus area. So that's the reason why you see a higher liability growth as compared to the loan growth as far as retail business.

Understood. Fine. Okay. That makes sense. I can already see the profitability flowing through on the retail banking side. You had a net profit of OMR 3.8 million for FY '24. And for 6 months, that number is already at OMR 6 million. So I can see the growth there. So Kudos to the team over there and the strategy of branch expansion, which is against conventional sort of approach. So congratulations on that. You spoke about your net interest margins and the spreads. And that, if I'm not mistaken, is at 2.22 as of June. What's an aspirational number when you look at your peers and in the market? And I understand there's been a -- there's a reason why it is where it is compared to competition. But with the initiatives you've taken and the focus that you have what sort of aspiration number do you have? And sort of what's the goal post in terms of the time frame to achieve that? Because that would be a key determinant on the core business side to achieve a higher profitability, ROE, et cetera, right?

Thank you. And yes, it is 2.22% as of the end of June 2025. If you ask from my aspirations, clearly, we need to go step up on these numbers. And there are various strategies that the bank is deployed to get there. I wouldn't want to put a number, but if you look at my numbers, 2022 numbers, our total net interest margin used to be 25%. So expanded CASA is 1 area that is definitely going to help us data about that strategy. in terms of our overall managing of liquidity is, again, in the area that the bank continues to focus on -- so that's again an area that the bank optimizes in terms of improving the overall gains and overall net interest margins. So in the short Well, with the volatility that we will probably be seeing as far as our interest rate environment is concerned, I do expect a marginal decline because as the interest rates go down, the overall yield to be -- tend to come down at a faster pace as competitors it because the term deposits, we have the on maturity time line. But in the longer term, with the expanded cost as well as the overall liability rate strategy that the bank is deploying and reducing its reliance on the high cost deposit, I expect my overall net investment margins to improve from this age.

Sure. This is more of an academic sort of query than an observation. Historically, what we've seen at the peak of the interest rate cycle was that there was almost very little difference between what sort of current account or a call account was yielding versus, let's say, a term deposit. And some of the banks had a decision to make in terms of offering higher rates to customers but not having flexibility of retaining that money when sort of the interest rate cycle turn. And part of the decision was to probably convert them into term deposits because you were anyway paying with a very, very thin margin of what the call account was yielding, but at least having comfort of having these deposits locked in for, let's say, 1, 2, 3 years, depending on what sort of terms you look at.

Now where do you see those spreads between, let's say, a call account versus a term deposit? And sort of what sort of conversations are you having with your key clients on the liability side?

Thank you. And you're absolutely right, is when the interest rates were not to speak, that's the behavior that we observed then lately, of course, after the 100 basis points cut that we've seen, the gap now seems to be widening a bit. Call and current tend to be higher priced in a way and as we all know, it's not really very sticky in nature, and we tend to be price sensitive. So whilst that spread widens there the tendency of customers to move into term deposits and lock in a rate that are available currently. And I would expect this behavior to continue as we see the rates declining. Of course, as an offset clearly and to avoid that kind of volatility from our balance sheet and pain. That's been one of our key focus areas. So you've seen over the last 3 years, -- the focus has been to increase the savings evolve. And that's aggressively the strategy that the bank has used to pursue -- so you're right. So there is an element of volatility in terms of the spreads between call cure and the behavior that it tends to drive depending on where the interest rate went -- see to hedge this or mitigate this increase in the increase in the deposits. I think as you rotate or otherwise, One or 2 things in terms of consolidation of the pension funds, consolidation of a lot of government entities together. So the bargaining power shift has happened in the country in terms of the corporates and the banking sector. So the branch expansion that we entered into is primarily 1 of the main reasons is to mitigate against that. and to have a sustainable reduce the cost of funds going forward, which I think as you saw from Vikesh's presentation that the cost of funds we were able to reduce because of this strategy. as we work hard to get those businesses in the branches, in our network, our assumption on the aspiration is basically on a sustainable basis, reduce the cost of funds and state at a particular level that we are comfortable with, so that the difficult bargaining position or the change in the bargaining position that's not affected in a major manner, the cost of funds of the bank going forward. At a macro level, that's really what we are looking at.

Right. And one last query from my sand before that credit where it's due, I followed the journey of Bank of Baroda very closely and as a keen observer, you pretty much walked the talk, especially when it comes to fee income. So congratulations on on sort of continuous growth over there. We've seen some phenomenal growth over there. And we're currently at 29% on fee income ratio, what sort of more juice do you see over there? What's an aspiration number over there? If you could just comment on that?

Thank you. And thank you for that clearing. We had -- we did talk about this and continues, as I said, to be a key focus area -- we did come from a smaller base of 14.5%. That was the total ratio in 2022, now at 29%. So is most of our businesses be it corporate, retail, treasury, financial institutions, systemic banking started generating a reasonable amount of fee and in line with the market -- we did talk about some of the new business initiatives that we had undertaken or have brought in into our businesses over the last 2 years. which is basically wealth management, private banking, priority banking as well as our corporate invoicing businesses. Now these businesses are in managing businesses. Now these businesses have started contributing, but we do expect the contribution coming from these businesses to accelerate further. So I do see some more upside into our overall fee business in coming quarters and we are hopeful we'll be able to take it further from them.

We have last query from my side.

Sure. Sorry, please go ahead.

We have steam let base taking on a look forward to that, I wish you a test 1 last way from my side is what would be a target or aspirational cost of risk. We saw a slight spike in Q2. You mentioned the reason for that. And we've seen sort of the journey on that book as well. what would be a sort of more optimal cost of risk sort of target from your side?

The cost of risk, as I mentioned, this was the guidance that we have issued earlier during the -- and then we were looking at 6 quarters of elevated cost of risk. We have already 2 quarters. And now I believe we are pretty much at the tail end of it. Currently, we are at between 70 to 80 basis points in terms of cost of risk I expect this to be pretty much a similar -- in a similar range over the next 4 quarters. The market cost of risk tends to move from as low as 2% to 60% level. We expect this to come down significantly once we are on some of these key challenges are behind us, key legacies. So I do expect this to gravitate towards some market and better than market level in the office. So a year from now, we should be 25% lower than where we are today. but in a couple of years, we should be nearly 50% lower than where we are.

Excellent. And this is with 100% provision coverage ratio or say, between 95% to 100% provision coverage ratio?

No. What was the IFRS models indicate and the requirements, I'm saying complying with those things. I don't have a number on what's the overall number in terms of the coverage.

Okay. Got it. That's it from my side team. I wish you all the best.

Thank you.

We have one more question from I just had a couple of questions. Starting with your deposits. You have seen some tremendous growth year-over-year in your deposit base, but if you're looking at it sequentially compared to March quarter, we have seen a small decline in deposits. Could you please give some light on it?

Thank you. We thank you. And if I look at my March numbers, and there was a question that I was responding to earlier used by ambition and 1 of that was with regards to the the lower stickiness that is associated with some of the call and current deposits that we have. And there was some one-off current deposits that we had as of the end of March. That essentially moved out so that's pretty much what's offsetting the money cost -- so you will see my consol growth while continues to be quite healthy as far as savings deposit is concerned. That non-sticky portion of my CASA led to that margin decline between March to June.

Right. And one last thing from my side is, although you have touched in detail on your impairment cost. We've also seen a significant surge in impairment cost, particularly in this June quarter. It went up close to 50%. And when you say that these will be normalized in the upcoming quarters. Should we be expecting this current number to sustain? Or should we be -- should we expect the number that we had seen in the March quarter to be there in the next quarters?

Thank you,. So as I mentioned, my overall cost of risk on a YTD basis is at around 80 basis points. I would expect this to continue to be in this range is between 7 to 8 basis points over the next 4 quarters.

All right. Thank you, thank you. Yes, can have.

Thank you for the presentation and the answers so far. Just a few follow-up questions on the answers so far. Now 1 is on the provision coverage that you have mentioned, you said you don't have a number, but the number -- the cost of risk will be higher going forward for quarters. I just wanted to pick a brain on what's the trend in NPL that you are seeing. Right now, we are at 4.8%. We have been coming down from an elevated level and is stabilizing. But when you say the credit cost will be higher and probably the coverage ratio may not improve or it could improve. You said you don't have a number, but you will be combined with your regulations. So what's the trend that you are likely to see in the NPL ratio?

Thank you, for the question. Yes, you're absolutely right. The NPL ratio, which peaked upwards of close to 6%, almost 5.8% in 2022 has since then declined to 4.75%. We do expect this ratio to stay under 5% voice in the coming quarters. Clearly, the additional provisioning that the client continues to make should help improve the coverage ratio. But as Mr. mentioned, coverage ratio is really a function of where we are on the LGD curve as well as as well as the level of collaterals that we carry on our NPL book. So that's really a function of that. But yes, in terms of our NPL ratio, we do expect this to be sub 5% in the coming quarters. See, I think I will go back to the previous question. also about what happened in this quarter, the level of provisioning or the ECL increase as compared to the previous quarter. I think what I'd like to say there is -- some of the provisions of the ECL that we are taking more were cautionary in nature. It's not necessary that there have been an additional classification or increase in NPA. And our neos to work to solve or the issues with respect to the stress in account, if we are able to sort out distress or solve that even a lot of provisions that we have taken or we are taking now might become really a surplus as well. So I think I don't want to give the impression that look -- it is going to be a one-way street in terms of only increasing the provision, it can very well be that if we are sorting out the stressing account, there's a lot of promotions that we have taken could actually become a surplus as well.

Understood. Very clear. Also another question is, could you throw some light on the liquidity outlook, your loan to deposit ratio has been on the side. Yes, you bear focusing primarily on the liability side through brand expansions. So what's the ideal loan-to-deposit ratio from a modeling perspective for maybe next year or 2 years down the line?

So just in terms of the notes to deposit ratio, again, if I take you back to the history, just a couple of years back, which is 3 to 4 years back, our loan-to-deposit ratio was similar in the range of 118% if all correctly. 103% of the current loan deposit ratio is something that we believe is sustainable given we have additional savings deposit, which is really supporting our liquidity ratios. In addition to that, we very intently, I talked about the subordinated debt at the bank has raised that also supports the overall liquidity. So it's really the mix of liquidity that has changed over the last 3 to 4 years. that's been the focus area. And we lost to say the bank continues to focus on ensuring the regulatory ratios are always being able to -- so to answer your question, for your modeling purposes, I think this is the range that you should be looking at.

Got it. Perfect. One more last question, and that's to Mr. by you been continuing as the acting CEO for the last 1 year, I wanted to check why the bank has not appointed a full-time CEO yet. Is it something internal? Or is it something because of issues with the regulator?

I think there's no issue. I'm doing the job with you just what is most reported is the job getting done. And I think the results speak for itself.

Absolutely, absolutely. Thank you very much. Yes, that's it.

Thank you very much. Thank you there are no questions, we can conclude today's meeting. Thank you, everyone. Thank you. Thank you very much the investor and invest commented analysts and everyone to have taken your valuable time to be on the call. I hope you found it so as always, we try to be as transparent as possible in terms of providing the information and answers to your questions and look forward to your continuous engagement. Thank you, everybody.

Thank you.