Bank Muscat SAOG (BKMB) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, everybody. Thank you very much for joining us today. It is my privilege to welcome all of you for this session of us presenting to you the results of 31st December 2024 for the bank and having a subsequent discussion and question-and-answer session for you. Thank you again for taking the time to join us. I'm joined today -- myself, I'm Waleed Al Hashar, Chief Executive Officer of the bank. I'm joined today by Ahmed Al Balushi, Deputy CEO of Banking; Ganesh, Deputy CEO of Finance and Investment Banking; Sheikha Al Farsi, Deputy CEO of Operations. So first, I think I will start with the disclaimer, of course, this is a very important slide, although even though it's administrative. The presentation contains the statements relating to the bank's business and have been prepared based on publicly available information. It's for discussion purpose. It is not made for inducing buying of the shares or selling of any of the products or services of the bank. [Foreign Language] So I would run through the context of -- the contents of this presentation and the focus will be on the operating environment, the banking sector, our strategy and key business lines and some key financial highlights for the results -- of the results for the year ending 31st December. And then subsequent to that, I will take questions from the attendees. In terms of the operating environment, in 2024, actually, which is [Foreign Language] no exception compared to the previous 3 years has been -- the economy has been scoring on a third consecutive year of surplus, amounting to just a bit above OMR 0.5 billion. Oman's economy continued to expand in the first 9 months. In fact, the real GDP has witnessed a growth of close to 2%. This is, in fact, despite growth in the contribution from oil activities, because of some oil production curves, and what was encouraging that it was mainly from increasing non-hydrocarbon activities, which surged by about 5% growth. The favorable, of course, oil prices, acceleration in non-hydrocarbon contributions, the reforms that have been initiated and implemented over the past few years, the reduction in the public debt levels, these are all factors that, in fact, continue to shore up our fiscal -- the country's fiscal deficit and its financial position. The efforts, of course, further -- to further improve the business environment, the budgetary project allocation, support to SMEs, accelerating investments in renewable energy and green hydrogen, also the government's strong commitment to diversifying Oman's economy highlights its strategic approach for fostering resilience as well as sustainable development during what we know to be a volatile global economic period, and this has been actually continuing over the past several months. The headline inflation in the economy averaged about 0.6%, and this is almost half of what it was. This is between January and November '24, half of what it was in 2023, reflecting an easing of core food and transport inflation. In terms of public debt management front, this is also quite an encouraging and a good story. The government was able to utilize oil revenue surplus generated in the last few years and paying some of its outstanding debt and reduce the impact of what we have seen as rising interest rates over the past 2 years. The debt-to-GDP ratio has reduced from the high levels of 61% in 2021 to almost half now to 34% in 2024. And further, the government actually anticipates another 13% reduction -- sorry, the government anticipates a 13% reduction in debt servicing costs in 2025. And this is all due to marked improvements in the fundamentals and in 2024, what's a good story also there is Oman gained back it's investment-grade ratings after a period of 7 years. Looking forward, in terms of the 2025 budget, it highlights a good and significant economic activities including developments and investment expenditure and several strategic projects, along also continuing the social and basic spending in key sectors of education, healthcare, social welfare and housing. And the -- of course, the government and Oman is guided by Vision 2040. It continue to be a press forward with broad array of reforms with the goal to achieve strong job rich, sustainable private sector-led growth in the economy and ensuring high living standards in the country. [Foreign Language] We move now to the banking sector overview. The banking sector continued to grow, and it also continues to play a vital role in supporting the economy of the country. The banking sector has also shown robust financial indicators over the past few years and 2024 was no exception. The regulatory oversight and the prudential guidance continue to support the sector's resilience and it shielded it quite well from adverse impacts that have been experienced globally. In fact, we recently released financial stability report in 2024 by the Central Bank of Oman highlighted this and highlighted the country's robust financial system. Despite all of these global challenges, geopolitical tensions, tightened monetary policies and so on. And the CBO, in fact, states that while global inflation and economic uncertainties persist, Oman's financial sector has shown resilience supported by high oil prices and more importantly, fiscal discipline. And the banking sector has also reported strong earnings very strong capital positions, ample liquidity and low non-performing loans. But over the past few years, banks have, in fact -- have invested heavily in technologies. And this is to reposition their offerings and continue to invest in technology and digitizing their operations expanding their physical branches, making sure their digital networks are also expanded. So all in all, these are investments for the future and are continuing in the banking sector. There was good growth momentum. This is supported by the economic recovery and positive macroeconomic indicators of the country. Credit, in fact, increased to OMR 32.5 billion, witnessing a growth of about OMR 2 billion or about 6.7% over the level achieved in 2023. This -- and then deposits have also increased to OMR 31.7 billion, that's about 9% amounting to an annual growth of about OMR 2.6 billion. Islamic financing and customer deposits contributed to 21% of the total sector and grew annually by about 14% and 21%, respectively, in 2024. As I mentioned earlier, on the backdrop of Budget '25, which promotes expansionary investments in key core sectors of the economy. And then also given the elevated or comfortable levels of oil prices, the positive macroeconomic outlook, and the government's serious focus on reforms and development strategies, we expect that it will be giving quite a good momentum and a much needed booster for the sector growth helping it achieve even better financial performance and hopefully a stronger financial position for all the banks in Oman. [Foreign Language] This slide, we can see a stable growth of the key parameters in the banking sector, compounded annual credit growth of about 4.7% registered over the last 5 years, which is quite healthy, including the disruption created by the pandemic during this period. Similarly, a compounded annual growth of 6.1% registered in customer deposits over the past 5 years. And over -- after having recovered back to pre-pandemic levels with a 21% growth in 2022, and a 11% growth in 2023. The profits of top 7 Omani banks showed further improvement of 15.2% in 2024. The sector is likely to grow and continue to grow at a similar pace in terms of credit and deposit growth going forward. Also due to the global geopolitical scenarios and situations and uncertainties and interest rate situations, banks will have to continue to tactically manage liquidity. But in the medium term, we expect that there will be -- there will definitely be a good and stable performance. [Foreign Language] In terms of Bank Muscat strategy, the bank's vision is focused on key strategic pillars, and they continue to be our customer centricity, our market leadership, efficiency and productivity and innovation. These are focused to serve our -- all our stakeholders better every day. And our stakeholders are our customers, our employees, our shareholders and societies we operate in. We focus on leveraging our strong branch value, our financial position and our good human resources. All of these are strengths that the bank has to deliver best possible value for all of our stakeholders. [Foreign Language] In terms of a quick snapshot of the various business lines of the bank. The bank is -- continues to provide all banking services with well-established lines in corporate banking, personal banking, wholesale banking and Islamic banking services. All of these lines have been performing quite well over the last few years and proving -- providing healthy profit contributions. In general, the three lines, corporate, personal and wholesale banking contribute around 26% to 35% each to our profit line. And Islamic banking contributes around 3% to 4%. Our overseas operations in fact, are showing continued growth. And this year in 2024, have contributed 3% to our bottom line. Islamic Banking continues to do well and has shown healthy growth since inception. The slide on the right shows that the bank does have a well-diversified loan portfolio and the deposit portfolio is quite strong, which is driven by retail deposits and supported by government and private sector deposit. [Foreign Language] In terms of some of the key financial highlights, this slide talks about the bank's financial performance, which ended in 2024. You can see that the top line performance was strong in spite of, like I said before, continuing global and regional challenges, the bank has always been agile in terms of balance sheet management and funding dynamics, which helped us to post this healthy net interest income. Also, the net profits were higher by 6.2% over the last year with healthy business growth and moderated credit cost. In terms of non-funded income, it has improved in 2024 by 5.1%. Operating expenses increased by about 6%, which is relative to the growth in the bank's loan portfolio, showing a growth of 3.6% year-on-year basis. Deposit portfolio has also shown a growth of 3.6%. In terms of total asset quality -- in terms of asset quality, the total provisions are about 1.7x of the NPLs of the bank, reflecting healthy provision levels. [Foreign Language] In terms of operating performance, this slide provides a quick snapshot of that. You see that the bank's NIMs have been stable over the last 5 years. The bank has been able to manage the yield and funding costs to maintain the NIMs at these -- and to maintain these NIMs. Also in terms of efficient balance sheet and liquidity management timely portfolio repricing and deploying agile heading strategies, all these have helped us maintain and grow the NIMs and keeping them sustainable over the past few years. The bank's fee-based income was also quite able with a healthy level of 31% to 35% of total income throughout this period in 2024 cost-to-income ratio has actually reduced to 38 -- sorry, it's increased marginally to 38.6%. Nevertheless, we see it at quite a healthy level at 38%. The ROE of the bank has also witnessed a significant improvement from lower levels of 9% in 2020 to reach 12.7% in 2024, after reaching 12.69% in 2023. So it continues to grow. ROA also continues at a healthy momentum, 1.64% compared to the last 5 years when it has reached a low of 1.3% in 2020. [Foreign Language] In terms of the asset quality. The slide provides trends on asset quality over the past 5 years. You can see that the bank has been able to maintain the NPL ratio at around 3% to 5%. However, the coverage ratio continues to be at a higher level of ranging between 135% to 170% over the last 5 years, reflecting prudent and agile policies in terms of managing the asset quality. As I mentioned earlier, the bank's gross loan portfolio is quite well diversified, well managed, with prudent credit policy, the bank was able to grow the gross loans by 4.4% during 2024 after growing the base by 4.7% already in 2023. The bank continues its prudent provision and credit policy, making sure that our stable performance continues. [Foreign Language] In terms of funding and liquidity, the bank has a well-balanced funding mix on 70% of the funding coming from customer deposits and the balance through interbank borrowings and equity. This has been the situation and the prediction for the past few years in fact. And it continues to hold high level of liquid assets over the last 5 years. And as I mentioned earlier, the bank's capital position is one of the highest amongst Omani peers and one of the strongest amongst also GCC peers as well. And if you can see that the capital position is largely driven by core equity capital along with retained profits after paying healthy dividends over the past many years. [Foreign Language] That was my final slide. We'll now move to a question-and-answer session. [Operator Instructions].

I have a few questions if I can continue?

Yes, please.

Yes. I have a question on the non-interest income. Your net fee income declined by 5% in fourth quarter and the operating income also declined over the last 2 quarters. So what are the key factors behind this decline? And also, are there any strategies taken to boost this?

Yes. Thank you, Manna. I think your question was on the quarter-on-quarter change on the fee income and operating income, is it?

Yes.

Okay. See, there are -- in the fee income side, there are seasonality, particularly Q2 is the highest you can see historically, because there are second incomes flow into that particular quarter like investment income, dividend income and so on. And as a result, when you compare quarter-on-quarter, there will be volatility. What we see is the year-on-year growth that same aspect also has an impact on the operating income. I hope that clarifies it.

Okay. The next question I have on Meethaq. The operating revenue was lower by 8% and operating profit was also lower by 15%. So can you also explain what are the key factors behind this decline?

Yes, sure. On Meethaq, I think in our last discussion also we talked about. See, Meethaq funding structure is quite different from the bank's overall funding structure. The reliance like any other Islamic entities in Oman is mainly on the institutional funding side. So if you look at the last 2 years, the cost of funds based on the Fed action has been going up. So that had an impact on their top line in terms of cost of funds going up during the last 2 years period and without much corresponding improvement in the yield side. So now we see the trend reversing for the past 3 to 4 months based on the production and the subsequent impact on the Omani rial cost of funds. There has been a moderation. So we will see that trend reversing. This is not specific to Meethaq, generally for smaller entities, which are Islamic banking entities, who are either windows or individual bank.

Also, can you give an insight into what is the Meethaq's medium- to long-term strategy to sustain growth and enhance the profitability?

Yes, that's true. In terms of our medium- to long-term strategy on Islamic banking, obviously, the focus on low-cost funding, focus on retail deposits, the branch network is key. We keep expanding. We have 23, 24 branches as we operate. We also invest in digital front to penetrate more into Retail segment. So those aspects will help us to diversify the funding mix. And obviously, with the global interest rates getting moderated, may not be not to that extent we expected, but gradually getting moderated. That will also help in improving the bottom line.

Thank you. I'll move to Abbas now, please.

Thank you, gentlemen, for the call. Thank you, Sheikh, for excellent presentation you've covered pretty much everything from top down. Just specifically talking about your bank and what's true for your bank, it generally tends to be true for the sector. How do you see net interest margins and growth evolve over 2025 and 2026. There was a recent Fed meeting, and they were indicating that they're going to hold for now, but there might be a couple of cuts in the future. Now you managed to hold on to spreads, thanks to your fantastic leadership in savings deposit. But in general, where do you see spreads going from now on? And where do you see growth coming in as well, sir? That's my first question.

Okay. Thank you, Abbas. Yes, that's an important question. Yes, obviously, it will -- we'll have to follow the global scenario vis-a-vis what happens to interest rates, because a large part of our funding relies on that, our funding cost also relies on that in terms of both on the funding side as well as the lending side. Also, in terms of the Omani rials, we have to be able to tactfully manage this piece and ensuring that our cost of funds remains at reasonable and robust level. So to cut a long story short, I do not expect a significant growth in net interest margin. I think and if we are able to achieve the similar margins in 2025, we would have been -- we would be doing quite a decent achievement. But the focus should be on the cost of fund, because I expect to be -- I expect competition to be quite severe or quite strong for the lending side. So there could be some shrinkages in terms of the yield slightly. But in terms of -- that's where we need to be managing our cost also at the same time.

Sure. Okay. But things are looking benign from that perspective for you. I mean, at least given your strong leadership in current account and savings account.

Yes. Well, I mean, we will have to react. Thank you very much for your confidence, Abbas. But we will definitely have -- we have been very agile over '24 and '25. One in terms of, yes, we've been helped by the savings -- large savings account balances and our branch franchise. But we've also taken several steps in terms of reducing our cost of funds on foreign currencies. By taking different steps to manage that in terms of the liquidity position and so on. So we will have to stay on our toes, is what I mean, Abbas.

Pleasure to hear. My second question is, you've always pretty -- I mean, whenever you speak about risk, you use prudent rather than conservative. Now when it comes to your coverage ratios, they've gone up, and now they're close to 170%, if I remember correctly. At what point do you feel like, hey, listen, there's no real skeleton in the closet, right? Because that makes me think, are you expecting a big sort of hit to come in, right? Because the sector has been at the 130, 140 range, you've led the sector for a while and suddenly when you start providing at 170, although it's good, but it makes me wonder, are there any risks that are hidden that we don't know about?

That's a very good question, Abbas. No, we don't. And this -- it remains to be prudent, but we expect moderation in the coverage ratio in terms of '25 and although these are -- I mean, this is what we aim for, we expect to moderate it. We don't, frankly, barring any unknown surprises. We don't -- we're not -- yes, that worried about a sharp increase about 4 billion NPAs of the bank. But you see -- I think, it's very important to highlight that the rise in the coverage ratio is mainly on stage 2, and that's where we are being prudent. It's not necessarily due to Stage 3 accounts or expecting that more will go into Stage 3. But Stage 2 accounts that we see could have prolonged aspects where we need to make sure that we don't get into bumps on the road for the future, which is not good for a bank, the size of Bank Muscat. So that's why we make sure that we have the adequate provisions for those. But in general, we are comfortable. I don't think you will see an unending increase of the coverage ratio from 170 to even higher levels. That's not our aim.

And my last question is, and I'll probably go back in queue, is my colleague asked you about Meethaq, but if I have to start scaling Meethaq to Bank Nizwa, right, similar asset base, but your return on assets is probably half of Nizwa, your ROEs close to 4%, I think. And then, you're looking at your conventional bank. Obviously, when I talk about ROE, I talk about adjusted ROE. So I think you ended the year at 10.7% after taking care of perpetual interest. And logically, your conventional ROEs are much higher than Meethaq. So at what point do you feel like, you know what, let me pull out -- let me pull back, because do you really see a path to ROEs going forward in Meethaq to come to a conventional level? Or is there a more serious conversation that you need to have when it comes to Meethaq?

Ganesh?

Yes. Thank you, Abbas. This is Ganesh here. On ROE trend for Meethaq, I think as we talked about earlier, the funding mix is one of the key components. That over a period will get addressed. The second component, particularly since you compared with Bank Nizwa, the level of credit provisions we make, again, on a prudent basis is higher compared to any other Islamic windows in the market. These two components had an impact for the last 2 years on Meethaq. But I think going forward, those get moderated as well. So -- but going back to your question on ROEs of Islamic entities to catch up to the conventional level, but I think it's a long way out. The reasons are, these are small entities. Reliance on financial institution or institutional deposit base is quite high. That structurally needs to change over a period of time. It is going to take much longer. Second is the number of other streams have to kick in, in terms of fee income. They are not really full fledged in terms of treasury operations, investment banking, private banking and so on, also need to catch up on Islamic banking across, all Islamic banking windows and entities. So it's probably in the next 3 years, is it going to change to conventional level of ROE? No. Maybe the 5 to 10 years horizon? Possible.

Next is Shaoor Turabee.

Yes. I'm Shaoor. Am I audible, sir?

Yes, you are.

Okay. Perfect. So my question relates to the upcoming trend in the interest rates and net interest margin. So once again, I'd like to allude to the point that was raised earlier. In a declining interest rate scenario, I sort of -- I'm trying to understand what is the lag and if there is any, and CBU decides to cut down the interest rates by 50 bps today, what's the sort of lag that you would have to give your advances? Obviously, you'll have to cut down your interest rates as well on the advances that you have given. So what's the lag between the two?

Go ahead, Ganesh.

Shaoor, thank you. See, when rates move -- market rates move up and down, obviously, there are different behaviors on the balance sheet, on the asset side and liability side. So generally, there is a little lag on asset repricing compared to liability repricing. So liabilities get repriced quickly. And the asset side, it takes about 6 to 9 months in terms of repricing. So obviously, when the interest rates decline, the same impact will be seen. So we already started seeing in the last 3 to 4 months in terms of deposit rates going down and immediately, there is a positive impact, but maybe 6 to 9 months, there is -- there will be, as Sheikh Waleed talked about earlier, there will be pressure on the yield across all banks. Because one, the Fed rate going down will have impact on the dollar book. and the corresponding impact on the Omani rial will also start going in over the next 6 to 12 months.

Perfect, sir. And if I could delve into it a little bit deeper. With regards to retail versus the corporate loan portfolio, which of these two segments take the impact first of the decline or the increase?

The Retail is usually fixed rate sort of mechanism in Oman with a cap of 6% regulated by CDO. So we don't expect the existing book to get repriced upwards or downwards generally. Only the new booking would go into new rates based on the market competition. So we don't expect any major change in the retail yield. But on the corporate, again, depending on the mix on the book of each bank, so if banks have large working capital facilities, those get repriced within a 1-year period. But if there are term loans, the price is fixed or reference to a benchmark, the impact would be minimal.

Great. And the last question from my side would be with regards to the investments. Now when we talk about investments, how exposed are you to the interest rate changes? I mean, what percentage of their investments is in the floating rate?

You are a little breaking, Shaoor, towards the end of your question.

I'm sorry. Is it better now?

Yes, it's clear.

Yes. Okay. So with regards to investments, I was interested in knowing that what percentage of the total investments, now I can see it's at OMR 2.1 billion investment on your book. What percentage of it is exposed to the interest rate? So what portion is floating and what is fixed, if you could guide us well?

The investment book, if I have to give you a broader breakup, which is also in the financial is more than of the OMR 2 billion, more than OMR 1.3 billion, OMR 1.4 billion is all government development bond and tables, largely Omani tables as well as U.S. dollar tables. So depending on maturity profile of these products, these are fixed rate. So there's no floating rate. Depending on the maturity profile of these products, as and when they mature, they will be reinvested. So it will have that impact. Within the remaining debt bonds with local bonds and outside Oman sort of bonds on private sector. Again, these are all fixed rate, usually 3 to 5 years sort of a maturity. So we don't see any volatility on the interest rate on the investment.

We have Abbas again, please.

Just a couple of more questions.

I have Sundar, [indiscernible] Abbas, just to be clear.

So I'm happy to give it to Sundar sir, I'll come back, because he's not asking question.

Yes. Okay, so let me take Sundar, please. Thank you, Abbas. Thank you. Please, Sundar.

Sheikh and Ganesh. It's pleasure to meet you after a long time, I think. Just a few kind of strategic question from my end, because how the banking sector is moving in future and a lot of changes are happening. Like what you said about competition, it's not about the traditional competition, the new age competition is also coming in. And Bank Muscat, historically has talked about certain investments in fintech, certain changes in the strategy, a lot of things, but nothing has seriously happened across the board. Do you think anything you're working on being a leader, because at some point of time, the market is still closed. At some point of time, it will be open, like what in other markets are happening, there are the new age digital, asset-light models will come in and hit you. Do you think this will hit you? Because already we are in a very substantially, if you look at the ROE of the banks, considerably lower. Do you think any strategic shift you're looking at? Because Bank Muscat, we like as Bank Muscat because it's a stable one. We don't see any major kind of changes, at least the stability, say, like what you have been always saying, prudent. But the one issue, what we are looking at is like what kind of growth we can see in terms of how we can see through a different Bank Muscat or a new kind of Bank Muscat going into the next 3 to 5 years, because that is very critical for the -- because, anyhow, I think, if you look at all, competition is coming across. If you look at everywhere, the competition is coming. Do you see any kind of indication? I believe you might be doing that, I think, but still I want to understand from a perspective of how you're going to face this.

Thank you, Sundar. That's -- okay. First, when you talk about technology, we have been investing in technology quite heavily. And that is mainly seen in terms of our -- the advancements that we keep developing in our applications and our digital channels and the uptick in terms of usage in it. Now when it comes to fintech, we have also participated in -- with a portfolio to invest through BM innovate and fintech companies across the world, and that's also part and parcel of our strategy. When it -- so -- and then when you say that ROEs are at a low level, I'm not sure what you mean by them being at a lower levels at 12.7%. That's generally a market and regional or market scenario and a market. But we see them as quite healthy and they have been growing. When you talk about what our strategies are over the next few years, we have a number of strategies, but we need to be careful and make sure that whatever we invest in is actually going -- it's not going to be some things of the nice to have or the wow factor, but some things that are going to be clear bringing in benefits to the shareholders of the bank or marking better efficiencies in terms of what we do through innovation or acquisition of more and more customers. But if you look at the digital space, if you talk about digital banks and that's what you are referring to. For us, digital banks are our phenomenon that is nice to watch, but it's also not something that is going to be gaining momentum as fast as one would think. There are still quite a few of them that are not really -- have not really achieved a decent momentum despite the sizable investments that are there. How we view this scenario is, digital banking, and in particular, stand-alone digital banking, it's more like a defensive strategy for any incumbent to make sure that -- because it doesn't -- in and of itself does not really make quite a bit of money. But what you do and how you monetize it is by making sure that you bring in a larger customer base into your fold, and that's when cross-selling starts happening. And that's where we continue to invest and continue to make sure that our digital platforms are ready for those kinds of scenarios. In addition, innovation. We talk about artificial intelligence, and we talk about the different aspects of where the sector is going, but also the world is going. We have already been a pioneer in terms of actually employing robotics within our operations to make our operations more efficient get our analytics in place for our customer relationship management systems, our acquisitions, our loan growth, all of that happens through robotics and analytics from the different systems that we have and that we have developed internally. When it comes to artificial intelligence, we're using artificial intelligence today at a smaller scale, but we have many use cases for it already. And we are going to continue to develop it and invest in it, especially when it comes to AML and when it comes to KYC, and when it comes to fraud monitoring and so on. And these are quite important projects for us. So all in all, I think what's important in terms of showing this Bank Muscat story and moving forward and what we expect to see in the future are the fundamentals. Today, we have grown our customers to a significantly large base. And what we -- and that we have done through the fundamentals of the bank through the digital channels of the bank through digitization of close to 75% of the bank's branch services into the palm of our customers' hands, 75% are digitized. Opening a bank account is through digital now. And so we have been able to acquire more and more customers. The future is monetizing, all of that through cross-selling, through enhancing of those balances, through making sure that the transactions flow through the bank's counters and so on and so forth. And we have a number of initiatives that are already in place for that. So that's really in a nutshell what I think, Sundar. Okay. Any other questions, Sundar? Or can I move to Abbas?

Yes. I have another question from my end, Sheikh. I think, I just want to understand from your perspective, like everybody talked about the Meethaq, but in the traditional side also, if you look at Bank Muscat size is there, but if you look at the kind of growth expectation for the next 2- to 3-year perspective, I know a lot of kind of projects are coming in. The competition is also coming. What level of growth you're looking at on a sustainable basis for Bank Muscat conventional side? Do you continue to grow at the same level of the market? Or do you see a strategy like where you want to be a bit more aggressive and grow a bit more than the market. How do you see in terms of the pure loan growth in the coming 2- to 3-year perspective?

We expect it to be growing along with the economy of the country and the market. And whenever the -- this is in terms of organic. So that's what we expect as far as that is concerned. So we expect it to be growing in line with the market and the market dynamics. Yes. I will finish Abbas, and then I will go to Abunawa. Yes, Abbas.

A couple of macro questions. One is -- I mean, I'm sure sooner or later, you're going to be asked this. Your -- the second largest competitor is at an 18% market share and a 15% -- asset market share and 15% loan market share. And obviously, Bank Muscat sits pretty at the top. Now how do you see the sector evolving if, let's say, this competitor had to go to a 25%, 26% market share by another acquisition? What do you think happens to Bank Muscat's positioning? Do you see ROEs coming under pressure for you? Because obviously, there is some speculation that something -- another consolidation might happen in the banking sector.

Yes, that's very true. And we -- this is probably going to happen. But that's a good thing. We don't look at it as a bad thing, having two large banks in the country is a good thing for the country and for the sector. Because that enables actually the ability of both those banks to participate as well as the other incumbents in the sector to participate more meaningfully in terms of the projects in the country. Today, most of these projects, our share as banking sector in Oman from all of them is on the large-scale projects. We could probably put it at 30% to 40%. Because of the balance sheet capacity of the individual banks and maybe Bank Muscat because it has the largest balance sheet capacity, it gets a slightly higher share depending. But I think having two large banks is definitely going to give us a better piece of the pie in terms of the lending on the growth side. That's one. Number two, having two large banks in the country is also quite helpful in terms of funding and in terms of the sector, in terms of enabling the funding from outside sources, outside the country into the sector, at a decent benchmark rate. Because the two stronger banks are going to be able to acquire better funding for -- and then support the different projects in Oman. Today is by comparison, for example, in Bahrain, they have -- there are two large banks and then the other banks are much smaller behind. We don't even have that situation here. We have two large banks, but even the other banks are quite sizable. So that's quite -- and then Bahrain situation, actually, they are still growing. They are still doing well. We are also here in a decent shape. And I think, it's quite good for the sector. The consolidation is quite good for the sector. It gives it better growth dynamics. It gives it better fundamentals as a sector. And so from our perspective, yes, there will be competition. But then that's normal. Competition has always been there. We have acknowledged it. We have seen it in the past. The competition is still there, but whether it was seven banks or five banks. It's never going to end. It's how you are able to being agile and managing all of this and managing your cost of funds and managing your cost of operations, and your customer acquisitions, your footprint in terms of your branches and a number of different strategic areas. So it's -- the formula is not just size that enables all of this growth. It is a combination of a number of different factors. But all in all, I would sum up by saying that Actually, the larger the banks in Oman, the better it is for the economy and the better the economy is, the better it is for the sector.

Thank you for that perspective. And the second question is, Ahmed Al Musalmi, of course, has been a CEO of two large banks. And then after he became governor you've got a guy who's obviously been in your position before. Is there a -- I mean, I noticed recently there was revised risk weights for priority sectors. Are there other such initiatives that are going to help the banking sector in terms of growth or even in other ways, because here's a guy who was obviously a very large personality in the banking sector and now he is the governor. So I was just wondering, is there a wish list that you guys have that you've gone to him, and any sort of positive news coming for the banking sector?

Yes. Thank you very much, Abbas. Yes, it is quite positive. Previously was a positive era, and now it's also quite positive, and we're quite optimistic from the circular that you have seen, and there are more in the pipeline that we comment on and that we -- the dialogue continues with the regulator, Central Bank of Oman. And we're quite optimistic, actually, in terms of different regulations that are going to come up in the future. Because the dialogue continues and the doors of the Central Bank has been and are continuing to be open for the banks. And the momentum of change is quite good, and we're quite optimistic about it, Abbas.

Okay. Okay. So nothing specific you want to comment on right now. Okay. Got it.

Yes, I cannot really comment on anything, because most of these are in draft or -- but we have seen already the positive ones, the ones that you talked about and the one that on the personal banking regulations were eased up, and that provides good opportunities for all the banks in terms of growth in the retail banking portfolio and more in the pipeline, I'm sure. So it will all be quite good for the banks. Abunawa, [Foreign Language].

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[Foreign Language] Thank you very much, everybody, for joining us today. I very much appreciate your presence and wishing you all the best for the weekend and for the remainder of Ramadan, and then [Foreign Language] Eid Mubarak to all of you in advance. Thank you.