Bank Muscat SAOG (BKMB) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, everybody. Thank you very much for taking the time to be with us here today. Firstly, I also want to thank MSX for providing us this opportunity to be interacting with you today and talk about our results for the first half year of 2025. I have with me here today -- myself, I am Waleed Al Hashar, I'm the CEO of the bank. I have with me Ahmed Al Balushi, Deputy CEO of Banking; Ganesh, our Deputy CEO of Finance and Investment Banking; and Sheikha Al Farsi, Deputy CEO of operations. First, I think it's just the regular disclaimer that we have. This presentation contains different statements relating to Bank Muscat and has been prepared based on publicly available information. And as usual, it's not an invitation to invest or a recommendation to invest, but more of a discussion session between us. [Foreign Language]. In terms of today's outline, I will be going through the operating environment of Oman and the economy, the banking sector. And then I will focus in on Bank Muscat strategy and business line, and then I will move to the key financial highlights for the 6 months ending in June 2025. [Foreign Language]. In terms of the operating environment, the economic activity, in fact, had continued to expand in 2025 with the real GDP growing by about 2.5% and nominal GDP by 4.7% in the first quarter of 2025. This was primarily due to a higher contribution from the non-hydrocarbon sector. Also, according to the IMF, as of June 2025, the Oman economy is set to expand even at a faster pace over the medium term. This expected performance is mainly driven by strong non-hydrocarbon growth and also underpinned by ongoing investments in logistics, manufacturing, renewable energies and tourism. Moreover, I think also the favorable oil prices and increasing the non-oil contributions, the public finance management efforts that were done, and the declining debt levels have all contributed to Oman's fiscal and external position. As you have seen before, and this continues, the government has taken quite a few steps to improve the business environment, allocating budgets to strategic projects, supporting SMEs, accelerating investments in renewable energies and green hydrogen. Also importantly, inflation has remained subdued, averaging by about 0.6% between January to May 2025. In July 2025, Moody's has upgraded Oman's sovereign rating to investment grade. And this is obviously a reflection on the stronger debt metrics and the greater resilience to the economic shocks that we have seen in the past few years. Public debt management initiatives have contributed to lower debt-to-GDP ratio. Generally, also the government anticipates about 13% reduction in debt servicing costs this year, which is obviously complementing the emphasis of Oman's leadership efforts in preserving financial stability and fiscal sustainability. There were also plans announced last year to expand Oman's LNG production capacity by 1/3 by 2030, which could further contribute to the economy positively. The 2025 budget also continues to focus on strategic developments and social sector spending. And as you already know, under Vision 2040, Oman is progressing with many initiatives and all are aimed at fostering the public and private sector and sustainable growth as well as stability and fiscal prudence, which all actually positions Oman well amid any of these recent and previous global macroeconomic volatilities. [Foreign Language]. In terms of the banking sector overview, it has continued to grow steadily and remains a pillar of support to the national economy. In 2025, the Oman banking sector continued to show growth -- show strong fundamentals and steady momentum, which is reflecting broader economic recovery and performance. The growth in private sector credit, healthy deposit inflows, expanding also some of the Islamic finance activities. It shows the sector's depth and diversity. And as you have seen, banks have remained well capitalized, sound asset quality metrics and ample liquidity. And this, of course, is all supported by quite effective regulatory supervision. And as everybody knows, in recent years, Oman's banks have always invested significantly in technology and digitization, while also continuing to expand their physical footprint. Between January to May '25, sectoral credit reached above OMR 33 billion, i.e., about 8% year-on-year growth. Deposits increased by also a little over OMR 32 billion, which is also almost 8% over the previous year. Islamic finance and deposits grew by 12.3% and 16.6%, respectively, and they are contributing to 21% of the sector. And the budget of 2025, which is also driven by the elevated oil prices, has an expansionary focus and a strong momentum. All these factors we expect are going to support sectoral growth and improving the financial performance of the Omani banks in the near future in the medium term. Banks are also adopting ESG principles and continue to enhance their risk frameworks to align with the international best practices. [Foreign Language]. This slide talks about the consistent performance and stability in the banking sector key parameters. Sectoral credit portfolio registered 5% compounded annual growth over the past 5 years. Customer deposits also registered 5.9% compounded growth during the same period. And the top 7 Omani banks reported a 7.7% net profit increase in the first half of 2025. Obviously, looking ahead, the sector is expected to continue mid-single-digit growth, while also needing to proactively manage any short-term pressures on asset quality or liquidity due to the global factors that we all know about. Nevertheless, medium-term performance is projected to remain stable and sustainable. The strong fundamentals and the forward-looking regulatory oversight provide us confidence that the sector's long-term growth trajectory is going to be a positive one. [Foreign Language]. In terms of the bank, the bank continues to focus on a strategic framework on 4 key pillars, which are customer centricity, market leadership, efficiency and productivity and innovation. These are all aligned for the purpose of delivering sustainable value for all our stakeholders. And we definitely do continue to leverage our strong branch network, sound financial position, and most importantly, our highly skilled colleagues to improve the outcomes and drive continuous improvement across the entire front, both financial and operational. And we are always embedding digital transformation and customer experience enhancement as well as responsible banking practices across our operations. [Foreign Language]. In terms of Bank Muscat business line, the bank operates across multiple business lines, whether it's in Corporate Banking, Personal and Retail Banking, Wholesale Banking and Islamic Banking. And all of these verticals have performed quite well and have consistently contributed to earnings performance. The Corporate Banking and Personal Banking and Wholesale Banking contributed around 23% to 33% of the bank's net profit during the first half of 2025. Islamic Banking contributed about 4% to 5%, while international operations added 8% to our bottom line. Islamic Banking continues to have the highest market share in terms of total assets in Oman and has shown quite healthy growth since its inception. The loan portfolio, as you can see, from the pie charts, continues to be well diversified. Deposits are largely retail-driven and also quite diversified, both in terms of retail, government deposits and private sector deposits. [Foreign Language]. Now I will move on to our financial highlights for the 6 months ended June 30, 2025. It has been quite a good 6 months. As you can see, the bank's top line performance was strong. Despite the continuing global and regional challenges, bank's net profit increased by 12.2% compared to the level in the first half of 2024. This was mainly driven by robust business growth as well as prudent credit cost management. The net interest income rose by 8.3% due to increase in our business volumes as well as our active balance sheet and liquidity management and optimization. Our agile approach and balance sheet management as well as the funding dynamics helped us maintain a healthy net interest income during this period. The nonfunded income has also improved by 8.7% during the first half and that's also due to growth across all the business lines and higher investment income. And during the period, operating expenses also increased by 5.8%, but that's a reflection of the business activities as well as the infrastructure investments done by the bank. You'll see that the loan portfolio, and that's on a quite a large base, grew by 5.1% year-on-year and deposit portfolio also on a large base showed a growth of 3.3% during the first half. In terms of asset quality, total provisions were about 1.7x of our nonperforming loans, reflecting strong asset quality buffers and metrics maintained by the bank. This consistent operational execution, robust and balanced growth, income streams actually provide us a strong foundation for sustaining our profitability moving forward. [Foreign Language]. This slide highlights the operating trends over the last 5 years. As you can see, net interest margins have remained stable and has shown consistent improvement. The bank has been able to manage the yield and funding cost to maintain NIMs. And that's through the efficient balance sheet and liquidity management as well as deploying agile hedging strategies. And you'll see that the bank fee-based income has held consistently around 28% to 32% of total income throughout this period. Cost-to-income ratio further improved to 37.5% in the first half versus 38.6% in December '24. The ROE of the bank has also shown quite a good improvement from the lower levels of 10% in 2021 to reach 13.4% in the first half of 2025. Bank's ROA also continued a healthy momentum and reached 1.79%, the highest when compared to levels seen in the last 5 years after reaching a low of 1.32% in 2020. And this trajectory highlights the bank's operational resilience, profitability and disciplined cost management. [Foreign Language]. In terms of asset quality, this slide also provides a trend of our asset quality performance. As you can see, the bank has been able to maintain a stable NPL ratio between 3% to 4% over the past 5 years. Our provision coverage ratio also remains strong between 145% to 170%, reflecting the bank's prudent approach. And as I mentioned earlier, the bank's loan portfolio is well diversified across different economic sectors and industries within the country. Gross loans portfolio increased 4.3% since December and 4.4% growth in 2024. And we continue our prudent credit policy to ensure stable performance. Actually maintaining robust asset quality metrics remains a core part of the bank's strategy to ensure that the credit resilience remains during the different economic cycles. [Foreign Language]. In this slide, we talk about funding and liquidity. The bank maintains, as you can see, and as has been our trend in the past, a well-balanced funding mix. Around 70% to 73% is from customer deposits. The balance is supplemented by interbank deposits and capital. We continue to hold high-quality liquid assets. And as I mentioned earlier, the bank's capital position is one of the highest among its Omani peers and one of the strongest amongst its GCC peers as well. The capital position is also largely driven by core equity capital along with retained profits after a good history of paying healthy dividends over the last many years. [Foreign Language]. I have reached my final stage, and we can take your questions after this.

Please raise your hand, if you can. Thank you. [ Manna ], please go ahead.

I have a question regarding the asset yield. It has been declining in the first and the second quarter. So we noticed that it's been declining in the first and the second quarter. It has reached 5.3%, and the cost of funds are also going up, so effectively tightening the spreads. So where do you see the spreads and the margin by the end of the year?

Thank you for that question. This is Ganesh here. Asset yield going down in line with the Fed rate changes happening over the last 1 year and also the moderation in the cost of funding in Oman market. But our focus is on the net interest margin, which has improved over the last 1 year. We are hovering around 2.7%, 2.76% level. So the function of market interest rate will impact both yield and the cost in a similar direction. So if you look at the last 5 years, our ability to manage the margins at a similar level, about 2.6% to 2.7%, that shows our dynamic activity on balance sheet management. So we don't expect any material changes on the margins going forward in spite of Fed rate cuts expected.

Okay. You had another question, [ Manna ]?

Yes. The ROE has also improved to 13.4%. So what would be the bank's long-term target for ROE?

This is a function of both the profitability and capital base. I think the profits level have grown and also capital adequacy has moderated. As a result, it has reached 13.4%. I think our medium-term outlook is between 13% to 14% range. If there are further optimizations, can improve beyond 14%.

Okay. So what is the outlook for loan demand for the second half of 2025? And where do you see this incremental growth coming from?

We expect to be sustaining this single mid-digit growth, we hope. I don't want to be giving any forward-looking statements, but single mid-digits. And the growth is coming from a number of different areas. In terms of loan demand, retail, for example, the young demography, new job creations, the salaries, [Audio Gap], lending to public sector projects and petroleum-related ventures. Mid- to large corporates are also investing in new and ongoing projects. And so we expect to be taking a share of their business loans and working capital needs. Renewable energy, projects tied to green hydrogen, solar related infrastructure. Logistics, you've seen Etihad Rail and road network upgrade. Real estate, Sultan Haitham City and other satellite towns around the country actually and tourism-related infrastructure development. A number of different areas. And all these projects are either on the planning stage or -- in terms of the financial, some of them are already on the financial closure stage. Power sector is also showing growth in terms of power supply and the need for new power capacity. So there are a number of areas that we expect growth to be coming from.

Understood. Regarding the NPL ratio, also, where do you expect the ratio to trend for the remainder of the year?

We have been showing this -- we have been maintaining it at this level between 3% to 4%, and we do not have any reason to see it moving anything above that.

Okay. Just want to know your thoughts...

This is your last question, [ Manna ], because I have to move to others. This is your last question.

Yes, I understand. I just want to understand your thoughts on this. Like do you expect the competition in the Oman banking sector to put pressure on the lending standards?

The lending standards?

Yes.

Well, we've been navigating through competition myself for the last 28 years in banking. And I know this bank and I know the culture here. So I will answer it in 2 ways. I don't think -- because the regulator is quite strong. So lending standards I don't think are going to be a factor of deterioration due to competition. But I think margins may be impacted. And that will depend on those individual banks' cost of funds and how they manage their liquidity. And we believe that we are quite well positioned as a bank to actually take advantage of how we manage our cost of funds and therefore, be able to compete on different lending opportunities. Okay, Sumaya. Sumaya, you are on mute if you are trying to...

[Foreign Language] Good afternoon to you and to Ganesh and the Bank Muscat management. I'll ask my questions in English. There was a question in the chat, which I shared the same. So I'm going to start with that on the liquidity. And even throughout the presentation, we've noticed that the liquid assets have dropped to 17%. So with LDR at 109%, sharing the same question with Shahrukh, what are your plans for increasing your liquid assets or term funding? And then where do you see deposit growth coming from in the second half especially and going forward? So that is my first question. And my second question is regarding just generally on the corporate lending side. There are other banks that are more corporate focused in the competition. But obviously, Bank Muscat still stands well above. Are you focusing on -- you've mentioned a number of projects now, but are you focusing on certain sectors? And to what extent will you be increasing your exposure to the mid-corporates and the SMEs in that regard?

Okay. So is there a third question? Or you want me to...

Oh, I always have a lot of questions, but we can go with those 2 questions.

No. Give me the third one.

Third one is regarding fee income. Fee income has been growing. And last time we've spoken as well, there was a mention, the cap on retail lending. Some fees that were imposed by the CBO have been removed. So if you could just share more insight into that? And where do you see the fee income generation coming from? Is it just purely from organic lending? Or is there other avenues of fee income that you're seeing?

Thank you, Sumaya. I'll go with the liquidity first and then he will go with the other 2. On the liquid assets, yes, these are particular point in time ratios. But if you see the trend from December to now, there has been a decline in the liquid assets stock. That was more structural. If you look at our deposit growth, we focused on CASA growth. We didn't grow on term deposits during the first 6 months of even year-on-year comparison. That is to enhance the margin perspective. But from a total liquid assets positioning, we are quite well liquid. There is no declining trend to mobilize funding. Depending on the asset growth in the second half, we will focus on funding, which will include customer deposits and interbank as well as any bond issuances. So overall, on liquidity, we are quite comfortable. We don't expect any material change from now.

I will take the question on the corporate lending. We look at it, Sumaya, yes, we will be focusing on a number of different sectors. And you've seen, our portfolio is quite well diversified. So whether it's in logistics, in tourism, in GREs, in the power sector, in the renewable energy sector and hydrogen projects. More importantly, you touched on mid- to large corporates. That's a part of our strategy and a very clear focus for a particular team within our Corporate Banking group. And we see, because of the growth in the economic activity in Oman, that there will be good growth in that sector. And some of that has already come into the balance sheet in the first half, and we expect more in the pipeline. I'm talking about mid- to large corporate. We expect more in the pipeline coming as well in the second half. So our growth trajectory is going to -- we expect it to continue within the same momentum. In terms of the fee income growing and where it's actually coming from, it's coming from all business lines. If we're talking on the retail side, yes, there was an impact on the caps, on the fees, and so on. But we have been focusing on our organic growth opportunities in the retail side, and we have grown significantly our customer base on retail side, and that's coming mainly from our good strategy on branch locations and sound branch expansion as well as our digital solutions. So that has helped us bring in a large customer base. And today, we are able to monetize on that, and we continue to be monetizing on that larger customer base. So retail has a number of different initiatives to continue the trajectory of the fee-based income. Corporate banking as well. The growth in corporate loans has helped us also get certain fees on that front. Investment banking, our investment activities, our investment books have also yielded good results in that area. So all of these, all our business lines have helped us grow our fee-based income. Okay. So Shaoor. Shaoor, please?

I'll start my question with the interest rate and your view on net interest margins. As you mentioned that with the expected decrease in interest rates, you expect the yield on advances to go down, but you expect that the bank with management will be able to maintain the net interest margin. Now my question is that with the decrease in interest rates, obviously, your yield on advances and interbank lending income won't go down. But what is your view on the yield on your advances, sorry? So investments and interbank income might go down, but do you expect a decline on the yield on advances as well?

We're going to have to manage. That's a part of our business, is managing the yields and the costs. And so yes, there could be due to different factors, whether it's competition or the drop in the different benchmark rates globally, a drop in the yields. But also that will also reflect on our cost of funds in terms of deposits and which we have been managing quite well. So from that perspective, we believe that we're quite well positioned to manage both. And hence, our expectations of the sustainability of the NIMs for the near future.

Right, right. That's helpful. So my second question is regarding your deposit number. We have seen a slight decline in the quarter-over-quarter deposits, the bank's book. Now I understand that this is a balance sheet number, but do you expect the year-end number to maintain the mid-single-digit growth rate that you guys are expecting?

For deposits, we manage this quite with an agile posture. We manage it quite well because we need to make sure that through deposit management, we manage our NIMs. And therefore, the growth numbers in deposits for us is not the function. What the function for us is actually making sure that we have the deposits at the right time for the right deployment. So we're going to continue to manage it agilely. You have seen us, for example, in the previous years. In some years, we may have dropped overall deposits or even lower single-digit growth, but it was intentional, because it's very important for us to make sure that the NIMs are well maintained while also making sure that our liquidity is quite strong and quite robust. And when I talk about deposits, in this particular fashion, I'm talking about term deposits. Now in terms of CASA, you would note that we have the highest ratio of CASA to overall -- we have quite a high ratio of CASA to the overall deposits. That is going to be a continued focus for us, especially on the retail side and savings. And that's why we continue to make sure that we onboard new customers, a major part of our strategy, and making sure that our branches are in the right locations and where we need to increase branches, we continue to do so. We continue to invest.

Perfect. And my final question is regarding your cost to income. We have seen some improvement in your cost-to-income ratio during the second quarter to 36% from previously ratio of some 40%. So is this a new norm, is the bank targeting now this...

You and my Board, you're talking the same language. Everybody misses that. No, it's a function of 2 things. One, the top line and the bottom line -- the top line and the cost, yes. So if the income goes up, then the cost-to-income ratio drops. What is for sure -- the sweet spot is between 38% to 40%, generally speaking. We endeavor to actually keep it at the lower part of that. But then we do not want to deprive ourselves of the opportunity to invest in the right investments that we're going to -- that's going to give us multiples in terms of top line. So we continue to watch costs. We continue to make sure that we are quite agile there and make sure that we spend in the right projects. But we're also not going to be -- but we're maintaining that drive to remain within the 38% to 40% range. Because as you know, investment in technology is important for the future, and we focus on that. Investment in footprint of branches and customer acquisition is important, and we focus on that. Investments in efficiency within the organization and operational efficiency, we continue to do that. So all in all, we're going to definitely be prudent on costs, but we're also going to make sure that we invest wisely. Mr. Dan [indiscernible].

Congratulations on a great set of results. My first question relates to the investment and dividend income. We've seen notable year-on-year increases in both of those revenue streams. And I was wondering if you could provide some commentary around what has been driving it? Is that a structural shift with the bank targeting higher dividend yielding securities in its mix or on the securities with high cap where you can realize high capital gains, some more trading securities. That would be really helpful to understand. And my second question relates to the credit risk-weighted density, which has been coming down year-to-date quite substantially as a percentage of loans from about 99% to now 95%. I was wondering what has been driving it? Is that a structural trend that as we see more corporate lending growth, RWA density more broadly should decline? Or does it have to do with lending to the specific sectors, which under new CBO rules have lower risk charges attached to them?

Sure. Dan, thank you for those questions. In terms of dividend income, yes, year-on-year, there has been good growth. This is a reflection of the investment activities that have taken over the last 1 year, including the local IPOs and also our investments outside. But the focus is largely on having sustainable income model. It's not anything speculative for a period of time. So that's why the reflection is more on the dividend rather than the gain. And this type of an approach will continue to follow. That is from an investment book and dividend income behavior perspective. In terms of credit risk weight to the total asset, yes, it depends on the function of sector we grow. If, let's say, retail mortgage grows, it has a lower risk weight, which is 35%. If we do a growth on GRE with the government guarantee, then it has 0 risk weight. So it's a function of the credit growth in a particular quarter or a year and which has an impact on the credit risk in proportion to the total risk-weighted assets. So there is no structural changes, but it could be transaction-based impact, but it will hold around 95% to 98% of the total asset.

And Sundar?

Three questions from my end. See, I just want to understand this countercyclical buffer in terms of -- because the regional central banks have started having this countercyclical capital buffer starting from 2026. Any indications on the Oman Central Bank side in terms of -- because we are still having this as 0 at this moment, how do you see this coming up in the coming years? Do you have any kind of indications from the Central Bank? Because I've been missing out a few of the calls earlier, just want to understand on that perspective from the capital adequacy perspective. That's my first question. And my second question is on the -- because I asked this question earlier to Ganesh also, I lost my memory now, because there was a large transfer of this -- the transfer to the memorandum portfolio, correct? In the first half, you've done almost OMR 58 million transfer to the memorandum portfolio. I forgot, I think it's always some reason you say, I think. Can you elaborate the reason for this transfer of this big to the memorandum portfolio? And my last question was on international operations. International operations, especially the international banking, the commission fee and income has grown and also the profitability of the segment has substantially moved up from last year. Any specific reason or this is also going to be a sustainable trend for the bank in the coming period? I think that's it as of now.

Thank you, Sundar. On the countercyclical buffer, I think the Basel III regulations of Central Bank is very clear. The CCB kicks in only when we have excessive credit growth in the domestic market. The UAE and Saudi markets have seen very excessive credit growth over the last 2, 3 years. We are talking about 10% to 20% credit growth happening year-on-year. As a result, these regulators are introducing. Whereas in Oman, Central Bank of Oman has a framework already in place. If they find excessive credit growth in relation to the GDP growth, the level of CCB will kick in. So I don't think anything expected. Unless the banking industry goes into a double-digit sort of a credit growth, there could be a possibility of CCB kicking in.

And in terms of memorandum accounts and move, this is a regular activity that we do as a bank and all banks do it. They move all the accounts to different buckets while still continue to focus on collections, so that we make sure that -- and the numbers reflect the reality for the bank in terms of NPAs and so on. So these would be very old accounts that are there, and it's just a cleanup exercise. That's what the -- and we do it on a regular basis, and all banks do it. In terms of international, our Saudi branch has, and has been in the past few quarters, shown quite good performance and continues to contribute quite well. Our associates also are doing quite well, whether it is SICO or Salam Bank. And our SIP is doing well. So a number of different factors when it comes to international that has helped us move in a positive trajectory. And we expect that to [Foreign Language] continue also for the future. Right. I don't see any -- there are chat questions. What we see in Stage 2 inflows restructuring? Do you expect the quarterly ECL run rate at OMR to hold? And where do you see the gross NPL ratio by year-end? We have answered the gross NPL ratio already. In terms of Stage 2, I will talk about that a little bit. About 12% of our gross loans in 2022 were restructured. It reduced to 8.5% now. Of course, more than 75 of these have already resumed repayment. The remaining 25% still have their cash flows deferred. Overall, the health of the portfolio is quite satisfactory. And our focus will always continue to be trying to work with our clients, collaborating closely, monitoring their cash flows and making sure that those are realistic in terms of cycles. Each restructuring is actually tailored to the borrowers' business model. So we're quite confident -- or quite comfortable when it comes to our perception of these. In terms of the ECL run rate, you have seen it moderating over the last 2 quarters compared to the previous year. And yes, we do expect it to continue to moderate compared to the previous year. But I think one important factor to highlight here when it comes to provisioning. So I'll answer the short answer, which is, yes, we're going to be -- that we believe is going to continue the same level of moderation moving forward. But I think it's very important for a large bank like Bank Muscat, it's very important to also see the different dynamics when it comes to its credit portfolio. One, while it is diversified, there are also a number of different clients. The ticket sizes are larger than some of the other banks in Oman. The credit parameters that are looked at, at the beginning are very important. That's what we focus on. And these buffers that we create, when it comes to ECLs, are important for any, god forbid, future shocks that we don't anticipate, but it's important to make sure that we have the right level of provisions moving forward. So that's that answer. In terms of what are -- I've finished that. What are the transaction banking payments initiatives that can sustain the 28% to 30% noninterest? I've already answered that. Cost to income answered. [Foreign Language] Islamic financing income rose in the first half of 2025. How does management see growth trends in Islamic banking relative to conventional? Islamic banking growth, we expect it to continue its momentum. Of course, it will also depend on growth in the financing side of it and most importantly, growth in its funding side, the deposit side, and especially retail deposits. Impairment charges contained, referring to the NPAs, does management expect provisioning pressure? No, we don't, but I've already answered that. Is bank targeting a stable dividend payout ratio? Yes. Well, [Foreign Language] we work hard to please all stakeholders of the bank, including, most importantly, our shareholders and including looking after the dividend payout ratio, but I cannot really project of how stable or otherwise it will be, but we will make our best to have the same story as in our financials, which is sustainability. We will work hard to do that. What percentage of GRE exposure is GRE loan with the government guarantee, and the government's balance? This is a bit -- it's a client-based question. So I think what matters is that in terms of the risk-weighted assets perspective, it's quite well diversified. I think what Ganesh had mentioned there was just giving an example. But nevertheless, I mean government guarantees are not necessarily a main function of our credit parameters that we look at. Ahmed, you wanted to say something?

Either the credit is with a guarantee or not guarantee is assessed differently. So the risk-weighted average is just a technical, I would call, methodology. But if they don't have a government guarantee, then the assessment and the pricing and credit terms and condition and covenant will be different.

Okay. I have one final question, and one final question verbally. Because otherwise, we have -- so one is from the chat. Contribution of wholesale banking, which is corporate finance, asset management and FI has witnessed a marginal drop in its share of assets as well as share of profit. Could you kindly explain the reason?

Yes, I will take that question. It's in proportion -- they've grown, but in proportion to how the other businesses have grown, that's very different. Share of profit is not reduced in the sense, but it's in proportion to the total. So if you see year-on-year, wholesale banking would have grown.

Final question from [ Varun ].

I'm sorry, I joined a bit late. So apologies if I'm asking something that has already been answered. I'm sorry, I have 3 questions. Really quickly, if I'm to ask. First thing is on loan growth. Loan growth has been very strong in the first half. But you expect this to slow down in the second half, because I don't think you will expect a similar run rate quarter-to-quarter. So I just want to understand that. And secondly, on the deposit side, going forward, do you expect deposit growth to support this loan growth? And the third question is on the fee income. Fee and commission income, which is, on a net basis, still, I mean, relatively weak.

Relatively, what, I'm sorry.

I mean, how do you...

I'm sorry. I didn't hear it. Relatively what?

No, no. I mean it's not as strong as, I mean, what is indicating in the loan book.

Weak. Okay. It's relatively weak. Okay. Yes.

So fee and commission income, what is your expectation going forward? Because I know that there are a lot of initiatives that you are taking, especially on the retail side. So I just want to understand when we can see this reflected in the financials?

Varun, I think we've answered all of those, but I will answer them again. Loan growth, as we have said, we expect mid-single digit, hopefully, we hope, and we are going to work towards that. And there are a number of projects, as I have explained before, you can probably also see the video of this subsequent to this. Deposit side, yes, we have also talked about that. And like we said, deposits is going to be a function of how we manage our deployment and growth on the other side, and also most importantly, our net interest income and margins. So also that you will find the answer to if you go through the video subsequent to this meeting. In terms of fee income, I've looked at the numbers myself. And in terms of volume, there has been growth. In terms of fee income to total income, it's between about 28% to 30%. So I'm not sure how you characterize it as not strong or weak. But nevertheless, of course, I respect and appreciate your opinion. And therefore, I will say this, that it comes from a number of different success that we have been able to achieve in fee income, comes from a number of different initiatives that we have taken. And as you will see the video also, in terms of our retail base and monetizing, growth in our customer numbers and onboarding of new customers, our investment banking side, our loan growth and the associated fees coming from that. So even despite the caps on fees and so on that are there, we are still able to grow our fee-based income. So that's really the answer, but you can find even more elaborate answers in the video, Varun.

Okay. That's clear. So what I meant to say was that, I mean, it's not that weak. I thought, I mean, given the initiatives...

No, no, no. No problem. It's okay. We respect everybody's impression of our performance. So whoever thinks it's strong, we thank them. Whoever thinks it's weak, we also thank them. Truly. So, much appreciated. It's fine. So thanks, everybody. I take this opportunity to thank all of you for being with us this afternoon. I hope we have been able to shed some light on our performance for the first half. And [Foreign Language] we'll see you after -- we will have another session like this after the year-end or the 2025 results. And I wish to thank MSX for giving us this opportunity.