National Finance Company SAOG (NFCI) Earnings Call Transcript & Summary

Welcome, everyone. If I could ask everyone to start the introductions. [Foreign Language] everybody. Good afternoon. On behalf of our Board of Directors and executive management, I'd like to welcome you to the National Finance Company's Mid-year Investor Meeting. My name is Wissam Al Said, and I am the Chief Marketing, Communications, and Sustainability Officer here at National Finance Company. Thank you for joining us all today. We value the continued trust you place in our company, and this platform is a reflection of our commitment to transparency, performance, clarity, and open dialogue with you, our respected stakeholders. Today's session will provide an opportunity to discuss the financial results for the 6 months period ended 30 June 2026. These results have been disclosed on the MSX platform as well. This session, as usual, will be conducted entirely in English. However, we are happy to answer any inquiries in Arabic if needed. We will allocate time to hear your questions and inquiries. Before we proceed, let me introduce the esteemed members of the National Finance team who are present with us today, starting with our Chief Executive Officer, Mr. Tariq Al Farsi; our Deputy Chief Executive Officer, Mr. Rakesh Makkar; and our Chief Risk Officer, Mr. Bikram Monga; our Chief People Officer, Ms. Marwa Al Kharusi; and our Deputy Head of Finance, Mr. Nirosh; as well as our Communications and Investor Relations Supervisor, Ms. Amira Al Khatri. We would like to emphasize that the main purpose of this session is to highlight the company's performance for the 6 months period ended 30 June 2026, and we do not intend to promote the company's products and/or investments in this platform. I will now hand over the floor to our CEO, Mr. Tariq Al Farsi, to begin the session and provide his insights.

Thank you, Sayyida Wissam. Good morning, everyone, and thanks again for joining our H1 2026 investor presentation. Our 5-year strategic plan remains firmly on track, and the first half of 2026 demonstrates continued execution across our strategic priorities. Despite spillover effects from regional uncertainties, we managed to reengineer our approach and continue to increase our market share. As a result, National Finance continues to be the largest finance and leasing company in Oman with over 50% of the market share, over 70,000 active customers, and a network of 24 branches. Our gross loan book has grown to OMR 760.6 million, while maintaining disciplined risk management and a net NPL of 5.9%. Our main shareholders continue to remain unchanged, once again, a testimony to our stable and prudent operations. We remain focused on sustainable growth, disciplined underwriting, and delivering long-term value to our shareholders. Slide 6. Our diversified product offering continues to be one of our key competitive strengths, serving corporate, SME, and retail customers. Our strategy continues to favor our portfolio diversification and lower ticket sizes to improve resilience during market volatility. We continue to maintain a diversified funding profile across equity, deposits, bonds, and bank borrowings, providing a strong platform for future growth. Going to Slide 7. Our Board and management team remain stable and highly experienced with more than 140 years of cumulative industry experience. Our Board continues to be led by Mr. Hani Al Zubair and Mr. Abdulaziz Al Balushi as the Deputy Chairman. I'm also pleased to announce NFC welcomed on Board 2 new directors during 2026, Mr. Fahad Al Bulushi and Mr. Al Wadhah Al Adawi. The management committee, which was already introduced to you, continues to drive execution across operations, risk, people, strategy, marketing, and sustainability. Slide 8. We also continue to dominate the geographical landscape of the FLC market with outreach with 24 branches. Our blend of both digital and physical channels continue to help us outgrow our competition, which in turn continues to get recognized with awards. Slide 10. We continue to outperform the market, maintaining approximately 50% market share by net loan book. And also in H1 2026, income from finance activities increased by 10.2%, while net profit grew by 15.2% or about OMR 8.1 million. Despite a challenging operating environment, we achieved healthy loan book growth while maintaining strong asset quality and disciplined provisioning. Our capital position as well, funding profile, and profitability remains among the strongest in that sector. With that, let's go through the rest of the presentation.

Thank you, Tariq. Good afternoon, ladies and gentlemen. A quick overview on our financials. If you look at our financials, we delivered another strong set of results during the first half of 2026. Our income from finance activities increased by 10.2% to OMR 38 million, which was supported by continued portfolio growth. We have grown by 5% as compared to last year, which reflects the momentum that we have in terms of asset growth and business. Net finance income increased by 17.7%, while our core income grew by 17.6%, reflecting both healthy business expansion and effective management of funding costs. On an overall basis, like Tariq mentioned, profit before tax increased by 16.7% to OMR 9.6 million, while our net profit reached OMR 8.1 million, representing a growth of 15.2% compared to last year. Moving on. This slide reflects the quality of our portfolio and the sustainability of our financial performance. Like I mentioned, our loan book continued to grow steadily to approximately OMR 761 million, while the net loan book reached OMR 686 million. That's a 5.5% growth compared to the first half of the last year. If you look at the bottom graph, although the Stage 3 ratio increased slightly compared with year-end, however, our portfolio remains one of the strongest in the industry. And we are continuing to provide and add more provisions as we grow over a period of time. That's the positive side. And the right-hand side shows you consistent and healthy financial performance. Those are pictorial presentations of the financials that we discussed just now. Moving on. Our capital position remains strong and provides a solid foundation for future growth. We maintain a diversified funding structure consisting of equity, perpetual bonds, corporate deposits, and bank borrowings, ensuring both funding stability and liquidity. Our gearing stands at 3.85, very comfortable and much below the regulatory cap of 5x as per CBO guidelines, which actually means we are very strong and have enough buffer to grow over a period of time. If you look at our returns, ROE, it continues to improve. And for the year, we had an ROE of 11.74%, while return on assets remains at 2.3% for us. In addition, we have maintained a consistent track record of increasing cash dividends and bonus share distributions over the years. We thank you all for giving us time to present our financials and our performance for the first half year. We'll be happy to take any questions from all the participants. Thank you.

Any questions from the audience?

Lakshay Aggarwal. Just wanted to have some more detail on the increased provisioning undertaken for this quarter. If you can give a slight brief about it?

Sorry. Exactly what do you want to know about the provisions? It wasn't clear.

In the Q1 financials, which have been presented, there is an increase in the provisioning undertaken for the quarter by around, I believe, 30% odd from OMR 5 million to around OMR 8 million, if I'm not wrong. So I just wanted to know a bit more details about the same.

So during the first half, which is the H2 (sic) [ H1 ] that we are presenting, we've -- I mean, the provisioning is an element of two aspects. One, it is directly linked to our model output, that's one. And two, we're always taking additional overlays in terms of ensuring that we've got enough conservative approach. So it's consistent with our strategy which has been there all along and in line with the portfolio growth we've seen.

So basically, the provisioning resulted in line with the regulated downgrades is what Bikram was trying to say. I mean, also allocated our additional income prudently because of the outflow.

Along with the incremental assets booked by the company. So it's in line with that, right?

Yes, indeed.

I have a couple of questions regarding the impairment charges during Q1 and Q2. During Q2, the impairment charges have declined to OMR 1.96 million compared to OMR 3.40 million in Q1. Can you explain the reason of the decline in Q2?

This is mainly because of -- if you see our movement in the Stage 3 portfolio, there was an increase in the Stage 3 portfolio during Q1. So it has been reflected based on that, and we have provided more. In the second quarter, there are no big movements in the Stage 3 portfolio. So based on that, we have provided accordingly -- based on that, we have provided the asset provision.

So we can expect this trend going forward also quarterly?

I mean to say, there is -- maybe we can expect the same trend to be continued in Q3 and Q4. But anyway, it is based on the portfolio performance and those things, but we are expecting the same.

We don't expect any shocks. No.

No. And also my second question is related to the cost. Your average cost is 5.9%. If you can put like that, what is the average borrowing cost and deposit cost separately?

I must say it is dependent on the -- based on the type of the borrowing we are doing, like in terms of the funding from the bank borrowing, we have a [ CLTL ] and long-term borrowings also. So in the corporate deposit side, we have seen big improvements during the last 2 quarters. So based on that one, I can say this is maybe variable in between 5% to 6%. So we are expecting the same trend to be continued also.

And also one question is related to the industry overall. So do you see any competition or threat from the banks going forward that the share of financing companies may decline?

So competition will always be there. And in fact, we welcome competition, because it helps us also to be agile and more customer-focused. And so far, we are not seeing any threat coming from the banks. In fact, the thing is that we have been trying to get into customers which are moving out from the bank to us. And this is a reflection of the processes and the service that we give to the customers. So just to give you an example, we added 9,000 customers in the first half of the year and another 4,000 customers, repeat customers for us who came back to us because of our service. And we continue to invest in technology. Our customer services, our lending processes are amongst the fastest. I'm sure you are aware that CBO has now allowed direct debit mandates, which actually takes away a lot of the painful process of getting checks from the customer, processing it, and all. So we are the first company in the country which is at 85% on direct debit mandates. We are also amongst the first companies in the country where we are doing digital agreements with the customer. So all these features help us to be ahead of the competition, but we have to be nimble-footed and look at what is happening in the market and be one step ahead.