Taageer Finance Company SAOG (TFCI) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the meeting -- to the Investors Meeting to present the unaudited financials and financial performance of the company for the half year 2026. In terms of introductions, we have our CEO, Sheikh Khalil Harthy; our Deputy CEO, Mr. Kashif; and myself, Head of Finance, Moosa Al Lawati, and we also have [ Mr. Akhtar ], our Finance Manager. I will hand it over to our CEO, to start with the introductory part of this presentation. And we will continue with the financial performance, and then we will move to the Q&A section.

Thank you, Moosa. [Foreign Language] good morning, everybody. Welcome to the first half section of MSX presentation. Thank you for your interest. Thank you for your attendance towards the session. We'll move to the first slide, if we may Moosa please -- probably some of these slides will be familiar somewhat to you, but we will try to look at updating them. Their gross loan book grew to almost OMR 360 million. We are having 23.2% market share as of the first, second quarter and first half of the year of the FMC market. Our branch network has been under expansion. For this year, we are looking for 4 new branches and the reallocation of our [indiscernible] branch. This becomes part of our strategic presence with the SME and the retail market so that will become available. We invite you to visit our new branches. There is a fresh look and feel into them where it makes all our clients feel most welcome. And then we have dedicated also some of the counters to be recipient for our SME clients where they can showcase their work. So a lot of initiatives are undergoing there. During this year, we became more of a SME focused. We have reviewed entirely our portfolio. We are trying to ensure that we're having sustainable returns for the shareholders and income. So, this is one of the focus areas we are trying to do. As you may know that the country is trying to focus on supporting SME sector in the country from the top level to the Central Bank. And it's a joint effort, and this is participation from Taageer in order to support this initiative. Then we have a new leadership, which is first towards the digital. Digital, of course, is more of a tool. It's not our objective. But like we mentioned before, the Board of Directors have approved a 5-year strategy for the coming five years. Management and Board are collaborating very closely in order to make sure that there is a robust execution dynamic outflow of the entire strategy forward-looking. And digital, of course, becomes the mean for that. I don't think it's elective anymore to go for that. So we are looking at becoming digital first, and we are trying to apply the AI tools wherever applicable within the guidelines of Central Bank and [indiscernible]. And of course, are trying to see that the strategy is aligning towards the goal. Well, as you may know, this is probably just a recap that 86% of the company's shareholding belongs to it's very strong sovereign and institutional investment house within Oman and outside of Oman. Oman Investment Authority makes about [indiscernible] holding, which gives us a good strong backing of shareholders, you will have the entire list available at. The key hirings were revolving around enforcing the strategy to make sure that we are moving forward in the right way. We have also enforced the compliance. The credit, we have a new high risk. We're going to highlight that on the subsequent slide. HR and business development has taken place. We have also run strengthened our control functions to ensure that we are aligned with the Central Bank mandates and objective. We are working the path and quite solid ways aligned with the best practices inside and within the external ecosystem. So we have highlighted these areas probably as we move on, we will try to zoom in into what are we looking at, of course, bearing in mind internal elements to be preserved for the company. So we are -- the first objective is to have sustainable growth. So we are focusing on the profitable sectors of the SME segment. We are undergoing an ongoing analysis for where are the profitable sectors. As you know, SME sector is undersold within the economy, yet it carries is a good amount of high risk. So were the higher risk the higher return, but we are trying to balance the wheel where we can focus into meaningful sectors in alignment with the 20, 40 key sectors, which are into the place. We are trying to be very practical in terms of approach. We are trying to ask what are the purposes of funds. We are trying to loan dispensation to a more robust criteria and then become more agile in terms of offering to a kind of financing. So therefore, based on that objective, we have dispensed 15% more this year towards SME sector compared to what we did last year. There's a portfolio diversification across the new branches. We are trying to see where are the hubs of businesses which are happening. As you may know, we have most governance naturally, we have [indiscernible], we have [indiscernible]. So we are trying to reinforce those and focus in into getting the right service levels for those sectors. Digital channels and alternative sales platform have been quite proactive in terms of trying to deploy adequate channels, more robust turnaround times. Internally, we are trying to shape up our risk assessment and the deployment from application to disbursement in effective way. It's an ongoing journey, but I think we have the right path for that matter. On the Credit Risk Management, I think we all agree that the core function of a lender is to have a robust credit management. So in there, we have looked at restructuring the underwriting credit department to enhance it, and that comes from either from functionality, from people, from a process point of view. And this is an undergoing. We have -- like we mentioned before, we have the new hires, we are looking at enhanced capacity and then upskilling our people on an ongoing basis to make sure there is alignment across different levels within the department. We are trying to also look at our portfolio, trying to recalibrate the risk concentration. So as you may know, systematically and there are many markets that the lenders have certain concentrations in some sectors, so we have ongoing basis reviewing what is the concentration level in certain sectors, and we are trying to rebalance based on profitability and based on the risk framework, what is our risk appetite and how do we see the past historical performance of the sector, what is the ongoing. And then what is the outlook for that? And based on that, we are trying to risk for -- so the risk for the sectors and the pricing for that matter. We are definitely trying to use technology as an enabler for us to help us expedite and rationalize our risk assessment and then arrive at an early warning sign system and then try to make the risk -- the credit risk as it could be to cope up with the market. In terms of governance, we have strengthened, like we mentioned before, our internal audit, our compliance and risk functions have been boosted up in terms of capacity, in terms of people, in terms of process. They have become a centerpiece for most of our decisions, either from second or third line of defense. They are engaged at large with many of their processes, many of the policies, many of the discussions of the company internally. So we are -- we would like to think that we are moving towards creating a culture strong GRC with it. We have also reviewed our management committees. There are several which are led by the regulator. And then in line with that we try to make them efficient. We're trying to reshape those terms of references. We try to quantify deliverables, and we try to make those management committees effective into delivering the key objectives in line with the company's strategy and in alignment to Central Bank, which we thank for their constant support, and we are in constant dialogue. And I think we are seeing very good support from Central Bank towards the sector as a whole and they have been very understanding. And then I can say from Taageer side, from a Board level, from shareholder and definitely company management, we have been forthcoming with them. We have been as transparent and open with them. I think this dialogue is quite healthy and looking forward. From people angle, they were -- like we mentioned before, they were key hirings in terms of strategy, credit, HR, compliance and product development. This is to ensure that we are in line with strategic initiatives we are trying to get, definitely, people are the key assets for any enterprise, where we have the right people at the right place what matters the most. We are building institutional capacities by creating a competency framework. Competency is vital, so that we make sure that people are being deployed and developed and they are shaping up to the next level of company aspiration. We have also started by developing enterprise level KPIs and that has been on the whole. This year, we're cascading further departmental and to individual. I think it's a very important element that people are having clear objectives from enterprise cascaded to the individual level. And then also, we have an alignment with our overall strategy. In terms of processes, like we've mentioned before, any transformation looks at people, process and systems. The processes are under constant and comprehensive review across all major functions. Whether it's on the core, from the sales, from the credit or from the recovery part of it. And then also from the support functions, whether it's an HR, IT or finance and all the support functions. We are going in a positive way where we have created list of key products which we are trying to execute towards execution and amongst them the process enhancement and the objective here is that we are trying to be agile and we are trying to be innovative forward. And the best way to do this is to cross-pollinate and bring all the heads together and to a constructive way to break it move forward. Improving customer experience is definitely a center-piece because this everything revolves around the customer experience, especially nowadays, where customer expectations we are all customers at one way or another. And bar has been raising and then we are trying to definitely see how can we improve on that element. And digitization is definitely a tool which people are seeking convenience out of. It helps efficiency, in terms productivity, turnaround time, reading of MI and agility to turnaround. NPA Management has been a center-piece. I think it's not only for Taageer per se. We all know that post-Covid there have been ramifications for especially the SME segment where a lot of companies within the SME sector have been given a breather over a period of time. Taageer has been also very collaborative with many of the SME customers, which we have and the spirit of collaboration. And therefore, we have been extending, with the guidance of Central Bank, certain break areas for them in terms of restructuring and moratorium. Taageer also has been trying to collaborate with some of the clients where we're finding it difficult to repay post-COVID and some additional facilities we are giving to them in terms of moratorium and restructure. I think several of those have reached those last miles within 20 -- we would have seen that we have captured part of them, you would have seen in the financials of last year, we have observed a couple of provisions in terms of NPA. We see that during this year, we will try to consolidate all of these accounts, which are falling under NPA. So we expect that within this year, [Foreign Language], the capture of the entire NPA restructuring post-COVID prudentially will be captured within this year to start normalizing these accounts. So like we mentioned, there are legacy portfolios, which we have into place. We have been trying to be supportive to the SME segment at large. Now prudentially, we think it's only right to start to build up our provisions. Now the management and been supervised also by the Board and then equal support by the Board of Directors. We have been proactively looking at those portfolios trying to recoup from them whatever we can, while provisioning -- the fact that we are provisioning is not a necessarily [indiscernible] money, but it's the industry norm to start providing additional provisions for this, which I do [indiscernible] is proactively doing. We are being revamping and aggressively pursuing our recovery models, trying to fast pace and expedite the NPA regarding into multilayers. Whether it's from a retail level, whether it's on SME and corporate level. But as you may know, the retail probably is largely mechanical at nature and it has its own pace, it has its own mechanics. And when it comes to SME to untangle their issues, it requires a bit of handholding from our side. And the corporate elements, also clients that require a different type of handling. Nonetheless, we are working as a financial adviser to those clients trying to see how can we progressively and then where needed, aggressively trying to support them and to getting outside the woods. And we are seeing very good traction of being engaged with them. So we see a very good high level of recoverability either from legal route, the typical way or from a legal execution. Of course, amicable settlement remains to be the preference for everybody. We are also trying to proactively ring-fence the legacy portfolios, what we have observed that from 2025 dispensations of portfolio, we have seen positive outcomes in terms of NPAs. We are seeing very better portfolio handling outcomes. So it is clear to us that these are predominantly legacy portfolios like we mentioned earlier, the indicators of the fresh portfolios, which were onboarded thereafter has been quite positive [Foreign Language]. And we see the efforts of shaping up our credit has been yielding well. But as you know, it is a cycle where year-on-year, the buildup of NPA has to be offset by a better portfolio underwriting as we go. So in a simple nutshell, NPA is a pragmatic -- being pragmatically approached by the management. It's not a symptom of the Taageer alone. Different financial institutions do face such challenges at different point of time, especially during economic or the geopolitical cycles. But we are becoming more and more aware that how we handle, what have we learned and how we improve our practices, policies and processes and how do we shape up our people towards better handling of the NPA management. For the performance highlight, we probably will hand it to my colleague Moosa, Head of Finance, to take you through the numbers.

To start off with some of the key indicators from the balance sheet perspective, the company's portfolio continues to grow a growing rate of 3.5% is registered for the current period as compared to the prior period. The fluctuation that you see in the bank borrowings and corporate deposits are mainly due to the company's efforts to optimize the cost of funding. The other point that I'd like to highlight here is that the bond maturity or retention that is planned in November of the current year, the company has enough liquidity planned for that perspective. Next page. The company maintains a diversified borrowing mix in an effort to optimize cost of funding. The debt-to-equity ratio is in line with the prior period. The gross loan book consistently with prior years continues to grow. Again, not to repeat what our CEO has mentioned, the company has undertaken great efforts and measures to build the provision over the coming period. From finance -- from income perspective, as the funding cost continues to decline, our lending rates as well have reduced which is evident, and this is why our finance income has been in line with the prior period. The company has taken good measures and maintaining our operating expenses, cost-to-income ratio of 36%, which is greater than the industry average, indicated here. The company has a very prudential provisioning policy, resulting in an increase in our ECL as compared to the prior period then resulting in the dip in profitability that is at the end of the screen. The ROE, ROA and EPS as well are in line with the or the profitability decline. Again, the cost-to-income ratio was 36.5%, which is greater than the industry average. Our net interest margin is due to the declined in both cost of funds and lending rates. We have reached to the end of this presentation, and we are happy to take out any questions from the [indiscernible].

If there are any questions, please feel free to ask. There any questions, free to ask, whoever have attended. Any questions -- I hope we are audible for everybody just to add some check. No more questions. We would like to thank everybody who has attended to the call. We remain committed from Taageer Board to management, to entire staff to make this work. We are trying to consolidate within this year [Foreign Language], with the support of shareholders, with the support with our partners, investors confidence on the company and support of Central Bank [Foreign Language], we are quite confident that we are -- we will be able to consolidate within this year. And [Foreign Language] we are looking for several strategic initiatives, which will uplift to bring back Taageer nto where it belongs [Foreign Language]. So with that, if there are no more questions, we would like to thank everybody for their kind participation and looking forward to see the best of all ahead. Thank you. [Foreign Language]