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. Myself, I am Walid Al Hashar, the Chief Executive Officer of the bank. I am 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. First, I think I will start with the disclaimer. Of course, this is a very important slide, even though it is administrative. The presentation contains the statements relating to the bank's business and have been prepared based on publicly available information. It is for discussion purpose.
It is not made for inducing this buying of the shares or selling of any of the products or services of the bank. [Non-English content]
I will 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 of the results for the year ending 31st December. Then subsequent to that, I will take questions from the attendees. In terms of the operating environment, in 2024, actually, which is, Alhamdulillah, no exception compared to the previous three years, the economy has been scoring on a third consecutive year of surplus, amounting to just a bit above OMR 500 million. Oman's economy continued to expand in the first nine months. In fact, the real GDP has witnessed a growth of close to 2%. This is, in fact, despite degrowth in the contribution from oil activities because of some oil production curbs.
What is encouraging that it was mainly from increase in 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 the country's fiscal deficit and its financial position. The efforts, of course, to further improve the business environment, the budgetary project allocations, 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. 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 2024, half of what it was in 2023, reflecting an easing of core food and transport inflation. In terms of Public Debt Management Fund, 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 in paying some of its outstanding debt and reduce the impact of what we have seen as rising interest rates over the past two years. The debt-to-GDP ratio has reduced from the high levels of 61% in 2021 to almost half now to 34% in 2024. Further, the government actually anticipates another 13% reduction. The government anticipates a 13% reduction in debt servicing costs in 2025.
This is all due to marked improvements in the fundamentals. In 2024 was a good story also, Oman gained back its investment-grade ratings after a period of seven years. Looking forward in terms of the 2025 budget, it highlights good and significant economic activities including development and investment expenditure in several strategic projects, along with continuing the social and basic spending in key sectors of education, health care, social welfare, and housing. Of course, the government and Oman are guided by Oman Vision 2040. It will continue to press forward with a 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. [ Non-English content ]
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 continued to support the sector's resilience, and it shielded it quite well from adverse impacts that have been experienced globally.
In fact, the 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. 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. The banking sector has also reported strong earnings, very strong capital positions, ample liquidity, and low non-performing loans. In fact, over the past few years, banks have invested heavily in technologies. This is to reposition their offerings and continue to invest in technology and digitizing their operations, expanding their physical branches, making sure their phygital 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 the 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. 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 had mentioned earlier, on the backdrop of Budget 2025, 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.
[Non-English content] In 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 five 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 five years. After having recovered back to pre-pandemic levels with a 21% growth in 2022 and 11% growth in 2023, the profits of top seven Omani banks shows further improvements 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. 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 definitely be a good and stable performance. [ Non-English content]
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 all our stakeholders better every day. Our stakeholders are our customers, our employees, our shareholders, and societies we operate in. We focus on leveraging our 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.
[ Non-English content ] In terms of a quick snapshot of the various business lines of the bank, the bank 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 providing healthy profit contributions. In general, the three lines, corporate, personal, and wholesale banking contribute around 26%-35% each to our profit line, and Islamic banking contributes around 3%-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. The deposit portfolio is quite strong, which is driven by retail deposits and supported by government and private sector deposits.
[ Non-English content ] 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 asset quality, the total provisions are about 1.7x of the NPLs of the bank, reflecting healthy provision levels. [ Non-English content]
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 five years. The bank has been able to manage the yield and funding cost to maintain the NIMs at these efficient levels and to maintain these NIMs.
Also, in terms of efficient balance sheet and liquidity management, timely portfolio repricing and deploying agile hedging 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 stable with a healthy level of 31%-35% of total income throughout this period. In 2024, cost-to-income ratio has actually reduced to 38. Sorry, it 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 five years when it had reached a low of 1.3% in 2020. [ Non-English content]
In terms of the asset quality, the slide provides trends on asset quality over the past five years. You can see that Bank Muscat has been able to maintain the NPL ratio at around 3%-5%. However, the coverage ratio continues to be at a higher level, ranging between 135%-170% over the last five years, reflecting prudent and agile policies in terms of managing the asset quality. As I mentioned earlier, Bank Muscat's growth loan portfolio is quite well-diversified, well-managed with a prudent credit policy. Bank Muscat was able to grow the gross loans by 4.4% during 2024 after growing the base by 4.7% already in 2023. Bank Muscat continues its prudent provision and credit policy, making sure that our stable performance continues. [ Non-English content ]
In terms of funding and liquidity, the bank has a well-balanced funding mix. Around 70% of the funding coming from customer deposits and the balance through interbank borrowings and equity. This has been the situation and the position for the past few years, in fact. It continues to hold high level of liquid assets over the last five years.
As I mentioned earlier, the bank's capital position is one of the highest amongst Omani peers and one of the strongest amongst GCC peers as well. The capital position is largely driven by core equity capital, along with retained profits after paying healthy dividends over the past many years. [ Non-English content]
That was my final slide. We will now move to a question- and- answer session. If you have a question, please use the raise hand functionality and we will unmute. Thank you. Can you see that? Yeah. Two participants joining. Continue. Yes, who?
Good afternoon. Thank you for this presentation.
Good afternoon.
I have few questions if I can continue.
Yes, please.
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 in the last two quarters. So what are the key factors behind this decline? And also, are there any strategies taken to boost this?
Please, Ganesh.
Thank you, Muna. I think your question was on the quarter-on-quarter change on the fee income and operating income. Is it?
Yes.
Okay. See, in the fee income side, there are seasonality. Particularly Q2 is the highest, if you see historically, because there are certain incomes flow into that particular quarter, like investment income, dividend income, and so on. 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.
Okay. Awesome. The next question I have on Meethaq. The operating revenue was lower by 8% and operating profit was also lower by 15%. Can you also explain, what are the key factors behind this decline?
Yeah, 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. Their reliance, like any other Islamic entities in Oman, is mainly on the institutional funding side. If you look at the last two years, the cost of funds based on the Federal Reserve 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 two years period, and without much corresponding improvement in the yield side. Now we see the trend reversing for the past three to four months based on the Federal Reserve action 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.
It is generally for smaller entities which are Islamic banking entities, either windows or individual banks. Yeah.
Also, can you give an insight into what is Meethaq's medium to long-term strategy to sustain growth and enhance the profitability?
Yeah, that is true. In terms of our medium to long-term strategy on Islamic banking, obviously we now 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. Those aspects will help us to diversify the funding mix. 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.
Right. Thank you. I will move to Abbas now, please.
Thank you, gentlemen, for the call. Thank you, Sheikh, for excellent presentation. You have covered pretty much everything from top down. Specifically talking about your bank and what is 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 are going to hold for now, but there might be a couple of cuts in the future. 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 is my first question.
Okay. Thank you, Abbas. That's an important question. 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 a reasonable and robust level. To cut a long story short, I do not expect a significant growth in Net Interest Margins. I think if we're able to achieve similar margins in 2025, we would be doing quite a decent achievement.
The focus should be on the cost of funds, because I expect competition to be quite severe or quite strong for the lending side. There could be some shrinkages in terms of the yields, slightly. That's where we need to be managing our costs also at the same time.
Sure. Okay. Things are looking benign from that perspective for you, I mean, at least given your strong leadership in current account and savings account.
Well, I mean, we will have to react. So thank you very much for your confidence, Abbas. We have been very agile over 2024 and 2025. One, in terms of, yes, we've been helped by the 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. We'll have to stay on our toes, is what I mean, Abbas.
That's good to hear. My second question is, 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.
Right.
At what point do you be 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. It remains to be prudent, but we expect moderation in the coverage ratio in terms of 2025. Although these are, I mean, this is what we aim for, to moderate it. Frankly, barring any unknown surprises, we're not that worried about a sharp increase, God forbid, in NPLs of Bank Muscat. 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.
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.
Thank you, Walid. My last question is, and I will probably go back in queue, 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 ROE is close to 4%, I think. Then you are 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. Logically, your conventional ROEs are much higher than Meethaq. So at what point do you feel like, you know what? 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.
Yeah. Thank you, Abbas. This is Ganesh here. On ROE front for Meethaq, I think as we talked about earlier, the funding mix is one of the key component 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 two years on Meethaq. But I think going forward, those get moderated as well. But going back to your question on ROEs of Islamic entities to catch up to the conventional level, but I think it is a long way out. The reasons are, these are small entities. The 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 terms of fee income. But 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 is probably in the next three years, is it going to change to conventional level of ROE? No. Maybe the 5- 10 years horizon, possible.
Thank you, Mr. Ganesh, for the well-rounded answer. All the best to you and the team.
Thank you. Next is Shaul Turabi.
Yes. Hi, gentlemen. Am I audible, sir?
Yes, you are.
Okay, perfect. Thank you for the opportunity. My question relates to the upcoming trend in the interest rates and Net Interest Margins. Once again, I'd like to allude to the point that was raised earlier. In a declining interest rate scenario, I sort of am trying to understand what is the lag, and if there is any. If CBO decides to cut down the interest rates by 50 basis points 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. What's the lag between the two?
Go ahead.
Shaul, thank you. When market rates move up and down, obviously there are different behaviors on the balance sheet, on the asset side and liability side. 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 six to nine months in terms of repricing. Obviously, when the interest rates decline, the same impact will be seen. We already started seeing in the last three to four months in terms of deposit rates going down and immediately there is a positive impact. But maybe six to nine months, there will be, as Sheikh Walid 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 flowing in over the next six to 12 months.
Perfect, sir. Thank you. If I could delve into it a little bit deeper, with regards to retail versus the corporate loan portfolio, which of these two segments will take the impact first of the decline? Or then.
The retail is usually fixed rate sort of mechanism in Oman with a cap of 6% regulated by CBO. We do not 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. We do not expect any major change in the retail yield. But on the corporate, again, depending on the mix on the book of each bank. If banks have large working capital facilities, those get repriced within a one-year period. But if there are term loans where the price is fixed or reference to a benchmark, the impact would be minimal.
Great. Thank you, sir. My last question from my side would be with regards to the investments. When we talk about investments, how exposed are you to the interest rate changes? What percentage of your investments is in the floating rate environment?
You are a little breaking, Shaul, towards the end of your question.
I am sorry. Is it better now?
Yeah, it's clear.
Yeah. Okay. With regards to investments, I was interested in knowing what percentage of your total investments, I can see it's OMR 2.1 billion investment on your book. What percentage of it is exposed to the interest rate? What portion is floating and what is fixed, if you could guide us regarding that?
The investment book, if I have to give you a broader breakup, it's 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 T-bills, largely Omani T-bills, as well as U.S. dollar T-bills. 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 three to five years sort of a maturity. We do not see any volatility on the interest rate on the investment.
Perfect. Thank you.
Thank you. We have Abbas again, please.
Thank you. Thank you, Sheikh. Just couple of more questions.
I have Sundar after Abbas, just to be clear.
I am happy to give it to Sundar, sir. I will come back because he is not asking questions.
Okay. Let me take Sundar, please. Thank you, Abbas.
Yes.
Thank you. Please, Sundar.
Hi, Sheikh and Ganesh. It's a pleasure to meet you after a long time. I think just a few kind of strategic question from my end, because you know how the banking sector is moving in future and a lot of changes are happening. Like what you said about competition, it is not about the traditional competition. The New Age competition is also coming in. 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 are 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-like 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 are looking at? Because Bank Muscat, we like as Bank Muscat because it is a stable one. We do not see any major kind of changes. At least stability is there, 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. 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 are going to face this.
Thank you, Sundar. First, when you talk about technology, we have been investing in technology quite heavily, and that is mainly seen in terms of the advancements that we keep developing in our applications and our digital channels, and the uptick in terms of usage in it. When it comes to FinTechs, we have also participated with a portfolio to invest through BM Innovate in FinTech companies across the world, and that is also part and parcel of our strategy. When you say that ROEs are at a low level, I am not sure what you mean by them being at a lower level, at 12.7%. That is generally a regional or a market scenario in 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, yes, we have a number of strategies. But we need to be careful and make sure that whatever we invest in, it is not going to be some things of the nice-to-haves 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, if that is what you are referring to. For us, digital banks are a phenomenon that is nice to watch, but it is 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 have not really achieved a decent momentum despite the sizable investments that are there. How we view the scenario is, digital banking, and in particular, standalone digital banking, is more like a defensive strategy for any incumbent to make sure that. Because 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. 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 run 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. These are quite important projects for us.
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. That we have done through the fundamentals of the bank, through the digital channels of the bank, through digitization of close to 75% of branch services into the palm of our customers' hands. 75% are digitized. Opening a bank account is through digital now. 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 those transactions flow through the bank's counters, and so on and so forth. We have a number of initiatives that are already in place for that.
That's really in a nutshell what I think, Sundar. Okay. Any other questions, Sundar, or can I move to Abbas?
Yeah, I have another question from my end, Sheikh Walid. Just want to understand from your perspective, 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 two to three-year perspective, I know a lot of projects are coming and the competition is also coming. What level of growth you are 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 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 two to three-year perspective?
We expect it to be growing along with the economy of the country and the market. This is in terms of organic. So that's what we expect as far as that is concerned. We expect it to be growing in line with the market and the market dynamics. Yeah.
Okay. Thank you.
Thank you. Abbas?
Yes. I will finish, Abbas, and then I will go to Abu Nawaf. Yes, Abbas.
A couple of macro questions. One is, I am sure sooner or later you are going to be asked this. Your second-largest competitor is at an 18% market share and a 15% asset market share and 15% loan market share. Bank Muscat sits pretty at the top. How do you see the sector evolving if, let us 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 there is some speculation that another consolidation might happen in the banking sector.
Yeah, that's very true. 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%- 40% because of the balance sheet capacity of the individual banks. Maybe Bank Muscat, because it has the largest balance sheet capacity, 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 and 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 decent benchmark rates. Because the two stronger banks are going to be able to acquire better funding and then support the different projects in Oman. Today, even by comparison, for example, in Bahrain, 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. Bahrain's situation, actually, they're still growing. They are still doing well.
We are also here in 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. From our perspective, yes, there will be competition, but that's normal. Competition has always been there. We have acknowledged it. We have seen it in the past. The competition is still there, 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 the formula is not just size that enables all of this growth.
It is a combination of a number of different factors. All in all, I will sum up by saying that actually, the larger the banks in Oman, the better it is for the economy. The better the economy is, the better it is for the sector.
Thank you. Thank you for that perspective. Thank you so much. The second question is, HE Musallam, of course, has been a CEO of two large banks. After he became governor, you have got a guy who has obviously been in your position before. 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? Here is a guy who was obviously a very large personality in the banking sector, and now he is the governor. I was just wondering, is there a wish list that you guys have that you have 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 is also quite positive, and we are quite optimistic from the circular that you have seen. There are more in the pipeline that we comment on and the dialogue, it continues with the regulator, Central Bank of Oman. We are 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. The momentum of change is quite good, and we are quite optimistic about it, Abbas.
Okay. Nothing specific you want to comment on right now? Okay. Got it.
I cannot really comment on anything because most of these are in draft. We have seen already the positive ones, the one 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 are more in the pipeline, I'm sure. It will all be quite good for the banks.
Sure. Thank you, Sheikh. All the best to you guys. Thank you for your time.
Thank you. Thank you very much. You too.