Salaam Alaikum. Good afternoon, everyone. Welcome to NBO's Interactive Session. This is Aisha Al Musa, Investor Relations Officer. In today's session, we will discuss our financial results for the year ended during 2024. Before we start, I would like to remind you all, if you're facing any technical issues or the sounds, please feel free to type in the chat so we can assist you accordingly. Now, let me introduce you to our esteemed management. We have here Mr. Abdullah Al Hinai, our Chief Executive Officer, and Mr. Girish Ganesan, our Chief Financial Officer. We also have Swami from Business Performance and Mr. Rashad Al Sheikh from Regulatory Reporting and ALM, and Mr. Balaji , Head of Investor Relations, joining us remotely, and we also have Mr. Wahid Al Balushi and Mr. Abdullah Al Balushi from Board Secretary. Yeah, Mr. Abdullah, please.
Salaam Alaikum. Good afternoon, everyone. Thank you very much for taking time out of your busy schedule and joining us in today's presentation. As briefed by Aisha, basically, we are going to present our financial performance as of 31st December 2024 and as disclosed to the market end of January 2025. We have a very standard presentation. I'll quickly take you through the slides, the initial slides, and then my colleague Girish will be taking us into detailed financial performance. But before I start on the presentation, again, I would like to thank everyone that supported us in our journey that started in 2021. Alhamdulillah, we've been performing extremely well over the past four years now. We've entered in 2025 our fifth year of our five-year strategy, and we are quite proud in terms of our achievement in the past year.
2024, we witnessed the highest profitability ever achieved by the organization in its 52 years history. This slide in front of you has certain key messages that we would like to relate. The key aspect is that we are the first commercial bank, locally incorporated commercial bank, and it was founded in 1973. This means that we bring with us strong and long-term relationships with different segments of the market, be it local companies, government and government entities, as well as individuals. We have a very strong management team. We continuously review the strengths of and expertise and knowledge of our colleagues. We continuously add new experiences as and when that is required and as demonstrated last year. Overall, we have a collective experience of over 100 years in banking.
Like I mentioned, in 2021, January 2021, we embarked on a five-year journey, and the title of the journey is Return to Prominence. We strongly believe that we've maintained and achieved a lot of the KPIs that we've set to ourselves, given the challenging global macro picture, as well as local challenges and changes and volatility that's been there in the market over the past four years. We are on the fifth year of that strategy. We believe that we'll continue the same pace that we've seen and witnessed over the past four years. We are also embarking now in terms of preparation for the new strategy. We will come to the market as and when that has been approved by different internal stakeholders. The other aspect that I would like to also discuss here, we predominantly operate in the Omani market.
The majority of our revenues come from our relationships in Oman. We believe that Oman provides a very strong macroeconomic market for us with strong stability, and we've seen rating agencies really emphasize that aspect about Oman, and with one of the rating agencies actually bringing back the rating of the country back to investment grade. We are hopeful that others will follow suit. As a bank, we are proud in terms of our technologies. We continue to invest selectively in certain specific areas. We've committed to the board and shareholders, and if you go back to our past presentation, we continuously are committed in terms of making significant investment in technology to ensure that we are market leader there. Another key strength for the bank is the shareholder rate.
Commercial Bank of Qatar and Mr. Suhail Bahwan together, Sheikh Suhail Bahwan, he said together own close to 49% of the bank equity, with government and quasi-government owning close to 35% of the bank equity. So a very strong shareholder base. We do benefit from their expertise, knowledge, and market access, and a lot of power in that respect. Next slide, please. Slide number three [crosstalk]. I'm skipping the overall economic picture. I think you're all familiar and I would say here to the Oman banking sector. Again, the banking sector has proven to be a quite resilient sector coming out of the pandemic situation, the volatile USD rates, etc., and has been able to post a quite strong recovery. This slide shows the continued growth in the financial parameters of the Omani banking sector.
Clearly, in the past one year, there was a stronger growth on the liability side and deposit base, vis-à-vis the growth in the loan segment, showing a strong liquidity position for the Omani banking sector. CBO continued to be the main regulator for Omani banks, and they are quite active in monitoring and ensuring adherence to very prudent and strict ratios. It's important also to mention that earlier this year, beginning of 2025, there was a royal decree issued by His Majesty Sultan Haitham issuing a new banking law. We are reviewing the new law and.
Correct? Correct level of the oil value.
Yes.
Yes. They said that as of now, the rebate is higher, but your rebate would not remain the same for the next year.
There's been an issue. The government has issued a new banking law, which basically we are waiting for more circulars and regulations from the Central Bank of Oman. Next slide. Yeah, next slide. On the sustainability, the country has embarked and has committed in terms of focus on sustainability. It is part of Oman's 2040 vision, and the slide demonstrates some of the key aspects and asks in terms of the sustainability element. NBO itself has embarked on that journey, and we expect that we will publish our first report sometime in the end of Q1, early Q2 of this year, as per required by regulations. With that, I would request Girish to take us through specific details of NBO. If there's any questions, I'm happy to take it at this stage or after Girish finishes his financial sessions.
Thank you, Aisha. Good afternoon. Salaam Alaikum to all of you. So the first slide, slide number 10, which you see on your screen, we are familiar with. We have mentioned that we are the first Omani commercial bank, 1973 establishment. At the end of 31st December 2024, we had 1434 employees. We've given you some facts around the number of customers and the number of branches that we have, etc. On Egypt, we've mentioned that before. We are in the process of legal closure of the operations in Egypt. Our primary focus is Oman and the corridor business with UAE. Within Oman, clearly, you're aware of our comprehensive universal bank approach where we do retail, wholesale, international, and Islamic banking. The CEO mentioned that it has been a record year for us. This is the highest profit that this bank has reported.
You can see below in the key financials, asset growth grew robustly. We finished the year at $30.6 billion of assets, US dollars, of course. Net loans of just over $10 billion. Okay. And net profit of $164 million, up from $151 million at the end of 2023. I will cover these numbers in the subsequent slides. On the right side, you see the shareholding as well as the rating that we've had. We can quickly move to the next slide. In terms of our own priorities, clearly, the five-year strategy, the CEO alluded to the five-year strategy that was created at the end of 2020, beginning of, sorry, yeah, beginning of 2021 onwards was our first year of execution. We are now in the last year of execution of the five-year strategy. We are working on the strategy plans for the next five years.
The strategy plan, just to very quickly recap because we have presented this more than once, is basically three areas: balance sheet, focusing on the liquidity, capital, and asset quality. These are very three key pillars for us. For those of you who are attending these calls for the first time, in 2021 or late 2020, we had an AT1 that was due for call, and we didn't call it. The first thing the CEO and I did when we came on board was to do a private placement and call that. Capital is a very important pillar for us and liquidity as well. So you will see when I talk about our CET1 ratio at the end of 2021 Q4 at 17.1%, we are very well capitalized, and we are liquid as set out in the balance sheet ratios.
Asset quality with the NPL ratio sub 5%, we've improved our asset quality, and I'll cover that when I talk a little bit, provide a little more color to you on the asset quality. Then the business model involved three areas again. One is revenue. Clearly, we know that growing the top line is an important priority for us. When we started our five-year journey, our cost-income ratio was about 36%. For the year end of 2024, we're just below 42% and better than the industry as well. So through capital management of the cost base and investing wisely, we've been able to achieve that. The partnership pillar requires us to work, one, within the bank closely with every division, but also with our external partners, including the regulators, the stakeholders, and the other investors as well. And our customers, of course, are our partners.
The third thing we talked about was sustainability. The CEO alluded to compliance with the ESG mandates for this year. In terms of the sustainability, then we identified three areas, which are the brand, the digital channels, and we have award-winning digital channel proposition. Lastly, but most importantly, our people who continue to be our area of focus. That's the key priorities for us. These are known slides for us, so I didn't spend too much time, and we've kept the slides the same in each of our presentations over the last three years at least. Okay. We can move on, please. Given the focus on ESG, ESG is now an integral part of each of these pillars, whether it be liquidity, capital, asset quality, or the digital channels. We talk about various actions within each of these pillars.
Our intent would be to make this as a way of life in everything that we do and more color on this as we set out our strategy plan for the next five years. That's what we're doing. Okay. Similar slide on the next, we talked about the other pillars, whether it be people and brand, revenue, optimization, and partnership. Clearly, in each of these areas, some of this involved a mindset change among our stakeholders and our employees. We are driving that slowly but surely. Okay. That's what we wanted to highlight. Lastly, before I go into specific numbers, slide that talks about our commitment whereby the 30 ESG metrics and the standalone ESG report would come out at the end of the quarter in line with the MSX disclosure guidelines. We are working on that.
As I covered earlier, and the CEO as well alluded, we are firming up our map for ESG implementation and also agreeing on targets 2025 and beyond. Now, obviously, you see a lot of noise around with major banks walking away from some of these goals, etc. We'd love to play and see how all of this filters in the Middle East region and what some of this is going to pan out. We're not letting that distract from us, from our whole goal of publishing the 30 metrics and the disclosure report by Q1 this year. That was the summary of our strategy and main priorities. I'm going to give you key financial highlights and then put a few slides around the balance sheet, P&L, asset quality, capital, and liquidity, and then we'll pause for questions.
The first thing I want to call out is that the profit for the year was $163.8 million, up by 8.7%. This is the highest that NBO's ever reported. Number one point. Number two, our assets, 13.6, I alluded to this number earlier, 8.7%, up 8.7% over the last year. What are the components of the asset growth then? Deposit growth, which was 14.4%. The CEO mentioned this as well. Not only NBO, but most of the banks in Oman have grown the deposits faster than loans. Why is that? Obviously, from our perspective, from NBO's perspective, we grow the loan book in a very cautious manner. Later, when you see the sectoral breakdown, you'll see that our focus has been on the GRE sector, that kind of credit.
So clearly, opportunities, we are very careful about growing and thoughtful in the segments and the customers that we want to go after. So clearly, those two aspects, both customer deposit and gross loans, which grew by 7.6% year on year, are key items of the growth. Fairly straightforward balance sheet. There are no complex derivatives or anything like that in the balance sheet at all. Then the AT1, we've already taken approval for $300 million of AT1 issuance. During 2024, we completed $150 million of that issuance. Earlier, we had completed the remaining portion. So effectively, this takes our capital adequacy ratio on a CET1 basis to 11.5% and total capital at 17.1%, well above the central bank limits. Last but not least, a couple of P&L items for you. One is the impairment number.
10% reduction is not because we are providing less, but as I mentioned, our growth in the two-thirds of our growth over the last three years has been the GRE segment. Clearly, that should filter in. Secondly, we had a good year in terms of the recoveries, which have also been able to help us to reduce the broad charge, the net charge, net impairment charge to P&L. Fee income was a very strong story for us. We are conscious that while we chase growth, it can't be all balance sheet driven. So a key focus area for us has been growing the fee income. Okay. So that's basically the headline. Let's quickly go into the other slides, and I've got three, four slides at best to cover in detail, and then we'll stop for Q&A. So operating profit, I've covered most of these already.
You see the first point there talking about net interest income and that coming off. That's primarily because of cost of funds, high cost of funds, and that's an issue not for NBO alone, but for the industry. But also, our focus has been on GRE exposure. I repeat, two-thirds of our growth over the last three years have come through the GRE loan growth. These are finally priced. Our view is that we would not compromise on this in terms of asset quality, albeit the margin being slightly lower. Cost income ratio, I've covered. Let me provide a little bit of color. You've seen that our cost income ratio has been decreasing year on year, primarily not because we are not investing in the business, but we had our optimization program. So effectively, over the last few years, we have renegotiated every contract that we've had.
We are very thoughtful in terms of additional people that we hire, but that doesn't mean we don't hire. We continue to invest in three areas. Number one, our people. Number two, our brand and branches. Number three, our technology. These are three areas that we are very thoughtful in terms of how we invest. We cut out and eliminated. We've eliminated a lot of bank cost already, but we've created space in the P&L to sustain some of these investments. So in terms of metrics, you see the return on assets, return on average equity, asset quality, etc., all improving in the right direction, very importantly for us. Then the impairment story I covered basically on why it's lower. It's not because we're providing less, I repeat. It's because the collections were better last year, and also the asset quality improved as well.
On the right side, you see the chart, which talks about the cost-to-income ratio, the ROE, ROA, etc., improvement in these three skills and also talk about the left side bottom table gives you the composition of our income between net interest income, other operating income, and also staff costs and other operating expenses. You will see that the staff cost number has remained broadly flat between 22 and 24, while other operating expenses reflect the investment that we are making in the areas that I just talked about so we'll move to the next slide. A favorite slide of ours, which talks about the asset quality. In our 12% asset growth, mainly driven by exposure to sovereign and GRE, we have a diversified loan portfolio, clearly well-diversified. Continuously, we are building our Stage 1 to 3 provisions. We look at total provision of 4.1%.
NPL, again, that's because of reclassification of some exposures, but still below the 5% line, and then the Stage 2 loans, which some have come off from 20.6% to 13.6%. You see on the right side our exposure by Stages. Again, we monitor all of it. It's a very strong partnership between me as a CFO and the Chief Risk Officer and the CEO in terms of what approach we take for loans. Together, we work with the businesses to achieve desired outcomes. That's really my call out on this slide. Again, very pleased with what we've been able to build for this bank over the last three years. In one of the calls, and I'm sure this question is going to come up, you seem to be a boring bank, but perhaps so, but we don't believe in giving surprises.
We want to grow steadily and in a manner being both well-capitalized and liquid. That's our framework. And that neatly leads into what I want to talk about next, which is the capital and funding and liquidity slide. And then I've got a slide on Muzn, our Islamic Bank. And then I'll stop for questions and comments, please. So you look at how we fund the book. Our panel on the right side, you see that current and savings account and call accounts comprise of 50.5% of our deposits. Time deposits are at 49.5%. Could the ratio be higher? Yeah, perhaps. But it's not just CASA for the sake of CASA. It has to be priced attractively. And you all know how the cost of funds in Oman went up over the last 18 months. NBO is no exception.
But we talk to you all about how we manage liquidity in the bank. We have the CEO and I share a weekly liquidity stress in a balance sheet meeting where we sit down with the businesses and look at what rate we are bringing in the deposits, what are the areas of focus, etc. That's what we do. So you look at how we look at some of this in a prudent manner. Then we talk about liquidity ratios there. Liquid asset ratio is 21.9%. Liquidity coverage ratio, again, LCR at 277%. So very well-capitalized and liquid. I already talked about the capitalization levels. The CET1 also I talked about. We are at 11.5 against the regulatory minimum of 9.5 with a 2% buffer. We do have ICAAP in place, so we manage this on a very tight basis.
I also talked to you about the AT1 issuance that did. The issuance is again listed in Dublin so we continue. The CEO and I believe that at any given point in time, we'd like to have some papers which are listed internationally. We will continue to explore further opportunities during 2025 and early part of 2026 to be able to be more visible to our international investors. My last slide is on Muzn, and then I will pause. Muzn has been an area of growth for us. Some of you expressed an interest to see what we are doing in Muzn. For us, for the CEO and I, this is a particularly rewarding area. When we started our journey with NBO, we were trying to see what are the engines of growth, where are the areas of focus so two areas which were at that point struggling.
One was our international operations, which is Dubai. You already did that. Sorry, not Dubai, and the other was Muzn. So if you see from Muzn's performance, then you could argue that it's growth at a small pace, off a small base. I do agree with that, but that said, look at our database, what we've achieved. I think that's really good in terms of the profit as well. The profit growth is quite impressive. Small, I acknowledge, but that's an area of focus, and we continue to grow our Muzn. We've completed the rebranding of Muzn. You've seen a fresh look in our branches, etc. That was my last slide on performance. Clearly, the detailed balance sheet has been given as an appendix. To sum up, 2024 was our record year in terms of our profit. We are well-capitalized and liquid.
We have a clearly defined strategy on which we are executing. This is the last year of our five-year strategy. We are working on the next five-year strategy, and we will update investors at the right time on this after the approval of the board, etc., which I expect will be in Q1 2026. That's really what I wanted to cover. I'll just ask if Aisha wants to add anything, and then we can open up for Q&A.
I think we covered most of the presentations. We are happy now to see if there's any questions that we've gotten. Thank you.
Thank you, Abdullah, for contributing. Please, does anyone have any question? You can open your mic and ask.
Please.
Go ahead.
Please go ahead.
Yes. Hi. Thank you for the opportunity, and I apologize for the disturbance earlier. I had a question regarding the coverage of the bank. As you mentioned in the presentation, your coverage ratio has declined. So should we be expecting any accelerated costs or accelerated coverage or any provision booked in the upcoming quarters to get your coverage back up to over 95%?
Some elements in terms of where we are in terms of underwriting and quality, etc. And then maybe Girish will directly answer your question. I think it's very critical just to understand the business that we've been working over the past four years that Girish had mentioned multiple times in the presentation. Two-thirds of our growth has come in from high quality, high-caliber GRE, quasi-GRE exposures that includes Muzn on the Islamic Banking side, as well as our operations in UAE. So that's number one. Number two, in terms of the deals and the staging of our book as well, we tend to be more on the conservative side.
So you see us and certain names that maybe we share with peers, always more aggressive in terms of any downgrade and any ECL provisioning required at any early stages. Most of the changes that would have happened would have been a migration from one stage to another rather than substantial new names that have come into our NPA book. Girish, do you have any specific?
Yes. Thank you. You basically covered it. So our approach to provisioning has been prudence, and we set that out four years ago. We will not hesitate to provision where it's absolutely required. And similarly, we're not going to go extremely conservative. So that's been the tone. Second, the CEO covered this topic at an earlier point where the GRE forms a big part for our group.
The particular reduction in the coverage ratio at the end was because of the reclassification of an exposure from Stage 2 to Stage 3. Obviously, we don't discuss customer names, but that exposure obviously impacted the coverage ratio. But all I would ask you to look at is just not coverage ratio, it's just one metric. It's an important metric, no question. But look at the sectoral composition of the book as well and look at it. And we're very mindful of that. Would we be in a hurry to take the coverage ratio up in this quarter? Not really. Because we have regular conversations with the Board Risk Committee on what we're doing and our approach to provisioning. We're in a good space. And we will gradually build this up during this year.
Sure. So it's important that we continuously maintain a prudent approach. I would like to repeat the fact that there's no specifically detailed information that you can compare with our peers, but our conversation with peers, our conversation with regulators clearly demonstrated that we are way advanced in terms of both identification, classification, and coverage of different stages of the book.
Other questions? Any questions at all?
Hello? Hi. Graham, am I audible?
Yes, you're fine.
Hello?
Yes, please go ahead. You're audible. We can hear you.
Yeah. Graham, Mr. Girish, this is Bishan Valla here. Thank you for the call and the presentation. Congratulations on a fantastic set of numbers. You mentioned that you embarked on this journey of the five years of a transformative plan. You've seen the results. It's there for everyone to see. So congratulations on that. As you embark on the next phase, if you could just give us some sort of key milestone in terms of what's an aspirational ROE, what are some of the sort of key metrics? You've spoken so often about jaws. If you could just give us some sort of qualitative and quantitative sort of metrics, if we could sort of get some guidance over there.
So I'll take this as an umbrella, first of all. Thank you very much for your kind words. You've witnessed our journey, so I hope you are quite satisfied in terms of what has happened over the past four years.
So far, so good.
Great. Thank you. Like I mentioned in my introduction, we are working on the new five-year strategy. We started this process earlier this year. We moved it fast forward probably after the holidays of Ramadan, inshallah.
Of course, it will have to be presented to the board. But in terms of broad ideas or concepts, like I mentioned, our first five years is Return to Prominence. We had three key strategic objectives, which are safeguarding, brand creation, and sustainability of that performance. This is based on the history of the organization where we were coming out of COVID. We had issues, for example, in UAE and in Oman in terms of NBO. The capital had issues and certain elements of liquidity. We lost certain business and cost-to-income ratios more than 55% in the end of 2020. Like you are aware, historically, the bank has gone through a cycle of three years of performance and then a drop of another three years, and it worked quite well at times.
So the priorities were based on the conversation we had with the board, the views, and key shareholders of the bank and what they wanted to see in the bank. Going forward, we want to position the bank in terms of preferred, and this was part of the original five-year strategy. We said the second phase of the strategy is to position the bank as the preferred bank in the market. I'm not saying the largest, not necessarily being size, but in terms of key efficiencies and key return on equity expectations. We are touching the 9% ROE, for example. We are working and figuring out ways of hopefully bringing it up to double digits. Hopefully not high, but on the lower end of the double digit range.
In terms of cost-to-income ratio, our investments in technology, both on the retail banking side as well as the corporate banking side, in addition to the operational back office, will hopefully enable us to maintain a very strong cost-to-income ratio vis-à-vis the market here. As you're aware, the market operates on a cost-to-income ratio that maybe ranges in the high 30s, 39% to more than 45%. So we always want to be in the top quartile. We're still crunching the numbers, but again, my personal wish is to be around the 40% range. There are systematic issues in Oman that will not enable us to continuously bring it back down. And also, we are very cognizant that technology is changing quite fast, rapid changes. So we always want to maintain a leadership position there.
So we want to maintain our investment base as long as there's a clear business rationale behind it and commercial rationale behind it. That's broadly. In terms of market segments, we are now believing that with a strong macroeconomic picture, the private sector should now increase its activities. We are seeing pockets of opportunities being in oil and gas, on the construction side, on the supplier side, etc. So we are gearing and ensuring ourselves well-positioned into those segments with GRE and government continuing to be also an important segment. As a result of the CapEx that is happening in the country, and we believe that there are more expected in the near future, the retail side will also be continued. So again, developing our retail proposition and enhancing that piece. The regulatory framework that is changing and moving quite fast.
I don't know if you are aware that towards the end of January or early February, there was a new circular from the Central Bank of Oman designating about eight sectors as priority sectors for banking and basically putting minimum thresholds in terms of allocation to these sectors. We are studying that and putting appropriate strategies for those sectors. There's a bit of incentive that the Central Bank has given the banks with lower risk-weight allocation for different sectors, ranges I think from 70%-90% compared to 100% in the normal sectors. I hope that gives you a bit of flavor. I know I cannot go into details. It's still a work in progress and at a very early stage of that, but we are happy to engage with the community to have a conversation.
And basically, we would also want to get feedback from the market of what's their expectation from the banking sector in general and in particular of retail.
Well rounded out. Just one clarification. You mentioned about ROE and a sort of double-digit aspirational ROE. That's an adjusted ROE that you're talking about, right?
No, I've looked at it at a gross level itself, which hopefully you're well, Ms. Girish. Yeah. So at a gross level, see, currently, Oman's now inched up into the investment grade. Despite that, I would think cost of capital, if you'd asked me two years ago, which you did, which you did in terms of the cost of capital, I would have said it's around 13%. I'd say now it's reaching towards the 12% mark. Our first goal in that next five years should be returns exceeding the cost of capital. Right?
So that's how I look at it. Hope I've [crosstalk] given you some flavor.
Fantastic. The only reason I asked or I mentioned the word adjusted ROE is because a seasoned banker and a team like yourselves would use the terminology of adjusted ROE, irrespective of what the number is or what the aspiration number is. When I, as an analyst, look at ROE, I always want it to be on an adjusted basis because the perpetual interest is explicit. It has to be serviced, barring dire circumstances which would not be ideal. So when the bank raises that money, they obviously earn some interest or some returns on that. So it would only be better and prudent to report adjusted ROE irrespective of what the number is. That's where I was probably focusing. I
t's in a way adjusted, but I think it's pointing.
So it's a question of what the market's familiar with, okay? I don't want to recently, one of my former employees got into a new terminology and the market in particular. So it's about making sure that people understand terminology that we use. I'm very conscious of that. But it's excluded from both, but we can use that going forward. Yeah. Thank you once again for all your support.
I really appreciate it. Thank you so much, Mr. Girish. Take care. Thank you.
Hi, good afternoon. This is Abbas Al Lawati from Vision Capital. Thank you. Thank you for the call. I was wondering, Abdullah, if I can get your views on spreads. Obviously, the company's cost of funds went up in line with interest rates, and you could not pass on a large portion of that, right? So your NIMs compressed, your spreads came down. How do you see that behaving in 2025? That's my first question.
This question really has more. So you're right. And the cost of funds, in particular on the dollar side, has increased substantially, affecting maybe even regional markets not necessarily only in Oman. But if you compare the situation in Q1 of 2024 and compare it to the year-end situation, there's a substantial improvement that has happened for two reasons. One, like Girish had mentioned, our asset liability management approach, and we've mentioned this a number of times in the past, we do weekly review of all ICAAP matters because the situation changes virtually on a weekly basis. For example, if we had discussion in Q4, we would have talked of 2024, we would have said there would be multiple rate cuts for 2025.
But standing today, I think there's a bit of market consensus that potentially, at best, there could be only one rate cut. Who knows? Reality could be very different or could still be surprised. But again, the situation changed, and we have to react to each of these kinds of discussions that happen globally. But our approach was slowly reduce all our cost of fund. We've raised on a strategic and opportunistic basis new sources of funding for us, being from deposit and being from syndication and bilaterals with our counterparts globally. If you see, we've reduced actually our bilateral and syndication loans to about $500 million approximately by year-end. Reducing cost of funds there. We've taken market leadership in the local market on the cost of fund as well. And we've reduced kind of the quotes or the participation in any fundraising in the local market.
So we've been quite aggressively focused on the cost of fund piece. The question of passing this increased cost to customers, there were multiple opportunities to do so, but it's also as a critical and responsible participant in this society. We didn't deem it as fit to pass every cost because it would have been a struggle. So we've been successful in areas that we needed to do so, but also refrained from certain elements. So we made sure that, again, we don't lose market share nor affect the borrower by additional cost. But on the cost of funds, we've been quite successful in reducing that element.
Okay. Thank you. Yeah. Sorry, Girish. You were adding something.
No, I think we've answered most of the point. Your point was how do we expect to manage it going forward? Listen, the key question is, I think it's about effective management. Some things are outside of our control, but what we are with is in our control. We manage more effectively to keep it stable would be my view. Okay? Great question. Thank you. And ready for your next.
Yeah. The second question is aspirationally, Abdullah mentioned that cost-to-income aspiration is late 30s%. So obviously, for that to happen, you need a wider NIM, right? It's happening, but I feel like [crosstalk] what's going to change it?
Yeah. High 30s%. I said the market range lies between high 30s% and our aspirations and around the 40%.
Yeah. Okay. Got it. Yeah. Okay. So for that to happen, maybe you need a bit of push from fee income, right? You're already out because your net interest income actually came down last year, but you did very well on the fee income. So I was trying to relate it to that in terms of aspirations on the fee income side, non-funded income.
No, exactly. That's exactly our aspiration in that element. We've demonstrated that last year with quite a strong growth on the non-fund income side, the fee income side. And again, not simply by raising fees and charges, but focusing on certain business segments like the trade side. Trade finance is a focus area. There's a lot that we are doing there. Participation in different taking leadership role in certain syndications, etc., that adds a layer of fees there. Investment banking and asset management activity is another focus area. Wealth management and remittances more on the retail side is also another focus area. So these are the kind of business lines that we want to enhance. We've achieved about 30% of total income from fees. We would want to see that inching up further in the next five years.
Got it. Yeah. I don't know if any of my colleagues asked you. I mean, NBO is top quartile or top decile, in fact, when it comes to adjusted ROEs. But on your coverage ratios, you're lagging your sort of bigger peers. Your cost of risk is one of the most stable ones for the last many years. I appreciate that. The book has moved on the cost of, at least from the risk point of view, it's been consistent. And your restructured loans are proof of that, the lowest in the sector. But your coverage ratios still haven't inched up. They're close to the 85% level, 86% level. So what's going on? I mean, is the devil in the details? Am I missing something? Am I giving a very simplistic? I'm taking a very simplistic view of this. I'm just understanding what's happening on the coverage side. Yeah, please.
Just on that piece, and as we said, we are very confident that our approach is very prudent in terms of staging of our book. We think we are maybe ahead of many of our peers in terms of how we look at the asset quality piece and how we stage some of the names. So your denominator sometimes becomes larger, and it's very difficult to maybe compare it on a year basis with others. Maybe Girish, that's fine.
Yes. Thank you once again. We addressed this question a minute ago, but I will repeat what I said. If you look at our 2023 provision coverage ratio, it was 100%, 99.5, to be very precise. During 2024, particularly in Q4, we had to downgrade a big exposure.
We don't discuss transitions from Stage 2 to Stage 3. That, of course, impacts the coverage ratio. Having said that, to 89%, it's not 85, it's 88.9. To also add, coverage ratio is one metric, an important metric for sure. But that's not the only metric, right? So as the CEO and I mentioned, we are very thoughtful and deliberate in terms of the credits. Two-thirds of our credit growth was in the GRE segment, number one. Number two, we are very prudent in terms of our staging. We've had feedback from various agencies, supervisory included, about our staging and how conservative we are. We are both banker-spirited bankers.
We want to make sure that we are well-capitalized, liquid, and the asset quality is robust. Then you can play around with fee income margins, etc., to drive profitability. The basics, fundamentals need to be robust, and that's what we've achieved over the planned period, please.
The other piece that we've been discussing it in different forums, including the annual MSX discussion, is also on the recovery. So it's one thing in terms of provisioning, but then efforts in terms of recovering some of the old NPAs. We've been going through all the accounts except for making sure that every avenue of recovery. This has resulted, again, in the highest recovery levels in the recent past, at least. I'm not sure whether it's the history of the bank, but at least in the recent past, close to about OMR nine million, OMR 9.9 million rials. This includes accounts that are booked in the UAE, in Egypt, including Oman as well.
We have a team that is quite frequently visiting different geographies that we operate to ensure that every of these NPAs are recovered.
Thank you. Thank you for that. The last question, I mean, I understand that it's a board decision, and you get this all the time that when you took over, you had a clear mandate, right? You've executed most of that. I remember when you first took over CEO, you had laid down a sort of path for the bank ahead. Now, the question is, of course, NBO stands out from the rest of the sector when it comes to the low payout ratio. The reason is that you wanted to sort of build up your CET1. But of course, at the same time, you're growing. Now, this year, it wasn't really profitable growth from a funded income point of view.
But you're still growing. Now, where do you see being comfortable at CET1 going forward, where you feel like you could become a little more generous with payout ratios and more in line with where the sector is right now?
We are very generous this year as well. So I don't know. Are you in agreement or not? So again, we want to be very prudent. If you see our history, we will try to reset the high dividend payout ratios of the past, right? We used to be maybe on the other side, just pre-pandemic levels. It's very important for us to maintain robust, high-quality capital as well to ensure that we are able to fuel potential growth. Our loan book has grown faster than the rest of the sector. So that requires a bit of capital there.
Few elements that potentially might change, like I mentioned, the RWA, the risk weights of certain sectors might give a bit of relief going forward. And the focus on fee income would also alleviate that as well. But again, we want to make sure that the growth in the payout would be comparable to the growth of the profit numbers. So we want to match those two and make sure we steadily grow and move forward rather than step back when there's an indication of growth.
Okay. Okay. I hear you. And I think one thing that you have shown is retention ratio into ROE is effectively the long-term sort of growth rate that you can see in earnings. And at least that's keeping pace. So you're retaining 75% of your profit.
And if I multiply by that by your ROE, you seem to be growing net profits by that. So at least that's definitely a good sign. Just wanted to leave that on the table as well because, I mean, investors obviously like dividends, and I get that. But eventually, that retention is coming at the cost of growth for us, which is always good. So I just wanted to put that on the record as well. So appreciate it.
There's a robust discussion at the board between us and the board on an annual basis. A lot of challenges on both sides, etc. And again, key philosophy is prudency and long-term view of the organization. And again, we want to make sure that we always reward shareholders in line with the profitability growth that we fix.
And as I was, I mean, this I promised is the last question because I don't see anyone else raising their hand. In terms of size, I've asked you this before now. There's Bank Muscat, who's the sort of industry behemoth with 35%. Sohar is at, I think asset share of 18%. And who knows what's going to happen in the sector in regards to further consolidation. You, as your management, at this 12% market share, are you comfortable that you can play with the big boys when it comes to, let's say, there's another consolidation and there's another large player comes in? So your value that you provide, are you comfortable that will allow you to generate profitable sort of margins, ROE, your aspirations? Or is that going to become a challenge as the sector consolidates further?
Because I remember your mandate, you had said specifically was increase ROEs, focus internally. And you weren't too interested in mergers is what the sense I've got talking to you over the last three, four years.
At NBO, but we only look at opportunities that are value-attractive for our shareholders. So we shy away, say, from kind of bidding wars, etc., etc. So there's a clear mandate from the board that as long as it adds value to shareholders, then we can look at it. But if it's a potential destroyer, so we don't chase growth simply for the growth sake there. On the question whether there's an opportunity, I think we believe that there's an opportunity. The last three years, four years has proven that. If you remember when we started the journey, we were a number four bank.
If it wasn't for the M&A transaction that happened, potentially we would have been a number two bank with the market share that we have. We are, this is my personal belief, we are considered quasi number two in terms of a lot of aspects, especially on the corporate side and GRE side. So we do get heads-up or priorities in terms of a lot of our discussions. We've been able to play a major role, lead transactions that wasn't the case three or four years ago. So we believe that we are in a strong position to continue to be of relevance and prominence in the local market regardless of size.
Fantastic. All the very best to you and the team. Thank you.
Thank you. [crosstalk] Thank you. Justin, you can mute yourself.