Islamic Banking In Oman

Transcription

1. Today ’s discussion points Why Islamic Banking? §  Pent-up demand §  Availability of Islamic liquidity, particularly internationally §  Potential for innovation Size of the prize? §  Up to USD 15 Bn, next 4-5 years Growth drivers? §  Favourable macro-economics §  Attractive demographics §  New entrants Main opportunities? §  Mass-affluent, mortgages and personal credit §  Infrastructure and real estate, SMEs How to win? §  §  §  §  Booz & Company First mover advantage; source deposits Cross border funding Selective, innovative strategies Sharia’h credibility with customers 1
2. Why Islamic banking ? Pent-up demand §  Religious sentiment among large consumer segment §  Recent survey ~ 70% of customers likely to switch to Islamic banks Availability of Islamic liquidity, particularly internationally §  Large (~ USD 800 Bn) and fast growing (25-30%) liquidity in Islamic finance globally §  Islamic banks can ‘bridge’ Islamic liquidity to the Sultanate Potential for innovation Booz & Company §  Excess capacity and heightened competition… §  … drives greater product, service and channel innovation to build customer and deposit base and boost profitability 2
3. Size of the Price ? Asset Credit GDP Penetration Penetration Penetration 38% 37% 35% 45% 57% 29% 2016 28% 34% 27% 17% 25% GCC Avg. Booz & Company 30% Up to USD 15 Bn Penetration/ Total Assets 15-20% Penetration/ GDP 12-15% 28% 24% 4% Islamic Assets 225% 18% 17% 3% 34% 31% 1% 38% 35 % 3
4. Growth drivers ? Favorable macro-economic outlook §  Economic diversification and greater infrastructure spend §  Higher capital inflows, vibrant private sector §  Growing FDIs and trading volumes Attractive demographics §  Young population (62% under the age of 30), large and growing middle class ( >60% of total income) §  Growing affluence and income levels - improving education infrastructure and Omanization New entrants §  Two new licensed banks (Nizwa and Al-Izz), sizeable capitalization (USD 600-800 Mn) §  Main incumbents launching windows (Bank Muscat, Al Ahli, NBO, Oman Arab Bank etc.) Booz & Company 4
5. Main opportunities ? - Personal banking Segments Affluent (incl. mass affluent) §  ~25-30% of bankable population; 10-15% growth; ~40-50% of revenue pool §  Underserved; needs differentiated/ tailored services/ channels Products % of 2016 Revenue Pool Personal Credit 60-65% Mortgages Young §  High growth segment §  Future feeder for affluent AUMs and Bankatakaful Credit Cards High networth Booz & Company §  Sizeable wallet and cross-sell potential (~20-30% of revenue pool) §  Needs offshore center and dedicated onshore coverage team Remittances And Others Growth (2011-2016) 10-15% 15-20% 10% 7% 5% 15-20% 15-20% 10-15% 7-10% 2016 Revenues ~ USD 1.5-2.0 Bn 5
6. Main opportunities ? Infrastructure financing Project Finance Commitments Expected Project Finance Commitments 2005 - 2011 YTD 2011 - 2016 YTD Capabilities needed §  Long-term, stable funding New Players Potential Domestic 20% –  Structuring/ advisory, industry-specific (e.g., utilities, LNG, transport) 25-30% –  Syndications(Sukuks/ securitization) Foreign 50-60% 15-25% 80% Local Foreign Total Financing ~ USD 25-27 Bn Booz & Company §  End-to-end project finance solutions: –  Banking solutions (e.g., supplier financing, payment management) Total Financing ~ USD 45-50 Bn 6
7. Main opportunities ? Real estate and construction sector Demand §  Construction finance fastest growing sector (~ 41% CAGR over past 5 years), ~ USD 3 Bn in 2010 §  Real estate and construction projects continuing ~ USD 6 Bn (next five years) §  Growth drivers: Need for affordable/ modern housing, urbanization (e.g., Sohar, Duqam, Salalah), and large Integrated Tourism Complexes Capabilities needed §  Shariah-compliant tailored solutions across the real estate value chain §  One-stop-shop for financing projects of local/ regional developers, offering: –  Capital raising and distribution/ placement with own affluent/ HNW customers and regional investors (retail and institutional) –  Channeling liquidity through funds, DCM, direct equity and/ or long-term financing vehicles (Istisnaa, Ijara, Musharaka) –  Asset management –  Financing for customers and investors Booz & Company 7
8. Main opportunities ? SMEs Demand §  10,000 – 15,000 SMEs in the Sultanate §  SME contribution to grow given private sector boost (particularly in manufacturing, trade, logistics) §  SME financing to grow (SME financing in GCC still limited: 2-5% of total loan book vs. 10-15% in OECD) Capabilities needed Tailored Solutions Superior Service Technology Innovation Booz & Company §  Easy and timely access to financing §  SME packages and bundles §  Advisory center §  Dedicated RMs §  Dedicated SME areas and contract center §  Simplified processes and custom pricing §  SME e-Platform §  Alternative and innovative channels 8
9. How to win ? §  There will be losers - excess capital and rapid switching of deposits §  Pressure on local balance sheets to provide large-scale and long-term funding (infrastructure, real estate) §  §  Launch early (First mover advantage) Focus on sourcing deposits early-on §  Build cross border funding and FI relationships Attract long-term funding (e.g., government deposits) §  §  Tough to generate returns from mainstream segments (personal and corporate) §  §  Be selective on where to play Adopt innovative strategies §  ‘Man on the street’ is demanding stricter Shariah-compliance §  §  Build-up appropriate Shariah skills rapidly Use proven products to gain credibility Booz & Company 9
10. Recap Why Islamic Banking ? §  Pent-up demand §  Availability of Islamic liquidity, particularly internationally §  Potential for innovation Size of the prize? §  Up to USD 15 Bn, next 4-5 years Growth drivers? §  Favourable macro-economics §  Attractive demographics §  New entrants Main opportunities? §  Mass-affluent, mortgages and personal credit §  Infrastructure and real estate, SMEs How to win? §  §  §  §  Booz & Company First mover advantage; source deposits Cross border funding Selective, innovative strategies Sharia’h credibility with customers 10