I am delighted to share the financial results of Oman Arab Bank Group for the second quarter, ending 30 June 2021.
Oil prices continued to gradually improve during the second quarter of the year. However, the ongoing economic challenges of the COVID-19 pandemic and the closure of several economic activities since the second quarter of 2020 still cast a shadow on the national economy in general. Signs of recovery are showing up on the horizon with the acceleration of the vaccination efforts aimed at reaching 60 per cent of the population before the last quarter of the year. This will pave the way for the Bank to play an integral role and deploy all its resources to support achieving the national objective.
The Bank has continued its efforts to support clients and employees during these challenging times while simultaneously ensuring business continuity. This was made possible through the implementation of strategic initiatives, combined with ongoing coordination with relevant stakeholders. In addition, the Bank continues to implement the directives of the Supreme Committee, such as limiting physical interaction of the employees and customers, reducing the number of employees in the workplace by 50 per cent and conducting the Bank’s activities through remote working facilities. Considering the current conditions, we have also taken steps to alleviate client debt burdens and rescheduled loans to provide support and facilitate liquidity.
The acquisition of Alizz Islamic Bank was completed on 30 June 2020. Therefore, the statement of income of the Group for the six months ending 30 June 2020 does not include the results of Alizz Islamic Bank. However, the results of Alizz Islamic Bank are included in Oman Arab Bank Group results for the six months ending 30 June 2021.
The Group achieved a consolidated net profit of OMR 10.49 million for the period until the end of June 2021 compared to OMR 10.39 million for the same period in 2020. Net profit for the period includes the reversal of operation loss of OMR 6 million incurred in 2020 based on the confirmation of the insurance claim by the reinsurers. Excluding this reversal of operation loss, net profit has reduced compared to the previous year due to the prudent approach adopted by the management to maintain higher liquidity, as well as additional provisions to mitigate the potential risk associated with market conditions, challenges arising from health situations and the economic downturn.
The measures undertaken by the Group in accordance with the its social objectives in supporting Omanis who have suffered job losses with interest relief and providing loans deferrals to small and medium enterprises (SM Es) to help them overcome cash flow constraints during these difficult times has also resulted in a significant impact on the resultsof the Group.
The Group achieved an operating profit of OMR 16.4 million for Q2-2021 compared to OMR 9.9 million for Ql-2021 resulting in 66 per cent increase.
Net interest income from conventional banking and income from Islamic financing amounted to OMR 41.90 million for the six-month period ending 30 June 2021. The low growth is due to the impact of higher level of liquidity maintained and the deferment of loan installments for individuals and companies inline with the Central Bank of Oman measures.
Non-interest income (excluding the Islamic financing income) was OMR 20.30 million for the six-month period ending 30 June 2021, as compared to OMR 7.89 million for the same period in 2020, increasing by 157 per cent. This is mainly on account of reversal of operational loss of OMR 6 million.
Operating expenses for the six-month period ending 30 June 2021, reached OMR 35.93 million, as compared to OMR 25.76 million for the same period in 2020, showing an increase of 39 per cent. This is mainly due to the consolidation of expenses of Alizz Islamic Bank in 2021.
Net impairment for credit and other losses for the six-month period ending 30 June 2021 was OMR 14.01 million. This is compared to OMR 9.24 million for the same period in 2020. This increase is mainly due to the additional provisions by management as the Group continues with its prudent approach, considering the economic environment, the impact of the pandemic on business and market conditions.
Net loans and advances, including Islamic financing receivables, for the six-month period ending 30 June 2021, increased by 3 per cent to OMR 2,654 million, compared to OMR 2,587 million in 30 June 2020. Customer deposits stood at OMR 2,708 million by the end of Q2 2021, rising by 5 per cent as compared to OMR 2,581 million as of 30 June 2020.
Alizz Islamic Bank
Alizz Islamic Bank (AIB) continued to achieve good results and profits during the second quarter of 2021. AIB reported a net profit of OMR 2.4 million, as compared to a loss of OMR 7.4 million for the same period last year. The financing receivables reached OMR 751 million (including transfer Al Yusr of OMR 140 million) in the second quarter of 2021, as compared to OMR 556 million as of 2020. While customer deposits amounted to OMR 806 million (including transfer Al Yusr of OMR 131 million) with a growth of 41 per cent compared to 2020. The Bank expects to report sustainable results in 2021 as it is pursuing a well-defined growth strategy with the full support of its shareholders.
Issuance of Perpetual Bond of USD 250 Million on the London Stock Exchange
The Group successfully issued USO 250 million Additional Tier-1 Perpetual Bonds, listed on the International Securities Market (ISM) of the London Stock Exchange on May 27. This generated widespread interest from international investors that included several top-notch funds from the London market. The final order book was valued at over USO 1.1 billion. This is a testament to the high level of confidence placed by international investors in the Bank’s shareholders, the Omani banking sector, as well as the financial performance of OAB.
This is the first issue of its kind for OAB in foreign currency and is also the first international issuance of public AT1 (Additional tier-1 bonds) in the last 3 years from Oman. Therefore, it was significant in enhancing domestic liquidity with a continuous flow of foreign investments, especially during the current market conditions.
Updates on disclosure on the criminal complaint
During the second quarter of the year, the Bank received a confirmation from the loss adjuster that the reinsurers had agreed in principle on the commitment for the amount claimed for the forgery and embezzlement incident that occurred towards the end of last year, with a value of approximately OMR 6 million. The Bank is continuing to follow up on the developments of this case with the Public Prosecution and the relevant authorities, in order to preserve the legal and financial rights of the Bank and its shareholders.
COVID-19 vaccination campaign for the Bank’s employees and their families
In line with its commitment to safeguard the health and safety of its employees, the Bank has started its internal vaccination campaign. The Ministry of Health is aiming to vaccinate approximately 60 per cent of the Sultanate’s population before the last quarter of the year. During the second quarter of 2021 OAB and Alizz Islamic Bank, undertook a vaccination drive in coordination with the Ministry of Health. The employees and their family members above 12 years of age, got vaccinated and the cost was borne by the bank. This initiative was extremely well received by the employees and their families.
Innovation Hub 2.0
OAB organized the second edition of the Innovation Hub from April 2 – 3, 2021. The virtual hackathon saw the participation of over 550 participants, who were divided into three categories, students, Fintech/professionals and OAB employees. Each of them presented innovative solutions under the three main themes: tourism, financial technologies and cybersecurity. It was the first such event ever organized virtually in the Sultanate and gained widespread popularity among the target audience.
Sustainability and Social Responsibility
As part of its vision to incorporate sustainability in various aspects of the Bank, OAB published its first sustainability report during the second quarter of the year. The 2020 Sustainability Report for Oman Arab Bank will be the first to be approved by Global Reporting Initiatives (GRI): Core Option. The report includes detailed information on the Bank’s performance in terms of environmental, social and governance for the year 2020. Moving forward this report will be published on an annual basis as it reflects our firm belief in our responsibility to contribute towards building a more sustainable future, not only for the Bank but for the Sultanate. We aim to support the local community and environment through a wide range of projects that are consistent with the three main pillars of our sustainability strategy, which are Environmental Responsibility, Community Partnership and Financial Inclusion.
During the second quarter of 2021, the Bank continued to encourage and implement activities aimed at supporting the local community by partnering with a number of charitable and environmental institutions. It has also launched several initiatives during the holy month of Ramadan in cooperation with a group of charities. On the other hand, the Group continued to support its customers from small and medium enterprises and enabled them to deal with the challenges posed by the current situation through the provision of various incentives and banking facilities. All these initiatives are in line with the directives of the government and the Central Bank of Oman.
On behalf of the Board of Directors, I would like to thank our Government for the distinguished role it plays, especially with regard to the economy, health and society. I would like also to thank all our shareholders, customers and employees for their continued trust and commitment in Oman Arab Bank Group. We pray to the Almighty to protect Oman, its people and its leader and to give us the strength to persevere through this pandemic.
May the Almighty Allah keep us all safe and blessed.