Analysis of Bank Muscat and its role in the Oman Vision 2020

Name

Table of Contents
Introduction...........................................................................................................................................1

SWOT Analysis.....................................................................................................................................1
Action Plan for Bank Muscat................................................................................................................3

Oman Vision 2020.................................................................................................................................3

Impact on Bank Muscat.........................................................................................................................4

References.............................................................................................................................................4

Introduction
Bank Muscat is one of the leading financial institutions in Oman, having an overall asset base
of over USD 27 billion (Bank Muscat, 2017). As of the data available as of 2014, Bank
Muscat had the highest rank in terms of the customer base (Bank Muscat, 2014). It was
established in the year 1982 and it is headquartered in Muscat. Ever since then, the bank has
expanded to having to more than 140 branches all over Oman. The Bank Muscat also
operates a few branches in overseas destinations as well, in locations like Riyadh, Kuwait and
Dubai (Bank Muscat, 2014). The overall portfolio of the banking institution comprises of not
only retail and corporate banking, but it also includes areas like Islamic banking, Investment
banking and Asset Management as well.

In this report, a brief analysis of the Bank Muscat and its operations is performed, with a
special focus on how the future goals and objectives of the institution align with the goals of
development that Oman has set for itself in the form of Vision 2020. The main sources used
for the purpose of this analysis are the industry reports, news reports as well as the data
published by the Oman government. This study contains an analysis of the strengths,
weaknesses, opportunities and threats facing the bank, and how can it use its strengths to
counter the threats and weaknesses.

SWOT Analysis
Strengths

One of the biggest strengths of Bank Muscat is its scale of operations. It is the leading private
banking institution in Oman with a strong customer base of more than 1.6 million customers
(Bank Muscat, 2014), along with having an equally high strong asset base. The market
capitalization of Bank Muscat is also the largest among all the banks operating in Oman
(Bank Muscat, 2014). Even when the Sultanate of Oman was registering a not so great
growth rate of 3 percent in the year 2015, Bank Muscat grew at a healthy rate of 7.5 percent
(Bank Muscat, 2015). In addition to that, the commercial portfolio that the bank has, is highly
diversified, thus reducing the risk that the bank faces. The innovative products offering of the
banks are also pioneers in the Oman market. For example, the comprehensive Islamic
banking products that Bank Muscat offers have been the pioneers products in the area of
Islamic Banking (Bank Muscat, 2014). The asset quality of the bank is also quite stable and
the bank also has a substantial support from the government, as more than 20 percent of the
bank operations are owned by the government. This implies that the ban also has a
substantial interest is the development of Oman and is also supported by the government.

Weaknesses

While there are many strengths that the Bank Muscat has, there are a few weaknesses as well.
for example, the cost structure and the fees charged by the bank are too less from the
perspective of financial sustainability (Bank Muscat, 2015). This also provides them with a
lower buffer against any financial losses that might take place. In addition to that, the low fee
structure mandates that the bank is dependent upon huge volumes for profitable operations
and meeting the profitability targets that it has set for itself.

Opportunity

The success that they have faced experienced in the area of Islamic banking presents a great
opportunity for them for international expansion particularly in the Middle East region. As
already mentioned above, Bank Muscat has a small presence in countries like Kuwait and
Saudi Arabia, and its competence and experience can help the organization to further expand
into the foreign territories.

Threats

One of the major threats that Bank Muscat has is its excessive dependence on the local
businesses prospects. This is because, as per the information provided about the financial
institution, more than 95 percent of the business for Bank Muscat is generated from the
domestic operations (Bank Muscat, 2015). This makes it excessively vulnerable to the
economic condition and the business cycles that are prevalent within the country itself and
there is no scope as such for the geographic diversification of the organizations.

Action Plan for Bank Muscat

From the above analysis, it is already established that while there are plenty of strengths that
the Bank Muscat has, there are also a few weaknesses and threats that it has. In order to
overcome these issues and challenges, the follows actions are being proposed for the banking
institution:

- In order to achieve diversification on a geographical level, it is necessary that Bank

Muscat adopts an aggressive international expansion policy and target at penetrating
the Middle East markets substantially.
- It should leverage its strong experience is Oman, along with the brand image that it
has created in the county to propel is aggressive expansion approach.
- This expansion will provide the financial institution with immense economies of
scale, through which its low financial fees can also be accommodated for.
- The international expansion will serve two important purposes for Bank Muscat.
Firstly, it will allow the financial institution to identify new areas to compete, being
only dependent upon Oman, which implies that its profits might not be get stagnated
by competing in a market where it is already dominating the market share. The second
 important benefit is that it will diversify the economic risks of the bank due to which
the sturdiness and robustness of tis business will increase and it will develop an
immunity from the varying economic forces that might be present only in Oman.

Oman Vision 2020

Up until the current times, the most of the economic revenues that Oman has generated has
been dependent upon the Oil resources that the country has. In fact, according to the data
present, the revenue from these oil related sources contribute as high as 90 percent to the total
revenue received by the government and to the GDP growth its contribution is 50 percent
(Strolla & Peri, 2016). Therefore, in order to diversify its sources of revenue and growth, the
Government of Oman has created a Vision 2020, which contains plan of actions and
milestones that have the prime objective of boosting the industrial sector in the country. Some
of the objectives of this program are as follows (Supreme Council for Planning, 2017):

- Improving the human resource capabilities of the country, in order to ensure sufficient
skilled man power is available to boost the future growth prospects of the country.
- The vision seeks to develop the private sector so that an appropriate balance can be
maintained between the public and the private sector, so that the economic health ca
be maintained.
- Create a favourable economic environment and promote stability.

Impact on Bank Muscat

The Vision 2020 has a significant impact on the operations and business opportunities of
Bank Muscat. One of the most major difference that the government is bringing about as a
part of the Vision 2020, is that of economic development for both individuals as well as the
corporates (muscatdaily.com, 2015). By developing the industrial sector in Oman, more jobs
are being created through which the people are getting even more economically empowered,
which helps the banking sector. At the same time, an improvement in the overall industrial
environment, ease of the government policies, boosting growth and development at a
corporate level, they all create a highly favourable business climate for the Banks to operate.
The environment is particularly favourable for international expansion.

In addition to that, since the government has a stake in the Bank Muscat, they both have
aligned their objectives, and are therefore, working together towards the achievement of their
business and country wide objectives (Bank Muscat, 2013). This is resulting is a synergy that
is benefitting both Bank Muscats operations as well as the agenda of the Government.
Conclusion
In conclusion, it can be stated that this analysis shows that the business operations of Muscat
Bank are doing pretty well in terms of profitability but at the same time there is an immense
scope for expansion and growth for the banking institution as well. While the bank itself is
progressive and is having progressive business strategies, its association with the government
of Oman and favourable economic climate of the country are opening more doors for its
growth and expansion in the future.

References
Bank Muscat, 2013. Bank Muscat supports conference on Duqm Special Economic Zone.
[Online] Available at: http://www.bankmuscat.com/en-
us/PressReleases/Pages/BankMuscatsupportsconferenceonDuqmSpecialEconomicZone.aspx
[Accessed 8 May 2017].

Bank Muscat, 2014. Investor Presentation. [Online] Available at: http://bankmuscat.com/en-

us/InvestorRelation/fi/Presentation/Bank%20Muscat-Investor%20Presentation_Jun
%202014.pdf[Accessed 7 May 2017].
Bank Muscat, 2015. Annual Report: New Opportunities Future Success. [Online]
Available at: http://www.bankmuscat.com/en-us/InvestorRelation/fi/AnnualReports/Annual
%20Report%202015%20English.pdf
[Accessed 7 May 2017].

Bank Muscat, 2017. About Us. [Online] Available at: http://www.bankmuscat.com/en-

us/AboutUs/Pages/Default.aspx [Accessed 7 May 2017].

muscatdaily.com, 2015. Bank Muscat Exudes Optimism on Oman's Economic Outlook.

[Online] Available at: http://www.muscatdaily.com/Archive/Business/Bank-Muscat-exudes-
optimism-on-Oman-s-economic-outlook-3qvh [Accessed 8 May 2017].

Strolla, A. & Peri, P., 2016. Oman: 20/20 Vision. World Finance Review.

Supreme Council for Planning, 2017. Sultanate of Oman: Vision 2020. [Online] Available at:
http://www.scp.gov.om/en/Page.aspx?I=14 [Accessed 8 May 2017].