Half Year 2026 Bank Dhofar SAOG Earnings Call
Speaker #1: Wa alaikum, and good afternoon, everyone. I would like to welcome you all to Bankable Files, MSX discussion call, where we will be discussing the bank's financial performance and the key highlights for the first half of 2026.
Speaker #1: Joining me today we have our Acting Chief Executive Officer, Mr. Gopakumar. Our Islamic Chief Islamic Banking Officer, Mr. Amir El Amri. And our Chief Financial Officer, Mr. Vikeesh Mirani.
Speaker #1: From the investor relations team, we have Mr. Hilal El Yarubi, Ms. Maram El Hadhrami, and myself, Sundar Selawati. Thank you all for joining our call today.
Speaker #1: As usual, our call will be divided into two sessions. The first session will take you through the bank's strategy and the key performance highlight for the first half of the year.
Speaker #1: The second session, we will address all of your questions through a Q&A session that will be interactive. Therefore, I would like to remind you all to keep your microphones muted until the Q&A session starts.
Speaker #1: With that, I would like to hand over to Mr. Vikeesh to start the presentation.
Speaker #2: Thank you very much, Sundar. And good afternoon, everyone. And welcome to you all on our earnings call for the period ended 30 June 2026.
Speaker #2: We'll run through the presentation and then, as Sundar mentioned, open this conversation for further Q&A. A quick disclaimer, of course: we will be shying away from making forward-looking statements and this presentation is for information and not for any investment decisions.
Speaker #2: We will be covering our agenda essentially covers highlights and financial performance. We will be looking at Oman's overview as well as the Omani banking sector.
Speaker #2: We will look at strategy and digital footprint for Bank Gofar, also the initiatives that we have undertaken for ESG, and we'll be then deep diving into the financial performance both for Gofar Islamic, which is our Islamic banking window, as well as Bank Gofar, followed by concluding remarks.
Speaker #2: Moving on, the first slide in terms of performance talks about Bank Gofar at a glance as at the 30th of June, 2026, the first half of 2026.
Speaker #2: Our operating profit increased by 17.3% year on year, to 51.33 million, an increase of 7.5 million as compared to last year. Our net profit stood at 27.26 million, which is an increase of 15.2% as compared to last year, an increase of 3.6 million last year, first half 2025.
Speaker #2: Our net profit stood at 23.6 million. Both our fee-to-income ratio as well as cost-to-income ratio continue to be good stories. Our fee-to-income ratio reached 35% a share, about 35%.
Speaker #2: Cost-to-income ratio continues to decline and improved to 45.44% as of the end of first half of 2026. Next slide talks about loans and advances, both for the conventional bank as well as Islamic Bank at a consolidated level at 4.58 billion.
Speaker #2: Our loans-to-advances increased by 9.78% as of the end of December last year. It stood at 4.176 billion. So in absolute terms, it was an increase of 408 million.
Speaker #2: Our deposits kept pace with the increase in loans. We went up by 9.04%, an increase of 370 million and stood at 4.49 billion. Our total assets crossed the 6 billion mark and stood at 6.08 billion in the first half of 2026.
Speaker #2: Our return on equity, both the ROE at shareholders' average shareholders' equity as well as including the additional tier one of 155 million that we have on our books, stood at 9.03% and 7.19% including the additional tier one respectively.
Speaker #2: Our ECL coverage ratio stood at 88.8% and gross NPL was at 5.26%. Our capital adequacy ratio at 16.72%, higher than the regulatory requirement of 13.5%.
Speaker #2: The boxes that you see on the right, which is the social impact, something that we closely continue to follow, 16 nationalities of full-time employees working with the bank, 44% of employees are women.
Speaker #2: In terms of credit rating, we are rated by both Moody's and Fitch. Moody's rates us at B883 with a stable outlook. The latest revision by July 2026, and Fitch at BB+ with a stable outlook again.
Speaker #2: And the latest was in December 2025. This slide shows the branch branches and the expanse of branch network for Bank Gofar. We are the fastest growing branch network in Oman; in fact, pretty much represented across the large landscape of our country.
Speaker #2: We are operating with 145 branches as of the end of June. In fact, by the end of July, we had reached 146 branches. With conventional at 114 branches and Islamic at 31 branches, you would recall in terms of our strategy of growing branch network, reaching out to our customers we started with 54 branches for conventional as of the end of 2021.
Speaker #2: Added 60 branches to our conventional network, which now stands at 114 branches. Our Islamic network, which was operating with 10 branches, now has 31 branches across Oman.
Speaker #2: Our ATM footprint also has increased and kept pace with the branch network increase. We have now 353 ATMs, 188 CDMs, and 5 multifunctional kiosks.
Speaker #2: We have a market share of 12% for loans, deposits, as well as assets. Clearly, the expanded branch network has grown that network to 831,000, which is close to almost 3.54x.
Speaker #2: With our conventional retail business having a customer base of 661,000, our corporate SME with 55,000, Gofar Islamic also crossed the 100,000 mark at 113,000, taking the total customers that we serve at 831,000.
Speaker #2: Next slide a bit of detail on our balance sheet, key ratios, as well as the income statement. I have largely covered this. Net loans and advances grew by 9.8% to 4.585 billion as of the end of June, as compared to December last year.
Speaker #2: Most of the growth came in the second quarter. In fact, pretty much close to the second quarter, and that's the reason why you haven't seen that translating into much of NII, but we expect that to continue to perform in the coming quarters.
Speaker #2: Our investment securities grew by 3.3% at 737 million. Customer deposits kept pace, as I said, with the increase in loans and grew by 9% to 4.489 billion.
Speaker #2: The table at the bottom left shows the income statement. Our total operating income grew by 11.4% to 94.1 million as compared to 84.5 million last year, an increase of 9.6 million.
Speaker #2: Operating expenses have grown by 5.1%. Again, you would recall the investment that the bank was doing in the expanded branch network. New businesses increased the cost base in the year 2023, 2024, which is and 2025, which is now come down to 5.1% increase.
Speaker #2: And as also reflecting on our cost-to-income ratio, which is getting influenced both by the increased operating income as well as a lower pace of increase as far as the cost is concerned.
Speaker #2: Overall profit before impairments grew by 17% at 40 from 43.8 to 51.3 million. Impairments which is the cost of risk increased by 20% from 16.2 million to 19.5 million, an increase of 3.3 million.
Speaker #2: This is in line with the guidance that we had issued earlier. We do expect a continued cost of risk or higher cost of risk for the next two, three or actually three quarters.
Speaker #2: Our total capital adequacy ratio as of the end of June 2026 was 16.72%. CET1 continues to be a healthy at 11.19%. NPL at 5.26% went up from 4.8%.
Speaker #2: And I'll cover the reasons in my subsequent slides. Our return on shareholders' equity, which is pure shareholders' equity, stood at 9.03%. And our ROE, which includes the 81 interest, our 81 stood at 155 million.
Speaker #2: Stood at 7.9 1.9%. Again, an increase of 34 basis points as compared to December 2025. ROI at 96 cents. Our NIMs, which is the spreads net interest spreads, stood at 2.09%, a shade below 2025 numbers at 2.11%.
Speaker #2: Our cost-to-income ratio, as I mentioned, continues to decline and improve to 45.44% as of the end of June 2026. Moving on, slide 9 shows the bank's performance over the last 12 years, 11 years, and one or two quarters.
Speaker #2: 2025, we saw the highest total income the highest operating profit and the highest net profit the bank has achieved over the since inception we continue to hope for good 2026 as well.
Speaker #2: As you would see in this slide, our overall ROE, which continues to grow, grew from 4.64% as from 2021 to almost twice of that at 9.03% in the first half of 2026.
Speaker #2: This slide shows the historic evolvement of the bank since inception 1990 to the first half of 2026. Some of the key events over the last one year includes the successful acquisition of the Bank of Baroda branch here in Oman.
Speaker #2: The issuance of 100 million of Tier 2 Omani Reals of sub debt and we have now reached, as I said, a milestone of 146 branches as of the end of July.
Speaker #2: As of the end of June, it was 145 branches for the first half of 2026. In terms of some of our key strengths, we are a leading franchise in Oman.
Speaker #2: Offering retail banking, corporate banking, wealth management, and private banking services. We have a strong corporate banking platform supporting our corporates. We also have an award-winning and one of the fastest growing Islamic banking windows in Oman.
Speaker #2: In terms of government and protection funds, we are co-owned by the both government and protection funds to the extent of 28%, giving us high stickiness and relationship with our government entities.
Speaker #2: We are operating out of a stable and growing operating environment with a stable banking sector as well as a prudent regulatory environment governed by both FSA as well as the Central Bank of Oman.
Speaker #2: Supported by a solid and robust capitalization as I mentioned, our capital adequacy ratio at 16.7%. Our CET1 at 11.19% continues to be higher as compared to the minimum regulatory requirement of 13.5 and 9.5% respectively.
Speaker #2: We operate out of a diversified smart distribution channels. Both the network of branches as well as the investment that the bank has done in various digital initiatives including internet banking, mobile banking, for the bank.
Speaker #2: Needless to say, an experience and seasoned management team and a very dedicated set of staff. A very quick overview of Sultanate of Oman. You'll see in this slide earlier, we are we are the second largest country in GCC with a population of almost 5.4 million.
Speaker #2: The total GDP the real GDP is expected to be at 4%. This is the earlier estimate by MOF, and that's the estimate that we continue to work with.
Speaker #2: Next slide, again, closer to home. In terms of the Omani banking sector, we have 20 licensed banks including the conventional the state-owned specialized bank as well as full-fledged Islamic banks.
Speaker #2: In terms of the total assets deposits and loans in the Omani banking sector, 52 billion being the total assets and 37 and 36 billion being loans and deposits respectively.
Speaker #2: The Islamic banking business continues to grow at a CAGR of 10.3% and stood at 9.83 billion in terms of total assets as of the end of May 2026.
Speaker #2: Looking at the bank's strategy, and again, this essentially. Summarizes the six key pillars of the bank's strategy and, you know, you would have seen how that is translating into our overall growth.
Speaker #2: We are basically building a future-ready bank through various initiatives that we have undertaken and how that is being executed. First, clearly being the distribution expanse.
Speaker #2: Our distribution network, as I mentioned, has grown from 64 branches to now 145 branches with both conventional and Islamic banking branches growing. Essentially allows us to reach closer to our customers.
Speaker #2: In terms of products and partnership, we have had many global alliances segment repositioning and again, I'll talk about it in detail in my subsequent slide, providing us an extensive product products for our customers.
Speaker #2: Whilst we continue to invest in our branch network and ATM network, we have also invested significantly in our digital capabilities providing a faster turnaround time for our customers.
Speaker #2: Both in terms of speed of delivery as well as efficiency. In terms of technology, landscape, the bank continues to invest in systems omni-channel score modernization, cloud native and AI
Speaker #1: I technologies . The bank is a very data driven culture is what we are trying to inculcate in terms of how we can make real time and near real time data inputs to make our decision making a lot faster in terms of financial prudence .
Speaker #1: Again , it's very high up on the agenda . You know , the governance , efficient growth as well as controls across our businesses Next slide .
Speaker #1: How are transformation pillars ? Are really making a difference . And in terms of the action distribution expansion , as I talked about from 64 to 146 branches as at the end of July , we are now the second largest branch network in the country .
Speaker #1: It's not only the digital investments that I talked about , it's how we are getting humans across and closer to our customers . It's really a combination of both digital and proudly human approach that we are adopting here through multichannel deployment , branch network , ATM network , direct sales , Otms our relationship managers and mobile vans operating closer to our branch network and reaching out to our customers in terms of products and partnership .
Speaker #1: We talked about global alliances to offer best in class products to our customers . We have launched private banking , wealth management offerings to our customers over the last 2 or 3 years , and that's also now reflecting both in terms of the offerings that we have to our customers , but also contributing directly to our bottom line in terms of it products .
Speaker #1: You know , it's bank assurance , asset management , corporate advisory , new businesses that are now being offered to our customers to improve both the customer engagement as well as stickiness , rebranding and repositioning our semi offerings to improve our customer experience , as well as we are tied up with some of the global alliances , which includes BlackRock , Mastercard and MetLife offering a better and improved products to our customers .
Speaker #1: In terms of digital capabilities and expanded digital landscape , allowing us to reach to our customers with an end to end digital onboarding and self-servicing channels .
Speaker #1: Enhanced mobile and web banking experience being offered to our customers . It's clearly improved the instant remittances opportunities for customers as well as card management services to our digital banking platforms , virtual accounts , E-mandate and mobile banking .
Speaker #1: Once again , improving the overall customer experience and an expanded ATM and CDM network , allowing us to reach closer to our customers technology landscape again , a digital engagement hub , we are also looking at implementing a new core banking system for our Islamic business , which will help us improve customer experience for our Islamic banking customers .
Speaker #1: In terms of deployment of specialized platform for our trade investment bank assurance and CRM businesses , focused investment on our cyber security capabilities .
Speaker #1: Clearly , this is an important area . We are the custodians of our customers money , so investment in cyber security is absolutely critical .
Speaker #1: We are also deploying cloud microservices as well as APIs and automation , both for scalability and improved experiences for our customers . A very data driven culture is what I talked about , not only real time , but also very near real time data enablement .
Speaker #1: Enablement as you know , enabling our businesses to take real time decisions as well as improving customer experience due to use of data .
Speaker #1: A robust sales productivity tracking , allowing us to improve overall customer experience as well as portfolio analytics and allowing us to have a rapid decision making whenever it comes to customer servicing , financial prudence .
Speaker #1: Again , as I mentioned , it's a very way of life for the organization You've seen that getting translated into how our cost to income ratio continues to improve our cost of funds being managed , as well as the fee to income ratio , improving from the lows of 14% to now 35% .
Speaker #1: Our disclosure practices , as well as our robust governance standards that we have applied in our businesses Moving on , ESG continues to be an important element of our strategy .
Speaker #1: We have actually moved from ESG strategy . Now to early stage execution , so to say . The four key pillars of our ESG strategy includes the climate action , the customer , and communities , and how we respond to our people as well as governance .
Speaker #1: We are also nearing a certification of our sustainable finance framework and working closely with some of our partners to put this into action Moving on , some of the key digital initiatives that we have launched , other than the the expanded branch network , next generation corporate internet banking platform An FSA integrated insurance claims payment platform .
Speaker #1: E mandate and direct debit services with API connectivity . A tailored SME digital banking platform . An a virtual account driven collection platform .
Speaker #1: Enhanced card management . Enhanced remittance services . Improved salary processing as well as implementation of government , government revenue collection systems This slide Is a bit detailed , shows how our each businesses is contributing to the overall operating profits , revenue and some of the key segment highlights , followed by the contribution of liabilities and assets on the extreme right of the slide .
Speaker #1: As you can see , our operating profit from the retail banking stood at 7.68 million , with 31% contribution towards revenue coming from our retail business .
Speaker #1: In fact , if I look at my retail business from a net profit perspective , from a low of 12% , as at the end of 2023 , it has now increased to 24% .
Speaker #1: So clearly our strategy on branch expansion has played out well for our retail business , both in terms of the customer reach that we have had .
Speaker #1: I talked about the increased number of customers or thousand to almost 800,000 as at the end of 2026 . First half . And how that's translating into better reach to our customers in terms of corporate business , our total revenue contribution from corporate business stood at 36% .
Speaker #1: And the total operating profit stood at 1220 2.58 million . Clearly , a relationship led banking business focusing on our corporate business , providing end to end financial solutions for working capital , trade finance , project finance , treasury , cash management , etc.
Speaker #1: we are also also offering a transactional banking services , which includes cash management , trade services collections and payment solutions to our corporate customers .
Speaker #1: In terms of Treasury investment and financial institutions , we total operating profit contribution to the bottom line or to the operating profit was 12.19 million , which represents 16% in terms of overall revenue , providing foreign exchange money market currency swaps , interest rate swaps and other hedging solutions to our customers .
Speaker #1: Corporate , finance advisory again , a new business initiative or business that was introduced two years ago is contributing good to the bottom line , as well as supports our customers .
Speaker #1: Who needs this kind of advisory support asset management overall , improving the net bottom line for the bank . Last but not the least , Islamic bank contributes 17% to the overall revenues with a net contribution of 8.8% , 8.8 million of operating profit to the operating profit profit line .
Speaker #1: Clearly , the largest Islamic banking branch network in the country . We are now with 31 branches , the largest network across the country , offering Sharia compliant solutions to our Islamic banking customers .
Speaker #1: As I mentioned , we are also looking at changing the core banking for our Islamic business , which will further improve our product and and offerings to our customers in terms of liability and asset contribution to the business , retail contributed 21% .
Speaker #1: Corporate and government was at 40 or 51% , Treasury and FII at 9% . And the Islamic at 19% . In terms of assets , 19% from the 24% from retail .
Speaker #1: Corporate stood at 40% and Treasury and FX 17% . Looking at the consolidated profit and loss Or NII , which is the net interest income grew from 59 to 61 million .
Speaker #1: As I mentioned , most of the asset growth came in the second quarter of 2026 , and that's not entirely translated into NII as yet .
Speaker #1: Plus , the growth has come from both the retail business as well as our government business , which is , again , you know , working on thin margins .
Speaker #1: So that's why it doesn't really entirely reflect on the we are hoping going forward , this should improve further on the fee income .
Speaker #1: As I mentioned , it continues to be a good story with an increase of 34% . We hope and expect this to continue to be sustainable in terms of the absolute numbers , the pace of growth may slow down because we are now already at 35% in terms of overall fee to total income ratio .
Speaker #1: Our operating expenses went up by 5% from 40 million to 42 million . We continue to manage our costs better , and that is reflected in our overall reduction in cost to income ratio , our operating profit went up from 43 to 51 million , an increase of 17% .
Speaker #1: Net provisions increased by almost 3.3 million from 16 to 19 million , our cost of risk , as I mentioned from a from an overall total assets perspective , stood at 0.69% .
Speaker #1: And if I just look at loans and advances was at $0.90 , and we expect that to continue to be around those levels in the next 2 to 3 quarters , my total net profit at 27.26 million went up by 15% .
Speaker #1: For our Islamic . The overall operating income had a had a growth of 9.34% stood at 15.82 million fee and other income continue to be a good story for Islamic Bank as well .
Speaker #1: At 4.25 million , an increase of 17% . Impairments for Islamic business also increased by 22% at 6.45 million . Net profit at 2.43 million was an increase of 6.7% .
Speaker #1: In terms of financing and deposits went up by 21% in terms of financing at 981 million . Our total deposits went up by almost went up to 915 million , or in fact .
Speaker #1: As far as Islamic business is concerned , with an expanded branch network increase from 53 to 58% . And that's also reflected in the overall cost of funds for Islamic business loans and advances .
Speaker #1: As I mentioned , went up by 9.7% to 4.809 billion . The chart on the top right shows the key sectors with on which or with which we have grown the loans and advances , retail being 125 million .
Speaker #1: Communications are 124 . Government was at 232 million and services at 110 million , leading to an overall increase of 4.8 of overall increase to 4.8 billion in the first half of 2026 .
Speaker #1: Credit quality NPLs went up from 210 million to 252 million , an increase to 5.26% , whereas my stage two exposure came down from 651 million to 603 million in the first half of 2026 .
Speaker #1: So this is mainly because of one large account . You know , that's what is causing this movement . In fact , the entire most of the movement from , you know , for the stage two decline as well as stage three increase is because of that account .
Speaker #1: You know , this is in line with the central bank guideline guidance , you know , that that's the that's the change that you see that clearly has led to a reduction in my overall coverage ratio .
Speaker #1: Because when the overall NPL increases , the coverage has declined to that extent . Whereas if you look at the stage three coverage ratio actually improved from 57 to 63% because the account that moved from stage two to stage three was significantly provided for .
Speaker #1: So that has clearly improved the overall stage three coverage ratio . But given the overall increase in NPL from 210 to 252 has led to a reduction in in the overall coverage ratio .
Speaker #1: Our restructured loans , which is the last bullet point on the right hand side , actually came down from 438 million to 379 million in the first half of 2026 .
Speaker #1: Very quickly , on the funding side , our Casa ratio improved from 48% to 50% . We are not really chasing a headline Casa ratio here .
Speaker #1: objective is to pay off some of the expensive gold deposits that we have , and improve and increase the overall contribution of savings deposit to the net funding side of the balance sheet .
Speaker #1: We continue to increase that with the expanded branch network , and we have seen an overall increase in reliability from 4 billion to 4.49 billion in the first half of 2026 .
Speaker #1: This slide shows the profitability and performance . The top left slide shows the income , breakup again , the way to read this is the block .
Speaker #1: The the bottom block shows the net interest income followed by the net income from Islamic business , which is basically refunded profit income from Islamic business .
Speaker #1: The top two blocks show the net fees and commissions , as well as the other other income . What we want to show here is how our fee income has grown year on year or starting , let's say 20 , 20 , 2122 .
Speaker #1: In fact , if I look at 2022 and that is something that you can see on the chart , bottom right , our fee to income ratio as at the end of 2022 , stood at 14.49% , which was the lowest in the industry .
Speaker #1: This now has improved to 35% . Clearly , you know , giving us a substantial contribution from our fee based business . And again , you know , the the investments that the bank has done into new businesses , which includes private banking , asset management , corporate advisory , etc.
Speaker #1: , is , is now reflecting into an increased fee income It's almost all sustainable . And , and that's what you can actually see in the table on the bottom right .
Speaker #1: Most of the fee increase is coming from net fees and commission or miscellaneous income contributed only to the extent of around 3.6 million to the overall fee increase , with foreign exchange going from 6.8 million to 4.8 in the first half of 2026 .
Speaker #1: Our investment income stood at 4.3 million as compared to full year 7.9 million last year . Again , as I mentioned , we do expect this to be sustainable .
Speaker #1: Going forward in terms of our yield , cost of funds , net interest margins , our yields to that 5.69% , a reduction of 18 basis points as compared to last year .
Speaker #1: Our cost of funds down by 16 basis points , again , largely mirroring the the the reduction in yield , as I mentioned , we are trying to manage our cost of funds by paying off expensive call deposits , etc.
Speaker #1: , and managing managing our overall increase or increase in savings , deposit that's directly contributing to the reduced cost of funds . The net interest spreads stayed flattish as compared to last year at 2.09% .
Speaker #1: Capitalization . I talked about , you know , total capital adequacy ratio at 16.72% higher as compared to the regulatory requirement of 13.5% , 11.2% being our CT one .
Speaker #1: Our overall risk weighted assets grew from 4.3 billion to 4.9 billion . We continue to , you know , continue to pay dividends year on year .
Speaker #1: In fact , it has improved from 2% to 7.5% cash as at the end of 2025 . With this , I will conclude my presentation with some of the key messages .
Speaker #1: Fee to income ratio that I talked about , which was a low of 14.5% , the lowest in the industry . Now stands at 35.2% , a net profit grew by 15.2% year on year .
Speaker #1: Or you can just our Casa . Increased to 50% . Consolidated with Dhofar Islamique at 58% . Our . Our focus on increased footprint .
Speaker #1: Now we are operating out of 145 branches . We are continued . We continue to be supported with an experienced management and a very dedicated staff for the bank .
Speaker #1: With this I will conclude my presentation and pass it back to Sundar and Hillel to manage the Q&A .
Speaker #2: Thank you , Mr. Vikash . Now I will open the floor for the Q and A session . Kindly raise your hand and please introduce yourself before asking your questions .
Speaker #3: Also , if you want , you can use the chat box to ask your questions and we'll read it from there .
Speaker #4: Hello gentlemen . Thanks for the opportunity and congratulations on a good set of numbers . So I have two questions . First one is regarding loan growth .
Speaker #4: So considering current geopolitical environment , how do you see loan growth evolving for remainder of year ? Where do you which sectors you see contributing to loan growth .
Speaker #4: And is there any change in customer demand or lending appetite ? Second question is regarding if you can please provide a guidance regarding important line items like loan growth , margin , cost to income ratio , cost of risk and capital ratio .
Speaker #4: That will be really helpful from modeling perspective . These are my questions .
Speaker #1: Thank you , thank you . Srinath , with regards to loan growth , as I mentioned , our loan growth stood at 9.78% in the first half of 2026 .
Speaker #1: We do expect this this growth rate to continue for the remaining of 2026 as well , which means higher side of single digit growth .
Speaker #1: You know , the opportunities are across various sectors . You would have seen my presentation on various sectors from which the loan growth actually came in the first half of 2026 , which includes retail business .
Speaker #1: Clearly , we are taking advantage of our expanded branch network . The loan growth was also from government sector to the extent of almost 250 million , which is almost half of my overall increase in loan growth , as well as communications , etc.
Speaker #1: . So we do expect the same level of growth rate to continue for the remaining 2026 as well . Some of the new sectors , like renewables , etc.
Speaker #1: , are also expected to contribute to the overall loan growth so that space or pace we , you know , we expect to maintain in terms of , you know , some of the I cannot really share some forward guidance with regards to key ratios , but directionally , if you see , you know , the cost to income ratio for the bank used to be upwards of 57% .
Speaker #1: Now in 2020 , 2021 and 2022 , from 57% , it has now come down to 45% . We believe it is still high as compared to the overall market , but the investment that the bank has done , you know , clearly is now translating into higher top line as well .
Speaker #1: So going forward , we do expect our cost to income ratio to continue to decline in terms of our fee to income ratio .
Speaker #1: Again , it's a good story . It used to be 14.5% , the lowest in the industry . It's now amongst , you know , the best performing fee income ratios at 35% .
Speaker #1: The pace of that increase now will slow down . But clearly , you know , mostly fee is sustainable given the additional businesses that we have inculcated and what we are doing .
Speaker #1: So we expect that to have a healthy growth in the coming quarters and years in terms of capital adequacy ratio , it stands at 16.7% .
Speaker #1: It supports our addition , or current balance sheet requirements . However , you know , we will be looking at additional tier one in the next few months and quarters , depending on the opportunity .
Speaker #1: We did raise 100 million of tier two last year . In 2025 . That was a conscious call because , you know , clearly the tier two allows us to amortize that over a period of five years .
Speaker #1: And that goes and adds to the overall CD one . And it's essentially a payback to the shareholders . So , you that's again , something that's going to help increase our CD one over and above the the blowback that we'll be doing for our profits over and above the distribution .
Speaker #1: So we expect our capital adequacy ratio to continue to be robust in the , in the , in the coming quarters with the additional capital that the bank is expected or will be raising , depending on the balance sheet , balance sheet growth , our ROE is currently at 9.03% .
Speaker #1: Again , you know , I'll shy away from making any forward looking guidance , but given the way our operating income has been growing , our costs are being managed .
Speaker #1: Yes , we have a higher cost of risk . And as I mentioned , it is expected to continue to be elevated over the next 2 to 3 quarters , after which we do expect our ROE to improve significantly .
Speaker #1: You know , going forward . If , as and when and as when our ROE as our ACL , our cost of risk , you know , gets gets more comes comes to a lower level .
Speaker #1: I think if that answers your question . Hello . Good afternoon .
Speaker #5: Good afternoon . Thank you very much for the presentation . And the answers so far . My question is primarily on the NBA trends that you have seeing for the bank and for the sector as a whole .
Speaker #5: So can you please share some thoughts on the NBA trends that we are witnessing , and what would be a comfortable coverage ratios that , you know , you will be looking at
Speaker #1: Thank you . Joyce As far as NPL is concerned , you know , the first half of 2026 , we did see an increase in the NPL .
Speaker #1: In fact , the first quarter itself . And as I mentioned , this was on account of one one account that led to this increase .
Speaker #1: You know , this account based on central bank guidance was in stage two . And , you which has now been moved to stage three .
Speaker #1: As I said , it was significantly provided for . And that's the reason why you saw the overall stage three coverage . In fact , going up from 57 to 63% .
Speaker #1: However , since the overall numerator has gone up , the , you know , the overall coverage has declined to 88% in terms of , you know , a comfortable coverage ratio .
Speaker #1: Clearly , you know , you've seen the bank continues to be prudent in terms of the ECL , that it continues to provide quarter on quarter .
Speaker #1: You know , we are whilst increasing the overall top line with improved and increased business , significant portion of that is set aside to , you know , improve the coverage ratio .
Speaker #1: So I cannot really give you a forward looking number as far as coverage ratio is concerned . You will see the coverage ratio continue to improve from this level .
Speaker #1: Earlier , we have kept coverage ratios close to almost 100% prior to the classification of this particular account , and that's where we'll eventually be heading to Joyce is an industry wide account in terms of industry wide , you know , again , NPLs , you know , are in the range of around 3.8 to 4% .
Speaker #1: And , you know , this is what we'll be targeting in the long run . Clearly , there are some legacy challenges that , you know , we have , Joyce , which we are trying to manage , both in terms of how we resolve those accounts as well as how we manage our coverage .
Speaker #1: And NPLs associated with that
Speaker #5: Sure . Thank you . And the next question is on the recent regulatory developments that we have seen from both from CBO , as well as from the FSA .
Speaker #5: One is on spinning off the Islamic banking and the other one is spinning off these investment banking right now . What we are seeing is Islamic banking for Dhofar is quite big , and it contributes meaningfully to your bottom line .
Speaker #5: So just wanted to pick your brains on , you know , your initial thoughts . I know it's very early , but you know , how do you see the sector evolving on this developments ?
Speaker #5: And also on any initial thoughts on what's going to be the strategy for the FA as well ? On these two aspects ?
Speaker #1: Yeah . So the as you would have seen from the numbers , the Islamic banking growth in Oman has been significant in terms of a compounded growth rate , though it's from a smaller base .
Speaker #1: It is much higher than the conventional over the last 13 years or so that Islamic banking has been in the country and the reason development or the announcement of the central bank in terms of development of the Islamic banking industry , is a very welcome step .
Speaker #1: And it will hasten the growth of Islamic banking in the country . We are welcome . This initiative and we are looking at from the bank side , what are the different options that we can look at ?
Speaker #1: We have been given , as you would have you might have seen the regulations , three different options , be it a merger into one of the Islamic banks or between windows , or again , as a separate subsidiary .
Speaker #1: We are looking at all these options . We are still not finalized . What is the best interest of the shareholders as well as the best interest for growth of the Islamic banking industry and our franchise in particular , as you rightly said , it's a large part of our the business and we want to grow that further on the investment banking side , we are again reviewing the regulations , which has come from the FSA , and we think some additional guidance on this will be available from the central bank .
Speaker #1: And once that comes through as well , before the end of the year , we could take a clear position on which way we want to go on that .
Speaker #1: What are the best options for the shareholders for developing this business , etc. ? On specifically on the Islamic banking business of the bank ?
Speaker #1: I will ask my colleague Ammar to talk further on this business how he sees Islamic banking growth for the Islamic .
Speaker #6: Thank you sir . As you mentioned , I think the Islamic making is growing fastly with increasing the demand on the Sharia compliant products and services , and also regarding the latest central banks guidance , I think I can say it's a positive .
Speaker #6: While to develop Islamic banking sector in Oman . And I think this is an . Align with Oman's vision 2040 .
Speaker #1: So if you see today among the Islamic banks or windows , our network is among the largest in terms of the network of the Islamic branches .
Speaker #1: Banking branches in the country . So I think it's a very strong franchise . And with and I think we are quite positive that that franchise can be developed further
Speaker #5: Got it . Thank you very much and wish you all the best .
Speaker #7: Thank you .
Speaker #6: Thank you . Josh .
Speaker #2: Yes .
Speaker #6: Go ahead . Hi .
Speaker #8: Good afternoon , my . Yes . Thank you . Yeah . Thank you for the call . Congratulations on a good set of numbers .
Speaker #8: Also wanted to especially mention the growth we've seen in your fee income . I think it's remarkable compared to previous years . Now I just wanted to touch pick your brains on the asset management or division .
Speaker #8: Do you see that as complementary in terms of , you know , offering alternate products to clients ? Once you've seen a sort of decline in interest rates , also , in terms of client retention , if you could just touch upon that , how is that sort of feeding in and what sort of growth do you see over there ?
Speaker #8: Well , absolutely . And in fact , you know , clearly there are some price sensitive customers , you know , and asset management , business clearly , you know , helps complement , you know , that that that part of the business as well .
Speaker #8: Not only that , it also is an additional offering to our customers , you know , from the overall product portfolio that we currently have , our total assets under management is close to almost 140 million already .
Speaker #8: And we continue to see this increase in in fact , this is one line of business that never existed , you know , within the bank , just 2 to 3 years ago .
Speaker #8: So , you know , this is something that is clearly an additional , you know , line of business and improves the customer stickiness and , you know , wherever we need to manage such , such requirements , it allows us that opportunity to work with those with , with those customers .
Speaker #8: And , you , we do expect this , this line of business to continue to continue to grow . There is a demand for , you know , such products in the country .
Speaker #8: There are some very specific customers looking for such products , and that is what our new relationships that are new to bank customers that we are targeting through this line of business .
Speaker #8: Okay . Thank you .
Speaker #5: Next question .
Speaker #8: Would be with regards to sort of the strategy going forward . You know , we've seen , you know , developments from Soha recently and they currently approximately 20% of of market share .
Speaker #8: Bank continues to be the standout leader . And then there's sort of a cluster for for bank , Dhofar , Nvo and the others .
Speaker #8: Strategically , how would you like to position yourself for , let's say the next five years ? Any any thoughts on that ?
Speaker #1: See , I think from the bank's point of view , it's a it's a very good question that you have asked . I think what we are always looking at is how to make bank Dhofar relevant for the industry , relevant for the customers .
Speaker #1: And that's really what we are looking at . If you see what we have done in the last few years is to create a business that is very sustainable .
Speaker #1: You can look at the numbers in terms of the liabilities . At the end of the day , it's a strong liability base , which develops the bank , and that's what we have been focused through .
Speaker #1: The expansion of the branch network as well as various other initiatives in the corporate governance , banking and retail banking , as well .
Speaker #1: Are we creating a franchise which is sustainable , growth oriented , and are we managing this business in a lean , mean and excellent manner so that tomorrow , if there is an opportunity that comes , is bank Dhofar ready to grab that opportunity ?
Speaker #1: And what should we be doing to keep to be in that position where we can take advantage of a market opportunity that comes ?
Speaker #1: One never knows . It's a it's not that too many opportunities are available and all that given said , okay , but you never know .
Speaker #1: Things can change anytime and something comes up . You basically ready . And that's what we are focused on . Creating a bank , which is ready to take care of that opportunity .
Speaker #1: And to be available and to grow further . So I think broadly , that's what we are looking at . Whether what is the organic currently we are looking at organic growth and how can we do it .
Speaker #1: And I think we have demonstrated through the numbers in the last few years . Tomorrow , if there is an inorganic opportunity that comes , then are we in a good position to capitalize on that ?
Speaker #1: And all that ? So I think broadly , that's where that's what we are doing as our macro strategy noted .
Speaker #8: And final question with regards to capital adequacy , with the current capital base , what sort of , you know , either quantum or percentage growth ?
Speaker #8: Can the bank do comfortably before it has to look at probably a further corporate action just to get a sense of , like you mentioned , there's an opportunity that comes by sort of how ready the bank , how nimble is the bank to capitalize on that without sort of returning to shareholders , shareholders ?
Speaker #1: I think if you see the last few years , what we have clearly not done is to go back to the shareholders asking for money rights issue or any such issuance .
Speaker #1: We have managed the growth through the bank's internal profit generation as well as as Vikesh explained elaborately a little earlier , we took the decision to take sub debt .
Speaker #1: We took 100 million riyal of sub debt , which has a cost which hits the PNL . We could have taken an additional tier one , which doesn't hit the PNL , but we looked at it from the shareholders benefit point of view because the subject is tax deductible , net of tax is about 4.85 , something which is far lower than the cost of equity or anything that you can look at .
Speaker #1: So that's the opportunity that we took . And it also helps us create the core capital over the next five years . There's 100 million gets amortized every year .
Speaker #1: So our strategy today is to look at this sort of a growth capital raise might be we will not shy away from looking at additional tier one sometime in the future .
Speaker #1: Because if you see a comparison of all the banking industry , the additional tier one on the total equity of bank among the lowest compared to a few others .
Speaker #1: So we have an opportunity there . So if we need to , we will look at and you would have seen the announcement that we made to the market a few weeks back on this regard , not that anything is going to happen immediately , but that's an option that we want to exercise or we want to look at for the future as well
Speaker #8: Note my final comment would be I , I take your point on sort of , you know , taking on , on , on the additional growth capital , but we do also look at adjusted return on equity to adjust the perpetual interest across the sector .
Speaker #8: Wish you all the best . Thank you so much .
Speaker #6: Thank you .
Speaker #8: Thank you
Speaker #1: So I think I see something on the chat , but I think Vikash covered that question in detail . Yeah , I think see , if I were to just further add Vikash in terms of the vintage , that's that's been in the .
Speaker #1: It is a common particular account with all the banks . And that's been in almost all the banks in Oman as a stressed account for the last seven , eight years .
Speaker #1: That's what we are talking about . It's nothing new that happened in the last one year or two years or last five years .
Speaker #1: If that clarifies what you are really looking at .
Speaker #2: , since there are no any further questions , I will have to pass it back . Vision . Yes . Vision
Speaker #3: , please go ahead . Vision .
Speaker #8: Thank you , thank you , thank you for touching upon that . You know , barring that one name , how do you currently see the sort of stress levels in the market compared to where they were ?
Speaker #8: Let's say a few years ago ? And in general , what's the sentiment when you talk to clients today ? So we'll not talk about that one account .
Speaker #8: That's fine . But in general , what's your sort of consensus on how the market is shaping up today versus going forward
Speaker #1: We don't see any particular level of stress that we are worried about today . Yes , the business changes the hospitality industry issues because of the current Middle East conflict is something which we keep cognizance of .
Speaker #1: But at this point in time , we are not particularly worried about any sector or account that is of bother for either the bank or the industry today
Speaker #8: Noted . Thank you so much .
Speaker #2: Thank you guys for attending this call . I will have to pass it back on the CEO of concluding the call .
Speaker #1: Thank you very much to everybody for taking your time to be on this call . And as we have always said , from our point of view , we want to present the information as transparent as possible .
Speaker #1: Sometimes more transparent than management accounts , probably , but that's the sort of the objective is to be okay . We are partners in this journey .
Speaker #1: And from our point of view , we are happy to share . And I know from the investor relations team of the bank , they also continuously engage with investors .
Speaker #1: If you feel you need any additional clarification questions , it doesn't have to stop with this half yearly call . I know after every quarter , the vacation , the IR team is happy to meet with people who are interested , and I think we'll continue with that and with those words , I will again close .
Speaker #1: Thank you very much to you , to all of you who have been on the call and our investor relations team and all my colleagues who have put through this presentation and make this event successful .
Speaker #1: Thank you very much , everyone
Speaker #3: Assalamu alaikum and good afternoon , everyone . I would like to welcome you all to Bank Bofa's , M.S. discussion call , where we will be discussing the bank's financial performance and the key highlights for the first half of 2026 .
Speaker #3: Joining me today , we have our Acting Chief executive Officer , Mr. Gopakumar , our Islamic chief of Islamic Chief Islamic Banking officer , Mr. Amir Al Umara , and our chief Financial officer , Mr. Vikash Mirani , from the Investor Relations team , we have Mr. Hilal , Miss Maram Al-hadrami , and myself , Sundar Salawati .
Speaker #3: Thank you all for joining our call today . As usual , our call will be divided into two sessions . The first session will take you through the bank's strategy and the key performance highlight for the first half of the year .
Speaker #3: The second session we will we will address all of your questions through a Q&A session that will be interactive . Therefore , I would like to remind you all to keep your microphones muted until the Q&A session starts .
Speaker #3: With that , I would like to hand over to Mr. Vikash to start the presentation .
Speaker #6: Thank you very much and good afternoon , everyone , and welcome to you all on our earnings call for the period ended 30th June 2026 .
Speaker #6: We'll run through the presentation , and then as soon as mentioned , open this conversation for further Q&A , a quick disclaimer of course , we will be shying away from making a forward looking statements .
