Now there are worries that chinese demand is trading off area markets in the region are focused on earnings season. My game is always long term. The Financial Stability of the country has been the core ends core essence of the game. And i will continue to make sure. Hat our longterm ally the institution has to perform. Qatari institutions are driven to achieve this. Cliques give us a sense of how exposed you are. You pointed out strong fundamentals in the system which has come under pressure. This is coming out of the United Arab Emirates specifically. If you look at the balancing from qatar. Ing trade for 125 million. Egypt is 1. 1 billion. That is not going to destabilize in any form. Institutions have a plan b. Whether it is a supply chain and the institutions of to realize. We have in kuwait. It has been a bigger opportunity. I wonder if plan b set plan b involves selling some of your loans. Banks buying what can you tell us on that front . Guest [indiscernible] i have to make sure i create a local market and maintain my acid ace. It is not significant to worry about. Stock, we look at your we see some sensibility considering the qatar isolation. 52 57, 52 57, 52. The market seems to be holding purely on dividends. Felt there have been no catalysts for your bank and how you change the narrative the only capacity is costeffective. Else it everyone is an important opportunity. And its a good investment. But increase the capital. Theave to strengthen management. I want to pick up on what you said. Crisis mean you are going to celebrate the bush out words, what does that wenment look like . Have offers rate from sydney to tokyo. Thats the substance. Thats what we consider it over the last 10 years. Thats why were going to concentrate to make sure. Best of Bloomberg Markets in the city Bloomberg Markets in the middle east. Him with this and more. Welcome back. One of saudi arabias biggest banks has the analyst estimates for another year and some say it plans to maintain its growth trajectory for the First Six Months of 2017. Can it continue to the back end of the year . Take a look. At banking,ok investments, or growing in double digits. That is according to our longterm strategy. If you look back to the last one ofars you will see the largest or Fastest Growing in the region. Allowedtinuously bank didnt hit our market share. We will add to it. How are you keeping that under control . If you see total financing, exceeding 76 billion, if you also see the funding one of. He sources did increase exceeding 110ets billion. The cost of funding will increase but there are many other opportunities. Balance sheets coming from a different source of funding, one is a current account. Other liquidity today. There are opportunities for the s, as really to we believe the governments continued issuing support. There would be capability to such an issue. Assisted what can you tell us about the timing and the size of the issuance . It has not yet been decided but i believe this will be the which is very important and a very good opportunity. Only markets but individuals. We are looking forward. Playerse seeing global to expand presence in saudi arabia. Is there enough business to go around . I think there are competing in very small different segments. Locationd be enough in. They would focus on some corporate business. And competition will enhance the quality. In terms of the impact and whatrisis of the standoff, do you expect to see on your Balance Sheet . Do you expect it to have any negative impact on the business . I dont think so. It is growing. That will continue. An issue as the economy grows. Qatar is very small. There is enough big size. Qatars talk about geopolitical had wings. Thank you for coming on the program. I put together a chart in terms of one gauge of risk perception. What im going to point out here is for the most part they have been moving in sets. How long do you expect this to drag on . As long as you have these geopolitical developments, especially on the offshore market. We continue to reiterate our views that they will remain in place. The central bank continues to bankse liquidity to the to meet economic and commercial needs. A disconnect between the offshore and onshore market. We see the tensions come tensions continuing that will be reflected in the offshore market. What is going to happen to funding . They can cope, but for how long . Deep excess very reserve pockets. They need to have access to foreign funding. Liquid ones. We feel the Economic Impact is manageable. I think what you will see policymakers is sure up deposits. The more they can show the Economic Impact is contained, that will be supportive of getting foreign funding, which has been an important source Going Forward. We do expect activity contained last year. We have seen moderation, even before these challenges came up and they slow down in construction activities. It will be more difficult in this environment and secondly a slowdown of a project and ongoing projects as those delays to Construction Material coming in. Miss was a Second Quarter for the biggest Retail Company this is bloomberg. Welcome back to the best of Bloomberg Markets. A secondquarter earnings and saudi arabias biggest listed retailer missed estimates. Of 39 million. That is 1 million short of analyst forecasts. We spoke to the chairman. Pickup andome nice an announcement has happened have a reasonable quarter from even the beginning. That to have an even bigger impact on your Balance Sheet . Off the back the restoration of those benefits . Hand it will be the shot for last years changes. Now it is probably stabilized. Including basket size. You are able to gain market share. You can go ahead and continue the market share gains from your competitors through the rest of the year or will you see a plateau in that sector . We expected to continue for the first quarter. The military advantage we had was happening. Most of us are required to have we have been able to give up. We are continuing to escort. You had a boost in retail. Howrooms will you continue that sort of growth . Opening this quarter and next quarter. We should continue to give us some growth. We have a positive growth. There is also there is also that love the coming in a fact. Could this be a drag on Consumer Sentiment . It has already started. And we will see nice growth similar to the first quarter. Eventually i guess some of them will reduce spending. We are trying to maximize our share of discretionary spending. Havelot of the ceos we been speaking to give us the sense of the impact that the crisis with qatar is or is not having on respective. What is your point of view on the effect is having if at all . Generally it is having an now it is i think normal. Somee other hand we have we are shipping more and more directly to those. We are seeing some consolidation the smaller retailers continuing to close their doors. Is this a trend you continue to see in the markets through the rest of the year . Weeks back to see more continuous consolidation. Opportunityly an for us to grow our business. We are taking advantage of some of these uncertainties. And we are continuing our expansion. We think there are Market Opportunities and were taking advantage of it. In terms of the expansion which you consider any acquisition . What are you excited about . We are not excluding acquisition if something is worth it. Where we can improve our share of the value. On the other hand we are seeing smaller talents. Plus we have a good expansion in kuwait. Which has started at the beginning of the year. Them are basically new markets and we can keep the what is the biggest risk out there for you . Is it changes in government policy, oil prices, what keeps you up at night . Not as strong as this. Cycles we actually go and look for market share and were taking advantage of those. We are doing double digit growth. And quick. E taking advantage of some markets , which we have not covered in the country. Next on the best of Bloomberg Markets middle east, our interview about the strategy of the gcc markets. We will break it down for you. Yousef welcome back to the best of Bloomberg Markets middle east. The past inclusion for saudi arabia is a volatile one. Muhammad is the strategist and thinks the upgrade process will not provide a Straight Path to riches, but also his views of qatar. Are saudi too expensive but worth it . Guest i think they are a little expensive. Banks are cheaper than the rest of the market. Is the growthg and saudi arabia will be weaker than emerging markets and weaker than egypt so that is justified to some extent about the premium has become expensive. If you look at the history, saudi arabia peaks around 16 times earnings so we are close to that level. There is little growth, more activity coming in. More pain for saudi corporates, more pain for expats. Domestic consumption from the local population, but expats are feeling some pressure. I think the story in saudi arabia will be a little volatile in corporate earnings. Yousef we do have some of the big banks supporting this week. We will get into the spending story later but i want to ask you about the Investment Strategy here and about how you take into consideration you are looking at a fed that is tightening. Its sending shockwaves across the world. How will that trickle down to how you craft a path forward around saudi arabia . Mohamad i think for saudi arabia, the key is the index inclusion. You are not going to face any outflows from emerging markets from the way you will see from other emerging markets as the fed titans very quickly. Ghtens very quickly. The banks would appreciate the rising hikes. I think you have to be very selective and cannot just buy and hold the market for the longterm. You have to be active and trade around index events. Shery how will vision 2030 play into roe, return on equity recovery in the market . Mohamad i think we are expecting some recovery at the base for some of the sectors, but for the banks, it will come when we see a pickup in growth. When the government starts relying more on the private sector to Fund Infrastructure spending, that is when you will see roe recovery for the banks and the index, because banks are the heavyweights. Until you see that growth, i think the roe will be there. Shery we are seeing oil prices gaining every day, adding to those gains we have seen. What about petrochemicals . Mohamad i think i will call on valuationsas neutral are rich on this level. Is at the end of the cycle and there is scope. It could grow in the coming years. That is one name we like. Names, theer valuations are rich and not much upside. Shery the saudi Retail Sector we are seeing some headwinds on that industry, but at the same time, we have just had the ramadan holiday period and the reinstatement of employee benefits. How will all of this affect the outlook for the Retail Industry in the kingdom . Mohamad as the chairman said, in both staples and discretionary, you will see more in saudi arabia. Longterm, the smaller stores, because of the requirements, they will not be able to cope as easily with those requirements as the big stores. As such, you see more small retailers closing down. The big stores will be gaining market share and that will help in terms of stock growth. In addition to that, the restatement of Public Sector employees will be positive for discretionary and stable consumption. Fee willthe expat be rising. Expatsbe paid by the worker himself and that will put pressure on and had spending in the kingdom expat spending. It is about one third in the population. Other countries are more dominant, but it will have an impact on growth as well. Yousef for the expats and across the Consumer Spending public, there is the reality that at one point in time, you grants beingnd taken away from the government. And that a few mean months later, you have a restoration of benefits. You cannot turn sentiment around like you are flipping a coin. This will take some time to really change and before it gets reflected Going Forward . Mohamad Quarterly Results so far for expats has been good. Ourbe it actually beat ar as the midby 7 . What you need to see is growth. The economy has been very muted. We have not seen major infrastructure spending. We have not seen regrowth in the economy and sentiment is weak. This is evidence from value traded in the saudi market by Retail Investors which is a proxy on how they feel of the local economy. You only saw a pickup during the announcement but saudi arabia has been quite muted. Yousef the rest of your portfolio recommendations, the research you are doing, youre going underweight egypt. Why . Overweight are still egypt. We went overweight saudi arabia ahead of the announcement. We went back to underweight now. In terms of the rest of the portfolio, i think egypt remains one of the strongest stories. That is where you will see the biggest earning growth as the Reform Program develops. That is where we are most excited about. Kuwait is also an interesting market to look at. For the rest of the region, you have to be very selective. Yousef coming up, the National Bank of oman staved off a ratings downgrade as the rest the state and a negative outlook. We hear from the ceo of one of the biggest banks. This is bloomberg. Welcome back to the best of Bloomberg Markets. Earlier this month, the outlook of five oman banks negative. The National Bank of oma we n, we spoke to the ceo. Ahmed it has 70 branches and 190 atms across the uae. And saving approximately 500,000 customers. Retail banking, corporate banking, investment banking, Treasury International and Islamic Banking. We will look at the results for first half of 2017. It has been three years since the fiveyear growth strategy, bringing superior customer experience. If we look at the context, went to look at the last three years. The last three years, nbo has been proven to be resilient and represents the market here in oman. It has remained intact despite challenging conditions. The bank continues to be strong. Diversewe maintain a portfolio and sustained superior profitability compared to our peers. Not just across the region. Yousef i will jump in here to pick up on what usaa. You areyou are saying. What does the road ahead look like in terms of expansion plan, acquisitions . What will keep that growth momentum for the bank . Ahmed actually for our key Strategic Priorities today, that is based on the fiveyear plan we put three years ago, our key Strategic Priorities is delivered superior customer experience. Scale up from digitization. It is becoming a big part of our business. Three, diversify income streams. You can see the first half results, we have been able to diversify income streams and bring more income and reduce less dependence on interest to income. We are continuing to reduce the use of the Balance Sheet and extend other capabilities to build on other types of income. Shery when you say diversifying ahmed yes. Shery sorry, when you say diversifying, you also mentioned Islamic Banking a while ago but for your business, your only 4 of revenue last year. Does that mean you will try to expand that . Ahmed absolutely. The Islamic Banking window has affirmed so well in the first half of the year. In the meantime, they have been able to maintain superior asset quality with a ratio of just 4 despite conditions. If i could actually talk about overall performance in terms of the profitability, return on assets returns on the high side compared to our peers locally and regionally. Ratio the npr ratio yes. Yousef i will jump in. You talk to some of the metrics there. To recap as well on the impact of the standoff that is ongoing qatar, howudi and will that change your road ahead . Do you need to adjust some of your business elements there . Ahmed yes, i just hope that has been resolved soon, for us as a bank, we are very much focused on those key Strategic Priorities i just explained to you. Delivering superior customer experience, digitization, diversifying our income streams, improve operational theciency, and enhancing discipline and brand appeal. It is important to see and actually analyzed in the context of the World Outlook for oman ever since the oil price started going down. Yes, it may continue to be subdued for an extended period of time but oman has diversification to reduce its dependence on oil and gas. Yes . I apologize for jumping in again. We want to get through so much with you. We talk about some other realities on the ground in omang in again. We with the performing markets. The worstperforming market so far this year. Worse than qatar. Why do you think the oman adjustment story has not been at the forefront . Why has it gone out of favor . Ahmed you look at the promise of the market in oman, particularly the stock market. The valuation is very good. The fundamentals are very sound. This ane sentiment is not really helping. Over the coming quarters and months, we will get out of that. Yousef the United States has a knowledge iran is complying with the nuclear agreement, but not the spirit of the agreement, but onled fresh sanctions actions outside of the agreement. Charlie rose got information from the prime minister. The Un