NBO's business continued to grow during the year, despite the gloomy bottom line. Operating profit increased to RO 44.7 million ($116 million) in 2001, 13 per cent above the RO 39.4 million ($102 million) recorded the previous year. Net interest income also rose by 19 per cent to RO 33.1 million ($86 million).

NBO decided to take RO 31.6 million ($82.1 million) in provisions for 2001 to cover the high incidence of non-performing loans. 'In good times, some poor lending decisions go unnoticed,' chief executive Aubyn Hill said on 3 February. 'However, in bad times even good loan decisions face difficulties. As a result of these factors. NBO decided to take a prudent and realistic approach to provisioning across the three jurisdictions in which the bank operates.'

In a move to reduce risks, and minimise the need for such large provisions in future, NBO has already tightened credit control at the bank and, this year, will concentrate on collateralised lending and diversifying the corporate loan portfolio. 'The entire area of credit control has come under close scrutiny and numerous enhancements are being made,' says Hill.

In Egypt, where the bank has five branches, NBO will continue shifting the emphasis of its local business to retail from corporate banking. 'The state of the economy and the devaluation of the currency in Egypt vindicate our long-term strategy,' says Hill. 'We have started reducing our corporate portfolio in Egypt, and our deposit growth there clearly reveals some success with the strategy.'