Oman International Bank (OIB) will use the proceeds of its first syndicated loan to help achieve an ambitious set of new targets and reduce risks in its balance sheet.

OIB, Oman's largest bank, is also implementing a series of measures to tighten up operating practices and put the bank on a firmer footing.

The five-year facility, signed in London on 11 August, was heavily oversubscribed.

In response, OIB elected to raise the loan to $125 million from the $100 million that was originally sought. The facility is priced at 52.5 basis points (bp) over Libor for the first three years and 65 bp over Libor for the last two years. It was arranged by Arab Banking Corporation, Bayerische Landesbank Girozentrale, Bank of TokyoMitsubishi and Credit Lyonnais.

The main purpose of the loan is to reduce the bank's US dollar exposure.

'This term loan facility is very much a step in the right direction and will enable us to reduce mismatch in our US dollar balance sheet, ' says chief executive officer Anthony Wright. 'As such, we become a stronger bank more able to withstand any shocks in the world market. Too many smaller banks suffer disproportionately at such times. . . this risk in our balance sheet is now much better covered than before.'

OIB is also taking steps to reduce the mismatch in assets and liabilities in its local currency book. Omani rial depositors are being offered a flexible certificate of deposit scheme that will enable customers to nominate a maturity date, as well as the amount, manner and timing of payments.

The bank will quote a rate accordingly.

Wright says OIB is implementing a new strategic plan following recent board approval. Lending criteria have been tightened. Automation is to play a key role, with a target of automating 70 per cent of customer transactions, compared with 30 per cent at present. The point of sale (POS) network is to expand from 1,000 terminals to 1,500, with the aim of boosting revenues from this source by 150 per cent.

Developing private banking, expanding treasury and developing risk management skills are among other priorities.

PricewaterhouseCoopers has been drafted in to improve corporate governance in line with Central Bank of Oman directives.

OIB boosted profits by 11.3 per cent in the first half of this year to RO 7.6 million ($19.5 million) against RO 6.9 million ($17.8 million) in the first six months of 1999. Total assets rose by 10.1 per cent to RO 725 million ($1,859 million). The bank reported continued credit losses in India, where it has two branches. It has 82 branches in Oman and two in Pakistan.