Banking majors top MSM 30 Index

27/08/2011 00:00 AST

The banking sector majors of the MSM 30 Index registered top line growth for the H1 2011 period mainly driven by higher credit off-take, maintenance of healthy margins and presence of higher recoveries. While the earnings of industry and the services sector came under margin pressure during the period owing to incremental operating and manpower costs.

The performance of the investment holding companies was lackluster due to the unrest seen in the region along with the impending global growth concerns. “For H1 2011, the overall corporate performance of MSM 30 Index companies saw a mixed bag of earnings with above than expected numbers from the banking sector majors”, according to a research report of Gulf Baader Capital Markets.

Total revenue of MSM 30 companies including investment holding companies for H1 2011 stood at RO 1.462 billion, registering an increase of 12.6 per cent on a year on year basis. While the total revenue of MSM 30 companies excluding investment holding companies during the period is at RO 1.429 billion, an increase of 13.4 per cent on a year on year basis.

“The top line growth of the index is mainly due to the higher than expected performance of the banking and industry sector majors, which is on a positive note”, says the report. The aggregate of banking and industrial sector grew by about 17 per cent and 17.6 per cent a year on year basis, respectively. Total revenue of MSM 30 companies including investment holding companies for Q2 2011 stood at RO 738.243 million, reporting an increase of 13.3 per cent on a year on year basis. The same has grown by about 1.9 per cent on a quarter on quarter basis.

While the total revenue of MSM 30 companies excluding investment holding companies during the period is RO 724.407 million — an increase of 13.9 per cent on a year on year basis. The same reported a growth of 2.8 per cent sequentially.

Overall, H1 2011 net profit of MSM 30 companies including investment holdings, is RO 215.603 million, registering a decline of 19.7 per cent on a year on year basis. While the net profit excluding investment holdings posted a decrease of 17.3 per cent on a year on year basis.

“Despite stronger banking sector performance, the index earnings declined for the period due to the pressure on margins especially in the industry and services sector majors”, comments the report.

The net profit of the industrial sector is the worst to hit during the period reporting a decline of about 38.9 per cent on a year on year basis.

On the back of stronger credit off-take, the presence of higher margins and incremental recoveries, the report maintains overweight rating on the banking sector. With the industry sector earnings touching the bottom during Q2 with the full impact of the additional costs, the report expects the upcoming quarters to show improved growth led by higher capacity utilisation levels and the ability to pass on the additional costs to the end customers.

The overall top line growth in the services sector gives comfort in the prevailing local demand for products and services, says the report.

Oman Daily Observer