Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed National Bank of Oman's (NBO) Financial Strength Rating at 'BBB' and assigned a 'Positive' Outlook to the rating.
The rating is underpinned by the Bank's improved and good profitability, sound capital adequacy and asset quality. The Bank's tight liquidity ratios, lower than peer group provision cover and customer concentrations in the loan book and deposit base constrain the rating.
The Foreign Currency Ratings are affirmed at 'BBB+' Long-Term and 'A2' Short-Term, with a Support Rating of '3' and a 'Stable' Outlook. The ratings are underpinned by the strong likelihood of support from the government of Oman.
NBO performed reasonably well in 2011, as operating profitability improved on the back of higher non-interest revenues and a small growth in net interest income while costs rose moderately. Net profit grew, aided by improved recoveries even as impairment charges on investments rose during the year. The Bank's loan growth revived in 2011, with both the corporate and retail loan portfolios growing in tandem. Favourable macroeconomic conditions helped to build the Bank's personal loan portfolio, while project finance business boosted the corporate book.
NBO's synergies with its strategic partner and principal shareholder also contributed to the growth in business. The Bank's asset quality ratios showed a mixed trend. Non-performing loans (NPLs) increased marginally, however, and the NPLs to gross loans ratio declined due to strong loan growth. Loan-loss reserves declined during the year due to high recoveries and write off of fully provided loans. The provision coverage ratio resultantly fell from the 2010 level but was still high. The Bank's capital provides additional support. NBO is well capitalised and is in a position to raise additional funds if required, either through equity or subordinated debt. Liquidity ratios had tightened by year-end 2011. The Bank was able to grow its customer deposit base reasonably well in 2011 and should be in a position to raise this further in 2012.
NBO is owned 34.9% by Commercial Bank of Qatar and 14.7% by the Suhail Bahwan Group. It is the second largest bank in the country with total assets of the equivalent of $5.7bn at end 2011. It is a full-service bank offering a wide range of retail and corporate banking activities.
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