Source: NBK Capital
OMANI BANKS: 1H2010 UPDATE
We examine the performance of a sample of Omani banks in 1H2010 in terms of balance sheet growth, liquidity, profitability, asset quality, and capitalization. The sample includes the six local commercial banks listed on the Muscat Securities Market (MSM). The Omani banking sector performance in 1H2010 was largely similar to the regional performance, which was characterized by lackluster economic activity and decreased demand for credit, in general. Most of the sampled banks were able to increase their operating income, supported by strong growth in net interest income, while net profit growth was supported by a general decline in loan loss provisioning charges in 1H2010. NPLs grew for half of the sampled banks in 1H2010, although at a slower pace than seen in FY2009, but NPL coverage stayed above 100% for all banks. All the sampled banks witnessed a decline in their CARs between December 2009 and June 2010; however, the CARs were still above the 12% minimum required by the Central Bank of Oman (CBO).
Between December 2009 and May 2010, total banking sector loans in Oman grew by a marginal 2%, after growing by 6% in FY2009, and an average of 40% in the two years before. The sampled banks posted mixed results, with the smaller banks posting stronger loan growth than their larger peers. Ahli Bank, the smallest bank in our sample in terms of total assets, recorded the highest loan growth in 1H2010 at 20%, driven by a surge (+36%) in corporate loans. Bank Sohar was the outperformer in FY2009, posting a 24% growth rate in loans, driven primarily by an increase in credit extended to financial institutions. Bank Muscat, on the other hand, the largest bank in Oman, witnessed a considerable slowdown in lending, as the bank posted a slight decline (-0.3%) in net loans in 1H2010, following modest 3% growth in FY2009. Oman International Bank (OIB) was the only bank to post a decline in loans in FY2009 (-1.9%) and 1H2010 (-2.4%). In Figure 2-1, we plot the growth in loans and deposits for our sampled banks in FY2009 and 1H2010.