MUSCAT -- As part of their plans to strengthen the capital adequacy, many Omani banks are planning right issues and private placement of shares in the coming quarters of the current financial year. The banking sector in the Sultanate has been witnessing an excellent uptrend mainly thanks to the prevailing conducive macro-economic environment in the country.
Economic liberalisation, rising economic diversification initiatives, rising government and private sector spending on infrastructure developments and healthy population growth are the major factors which contribute to this affluence. "Banks need additional capital to meet high demand for credit as several big ticket projects that were awarded towards the end of 2011 will reach implementation stage by early this year. As the level of disposable income increases there is likely to be good growth in the retail segment as well", says Suresh Kumar, Head of Research, Al Maha Financial Services.
The banks earned sizable profits in the last financial year reflecting resilience of the banking system. They also remained largely insulated from adverse international developments associated with the global financial crisis. "With the decision to introduce Islamic Banking in the Sultanate, leading players have started developing the necessary framework for Islamic Banking windows", adds Suresh Kumar.
The Central Bank of Oman had recently announced that the minimum capital requirement for Islamic banking window operations is RO 10 million for conventional banks. Commercial banks also need to comply with the CBO norm for minimum capital requirement of RO 100 million. BankMuscat, the biggest financial provider in the Sultanate, is planning to raise RO 100 million through rights issue in the second quarter of this year.
The right issue, which is aimed at raising the capital adequacy ratio for meeting the anticipated asset growth next year, was approved by the Board of Directors on December 21. The shares will be offered to the existing shareholders at a 20 per cent discount to the market price.
Also the board has approved a plan to raise additional capital amounting to RO 57.75 million through private placement of shares with international institutions. According to the bank, the transaction is part of the bank's capital augmentation plan to strengthen the capital adequacy ratio to meet future organic growth and planned business expansion.
The bank also signed a RO 65.6 million loan agreement with IFC Capitalisation. Bank Sohar, another leading bank, has also announced plan to go in for right issue to the tune of RO 10 million. The amount to be accrued after necessary approval will be used as capital for its planned Islamic banking window. The bank made a net profit of RO 14.497 million for the year 2011, which is 41.8 per cent higher than the previous year's net profit of RO 10.220 million.
The operating profit for the year was RO 20.007 million as compared to RO 15.645 million in 2010, an increase of 27.9 per cent. Net interest income during the year climbed 13.6 per cent to RO 34.757 million, as compared to RO 30.595 million in 2010. Bank Dhofar recently raised RO 50 million subordinated loan. The bank reported a 17.8 per cent rise in its total assets, rising to RO 1.960 billion, up from RO 1.664 billion in 2010.
The bank's operating income climbed 10.2 per cent to RO 78.591 million in 2011, from RO 71.315 million a year earlier.
At the same time ahlibank with a capital base of RO 80 million, is planning right issue to the tune of 250 million shares to its existing shareholders.
The bank's net profit rose from RO 14.10 million in 2010 to RO 18.22 million in 2011, demonstrating continued growth in the bank's core operations, according to its unaudited results,
The bank's net operating income for the year ended December 31, 2011 grew by 37 per cent to RO 35.31 million as compared to RO 25.83 million during the same period last year.
© Oman Daily Observer 2012
