30 June 2015
MUSCAT: Profits of Oman's conventional banks showed a reasonable growth, thanks to better interest income on account of a robust growth in demand for credit, according to the Central Bank of Oman (CBO).
CBO in its annual report said that the combined net profit of Omani banks grew by 3.3 per cent to OMR362.9 million in 2014, from OMR351.3 million for the previous year. Of this, net profits of local banks amounted to OMR349.6 million (or 96.3 per cent), while that of foreign banks stood at OMR13.3 million (3.7 per cent).
The apex bank said that "the interest income from the core activities, including loans and advances, placements with banks and investments, remained the dominant component of bank earnings, accounting for 72.2 per cent of the total income of commercial banks in 2014." The rise in interest income to OMR881.2 million in 2014 from OMR841.1 million in the previous year was mainly due to the increased volumes of credit as well as larger levels of investment by banks. Total credit of commercial banks grew 11.3 per cent to OMR16.898 billion in 2014, from OMR15.177 billion recorded in the previous year.
Interest expenses, on the other hand, remained more or less unchanged, despite the significant deposit growth largely due to the decline in the weighted average interest rates paid on deposits by banks, which fell to 1.03 per cent last year, from 1.2 per cent in the previous year.
Net interest income
"The net interest income defined as the difference between interest income and interest expenses increased from OMR584.6 million in 2013 to OMR624.2 million in 2014, a rise of 6.8 per cent over the year," the annual report noted.
With the diversification of banks' portfolio, non-interest income has evolved as an increasingly important category of income for banks.
Income from foreign exchange operations posted a significant increase of 39.2 per cent to OMR47.7 million in 2014.
The CBO's annual report also said that fee based income such as commissions earned on letters of credit and guarantees, remittance fees and other transfers also rose significantly during the year to OMR83.3 million, a rise of 29.1 per cent over the previous year.
The operating expenses of commercial banks registered an increase of 7.3 per cent over and above the 11.1 percent growth recorded in the previous year. Operating expenses comprise broadly the wage bill and non-wage expenses such as rents paid, head office expenses, depreciation charges and other miscellaneous expenses in the form of travel, entertainment, legal charges and advertisement. The ratio of operating expenses to total expenses increased marginally from 61 per cent in 2013 to 62.5 per cent in 2014. The total wage bill increased by 11.9 per cent to OMR238.6 million from OMR213.4 million in the previous year.
Also, gross provisions earmarked for doubtful debts and contingencies inclusive of general provisions made last year increased from OMR105.6 million in 2013 to OMR124 million in 2014. Commercial banks provided OMR48.6 million as provision for taxes in 2014. Cash dividends paid out by local banks to their shareholders registered a marginal decline of 7.4 percent from OMR120.5 million in 2013 to OMR111.5 million in 2014, while stock dividends rose significantly by 49.2 per cent from OMR64.2 million to OMR95.8 million during the period.
Islamic banks cut losses
Also, Islamic banks and window operations of conventional banks reduced their net losses to OMR4.4 million in 2014, from OMR13.86 million for the previous year, according to the Central Bank of Oman. Islamic banking entities provided financing to the extent of OMR 1,049.5 million by the end of 2014 compared to OMR434.3 million a year ago. "Total customer deposits held with Islamic entities also registered a significant rise over the year to OMR688.9 million, while their capital and reserves amounted to OMR350.6 million as at the end of December 2014," the CBO report noted.
"There has been considerable increase in the number of branches and assets held by these entities. Islamic banks are opening up new segments and players and thus adding to the competitive environment not only in terms of efficiency and innovations, but by also providing the consumers the benefit of choosing between both conventional and Islamic banking products," the CBO report said, adding; "The total assets of Islamic banks and windows stood at OMR1,371 million at the end of December 2014, an increase of 68.2 per cent over the previous year-end," the report said.
MUSCAT: Profits of Oman's conventional banks showed a reasonable growth, thanks to better interest income on account of a robust growth in demand for credit, according to the Central Bank of Oman (CBO).
CBO in its annual report said that the combined net profit of Omani banks grew by 3.3 per cent to OMR362.9 million in 2014, from OMR351.3 million for the previous year. Of this, net profits of local banks amounted to OMR349.6 million (or 96.3 per cent), while that of foreign banks stood at OMR13.3 million (3.7 per cent).
The apex bank said that "the interest income from the core activities, including loans and advances, placements with banks and investments, remained the dominant component of bank earnings, accounting for 72.2 per cent of the total income of commercial banks in 2014." The rise in interest income to OMR881.2 million in 2014 from OMR841.1 million in the previous year was mainly due to the increased volumes of credit as well as larger levels of investment by banks. Total credit of commercial banks grew 11.3 per cent to OMR16.898 billion in 2014, from OMR15.177 billion recorded in the previous year.
Interest expenses, on the other hand, remained more or less unchanged, despite the significant deposit growth largely due to the decline in the weighted average interest rates paid on deposits by banks, which fell to 1.03 per cent last year, from 1.2 per cent in the previous year.
Net interest income
"The net interest income defined as the difference between interest income and interest expenses increased from OMR584.6 million in 2013 to OMR624.2 million in 2014, a rise of 6.8 per cent over the year," the annual report noted.
With the diversification of banks' portfolio, non-interest income has evolved as an increasingly important category of income for banks.
Income from foreign exchange operations posted a significant increase of 39.2 per cent to OMR47.7 million in 2014.
The CBO's annual report also said that fee based income such as commissions earned on letters of credit and guarantees, remittance fees and other transfers also rose significantly during the year to OMR83.3 million, a rise of 29.1 per cent over the previous year.
The operating expenses of commercial banks registered an increase of 7.3 per cent over and above the 11.1 percent growth recorded in the previous year. Operating expenses comprise broadly the wage bill and non-wage expenses such as rents paid, head office expenses, depreciation charges and other miscellaneous expenses in the form of travel, entertainment, legal charges and advertisement. The ratio of operating expenses to total expenses increased marginally from 61 per cent in 2013 to 62.5 per cent in 2014. The total wage bill increased by 11.9 per cent to OMR238.6 million from OMR213.4 million in the previous year.
Also, gross provisions earmarked for doubtful debts and contingencies inclusive of general provisions made last year increased from OMR105.6 million in 2013 to OMR124 million in 2014. Commercial banks provided OMR48.6 million as provision for taxes in 2014. Cash dividends paid out by local banks to their shareholders registered a marginal decline of 7.4 percent from OMR120.5 million in 2013 to OMR111.5 million in 2014, while stock dividends rose significantly by 49.2 per cent from OMR64.2 million to OMR95.8 million during the period.
Islamic banks cut losses
Also, Islamic banks and window operations of conventional banks reduced their net losses to OMR4.4 million in 2014, from OMR13.86 million for the previous year, according to the Central Bank of Oman. Islamic banking entities provided financing to the extent of OMR 1,049.5 million by the end of 2014 compared to OMR434.3 million a year ago. "Total customer deposits held with Islamic entities also registered a significant rise over the year to OMR688.9 million, while their capital and reserves amounted to OMR350.6 million as at the end of December 2014," the CBO report noted.
"There has been considerable increase in the number of branches and assets held by these entities. Islamic banks are opening up new segments and players and thus adding to the competitive environment not only in terms of efficiency and innovations, but by also providing the consumers the benefit of choosing between both conventional and Islamic banking products," the CBO report said, adding; "The total assets of Islamic banks and windows stood at OMR1,371 million at the end of December 2014, an increase of 68.2 per cent over the previous year-end," the report said.
© Times of Oman 2015
