Standard & Poor's (S&P) has raised the long-term rating of BankMuscat to 'A-' from 'BBB+' and affirmed the 'A-2' short-term rating. The ratings also reflect BankMuscat's 'BBB' anchor, as well as its strong business position, strong capital and earnings, moderate risk position, average funding and adequate liquidity.
Abdulrazak bin Ali bin Issa, CEO of BankMuscat said that raising the long-term rating of BankMuscat is yet another affirmation of its robust performance, competitive advantage and stability. "The S&P rating upgrade, achieved during challenging situation, will further promote investor confidence and improve the overall performance of the bank, marked by positive management and corporate strategies," he said.
The long-term rating is one notch higher than the Bank's stand-alone credit profile as S&P has classified the bank as having high systemic importance in the sultanate. The stable outlook reflects S&P's expectation that BankMuscat will remain the dominant player in Oman and experience no significant changes to its business and financial profile over the next two years.
"The assessment of BankMuscat's business position is supported by its well-established franchise in the sultanate, where it is the leading player and has a 40 per cent market share. Oman's economic activity is largely based on infrastructure-related project financings. As a well-established bank, BankMuscat benefits from this activity. Its core earnings have remained fairly stable in the recent downturn, especially compared with many peers in the Gulf Cooperation Council (GCC)," S&P noted.
S&P assesses the bank's capital and earnings as 'strong'. This mainly reflects the expectation that the risk-adjusted capital (RAC) ratio before adjustments will remain slightly above ten per cent for the next 18-24 months and that the quality of capital is high, backed by a strong revenue stream. Under the base-case scenario, S&P expects the bank's core earnings to benefit from relatively buoyant loan growth and strong margins, although this is expected to put pressure on capitalisation.
"The Bank's cost of risk has stabilised and will remain below one per cent of loans over this period," S&P noted.
© Muscat Daily 2011
