Credit growth of Oman's banking sector slows

Oman's banking sector last year recorded a weakness in lending activities.


With a slowdown in economic activity and tight liquidity conditions, Oman's banking sector last year recorded a weakness in lending activities. Bank credit growth fell to just 3 per cent in 2019 from more than 6 per cent in the previous year.

Total outstanding credit provided by the banking sector increased to RO25.83bn in November 2019, an increase of 3 per cent compared to RO25.07bn recorded a year ago, according to statistics released by the Central Bank of Oman. Among all the listed banks, for the full year 2019, larger ones witnessed either a muted growth or decline in total credit offtake whereas smaller banks have been able to register better growth in lending. The steepest rise in credit was reported by Ahlibank.

The bank's net loans, advances and financing recorded a growth of nearly 10 per cent to RO2.05bn in 2019 as against RO1.87bn in the previous year. Sohar Intentional reported a 9 per cent rise in net loans, advances and financing to RO2.45bn in 2019 as compared to RO2.25bn in 2018.

Similarly, HSBC Bank Oman also reported around 8 per cent growth in net loans and advances at RO1.5bn for the year 2019 from RO1.39bn in the previous year. 'The sector remained resilient in spite of slower credit growth, volatile market conditions and tightening liquidity conditions. With anticipated improvement in economic conditions in 2020, the banking sector is likely to continue on growth trajectory,' Ahlibank said in its yearly report filed to the Muscat Securities Market (MSM).

Oman's largest financial institution Bank Muscat reported a 0.7 per cent decline in net loans, advances and financing to RO8.88bn in the end of 2019 as against RO8.94bn a year ago. In its company report submitted to the MSM, Bank Muscat said that the decline in net loans and advances is primarily due to the prepayment of certain large corporate exposure in 2019.

According to a Gulf Baader Capital Markets (GBCM) report, the management of Bank Muscat had their annual results conference call on Tuesday to discuss the bank's 2019 performance and outlook for 2020. 'Oman's banking sector lending growth to remain about 4-6 per cent levels in 2020 higher than the growth rates seen in 2019 amidst demand from project financing and select retail lending opportunities.

Management of Bank Muscat estimates their credit growth to be in line with the market during 2020. The growth is expected to be from diversified sectors of the economy driven by the proposed investment spending of RO5.3bn in the current fiscal year.'

Bank Dhofar also reported a decline of 3 per cent in total credit in 2019 at around RO3.06bn from RO3.16bn in the previous year. Following the trend, National Bank of Oman (NBO) also reported a marginal decrease of less than one per cent in net loans, advances and financing at RO2.8bn in 2019 compared to RO2.81bn in the end of 2018. 'The sector however continues to operate in a difficult environment.

Liquidity pressure has not eased, resulting in higher cost of funds and asset quality issues are forcing banks to further tighten their underwriting norms,' NBO said in its yearly financial report to the MSM.

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