OMAN: The Sultanate
of Oman, which was recently afforded an ‘A1’ rating by Moody’s due to the
government’s solid financial position supported by a robust growth
outlook, is seeing a healthy expansion of its banking sector attributed
considerably to the growth of its Shariah compliant banking industry.
Central bank figures show that the Omani banking sector has registered an
increase in the areas of deposit and credit extension: For the period
until the end of July 2014, aggregate deposits held with commercial banks
accrued by 15.9% year-on-year to reach OMR17.2 billion (US$44.54 billion)
while combined banking credit charted a 12.8% increase in the 12 months
until June 2014, parallel to the growth in deposit base over the same
period.
Leading the positive growth story are the country’s six conventional
banks: Ahlibank, Bank Dhofar, Bank Muscat, Bank Sohar, National Bank of
Oman and HSBC Bank Oman, all of which (except HSBC Bank Oman) offer
Islamic financial products through their Islamic windows. These banks
(which account for almost 88% and 96% of total commercial banks’ credit
and deposit, respectively, according to Al Maha Financial Services) show
that their Shariah compliant business has outperformed their conventional
counterpart with income from Islamic financing more than doubled to OMR14.4
million (US$37.29 million) for the first six months of the year while
non-interest income was up 18.1% against the 1.2% growth in interest
income as compared to the corresponding period last year. This growth has
supported the overall operating income growth of the six banks which
counted 6.7% year-on-year.
The two Islamic banks in Oman – Alizz Islamic Bank and Bank Nizwa –
however may not be able to boast such positive success stories as they
both recorded net losses for the first half. Yet, while not reporting
profits for the period ending the 30th June 2014, the banks
have nonetheless demonstrated improved performance in some areas. Alizz
Islamic Bank managed to grow its market share both in the retail and
corporate segments, increasing its financing portfolio to OMR27 million
(US$69.92 million) as compared to the OMR20 million (US$51.8 million) in
the previous quarter while expanding its deposit base to OMR5 million
(US$12.95 million); and the bank plans to launch another four new
branches before the end of 2014. Bank Nizwa on the other hand had managed
to cut its losses by more than half during the first six months of 2014:
from a OMR9.75 million (US$25.25 million) loss in the first half of 2013,
Bank Nizwa was able to moderate its negative earnings to OMR3.9 million
(US$10.1 million) as it saw revenues for the period more than quadrupled
to OMR3.43 million (US$8.88 million) from OMR707,805 (US$1.83 million)
the year before.
With a resilient banking sector, the Omani banking landscape is looking
to continue on its positive trajectory with industry observers noting
that Islamic financial operations coupled with a buoyant market condition
would play a major supporting role.
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