Fitch said that the rating action follows the impact of the sovereign downgrade on the Omani banking sector operating environment.
Sunday 24, March 2019 BY KUDAKWASHE MUZORIWA
Fitch Ratings has downgraded National Bank of Oman (NBO), Sohar International Bank (SIB) and Bank Dhofar’s long-term issuer default rating (IDR) to BB from BB+ with a stable outlook.
Additionally, the rating agency also downgraded Bank Muscat’s long-term issuer default rating (IDR) to BB+ from BBB- also with a stable outlook.
In a statement, Fitch said that some of the factors behind the sovereign downgrade also negatively impacted their assessment of the operating environment, which implies that it will be more challenging for the banks to execute their strategies.
Fitch removed all the four from rating watch negative (RWN).
Oman’s ability to provide support to banks has also diminished, hence the downward revision of the support rating floor (SRF).
The Sultanate’s undiversified and narrow economy is correlated with government spending and initiatives, this will reflect on the bank's intrinsic strength through lack of lending opportunities, corporate balance sheets' weakening, and consumer vulnerability.
The lenders’ operations are primarily in Oman, a market that is less stable and resilient to economic shocks than it was previously.
Moody’s downgraded Oman to Ba1 from Baa3, S&P has Oman at BB, two levels below investment grade and Fitch Ratings has it at one level below investment grade.
Similarly, CI Ratings expects the operating environment to remain challenging for the lenders, with loan growth prospects likely to be dampened by slowing economic expansion and ongoing high credit risk.
Oman is delaying the implementation of reforms and rating agencies are saying that the government is facing challenges to introducing new non-oil revenue measures as well as controlling expenditure, especially in a weak growth environment, given the Sultanate’s social stability objectives and the desire to preserve the current level of living standards for citizens.