CI Ratings said that the Sultanate’s prudent regulatory environment is a supporting factor for the ratings.
Tuesday 21, May 2019 BY KUDAKWASHE MUZORIWA
CI Ratings has affirmed its BBB- long-term foreign currency rating (FCR) of Bank Muscat, National Bank of Oman (NBO) and Oman Arab Bank (OAB) with a stable outlook.
The rating agency stated that the stable outlook balances challenges relating to slower economic growth and still elevated credit risk against the Omani banking sector’s good financial position, sound risk management as well as prudent lending policies.
Bank Muscat, NBO and OAB’s FCR are set one notch above bank standalone ratings (BSR) of bb+, reflecting the moderate likelihood of official extraordinary support given the lenders’ position in the country, with well-established franchises and sizeable government shareholding as well as the government’s strong track record of providing assistance to the sector in need.
Additionally, the banks’ ratings are said to be driven by solid and strengthening capital ratios, sound loan asset quality metrics as well as large customer deposit base and resilient profitability ratios.
CI Ratings said that Bank Muscat has a good credit risk absorption capacity and its strong capital position would provide an additional buffer in the event of a significant weakening of asset quality.
Similarly, NBO’s ratings are supported by the bank’s generally sound financial metrics and performance, in particular, the solid capital position as well as sound liquidity and resilient profitability metrics, while OAB’s ratings are supported by the bank’s solid capital position, comfortable liquidity and resilient profitability.
However, the rating agency said that the Sultanate banking sector’s main challenges are due to the difficult operating environment, given that the economy and the public finances remain negatively impacted by low oil prices as well as elevated credit risk due to ongoing delays in payments by the government and the lagged effect of slower economic growth on asset quality.