The Sultanate's banking sector continues to maintain strong performance aided by higher credit growth, increasing contribution from non-interest income and stabilising asset quality.

Total income of the banks listed on the Muscat Securities Market grew by 9.1 per cent year-on-year basis at RO 158.724 million. On a sequential basis, the total revenue grew by 7.6 per cent led by stabilising margins and higher contribution from fee and commission income during the first quarter of 2012.

While the earnings for the period increased by 16.3 per cent year on year to RO 65.696 million, the net profit saw an increase of 12.6 per cent on a sequential basis. Yet the listed banks in Oman had been underperformers in the secondary market since the beginning of the year owing to expectations of lowering interest margins, impending competition from Islamic banks and concerns thanks to over-capitalisation levels in terms of lower return ratios in the short-term.

Due to various regional and global factors, the banking sector in general has been facing pressure on Muscat Securities Market. Expectations of lower margins owing to pressure on interest spread, impending competition from Islamic banks have all contributed to this.according to Said al Badai, DGM, Branches, BankMuscat.

The correction in stock prices has proved beneficial as a buying opportunity, hence the BankMuscat share is expected to touch fair value levels and trade at good volumes, he says. According to Gulf Baader Capital Market (GBCM), the overall credit addition to the sector during the same period stood at RO 626.5 million, registering a year to date growth of 5 per cent, the highest level of quarterly addition in the sector in absolute terms.

Total deposits of the sector had increased by RO 479.8 million during the quarter, reporting an increase of 3.8 per cent for the year led by higher level of growth in private sector and Government deposits. 'The banks took efforts in mobilising low cost deposits and also lowering the high cost term deposits. This is reflected in the stronger growth rate of 10.8 per cent year to date in saving and demand deposits' Gulf Baader analysts say.


According to figures available from the GBCM research report, the combined market share of top three banks — BankMuscat, NBO and BankDhofar — stood at 60 per cent levels as compared to about 76 per cent levels seen during the last fiscal year. The market leader, BankMuscat added about RO 178.5 million to its gross loan book during the quarter, an increase of 3.6 per cent year to date. While the same is lower than the addition of RO 253.611 million during final quarter.

The market share of BankMuscat in new loan book addition for Q1 2012 is at 27 per cent of the total addition. The total income growth of the bank stood at about 3.5 per cent year on year, while net profit grew by higher 20 per cent. Said al Badai says: 'Oman is expected to witness 15 per cent credit growth and the bank is adopting optimistic growth strategies to sustain profit margins. Even as the bank is committed to fulfilling its social responsibility in meeting the financial requirements of citizens and residents, the cost of funding is lower which will help maintain the profits margins. The prevailing strong liquidity in the market is expected to facilitate this. The bank continues to focus on low-cost deposits which will help to maintain the lower cost of funding'.

Meanwhile, National Bank of Oman continued its stronger performance with the higher market share in loan book during the quarter. The total credit addition of the bank is at RO 124.9 million, an increase of 7.2 per cent year to date. The market share of the bank in incremental loan addition is at 20 per cent levels. The total operating income of the bank for the quarter grew by 17.7 per cent.
BankDhofar showed steady asset addition. The loan book growth of the bank for the last quarter is at RO 85.9 million, reporting an increase of 5.5 per cent year to date. The market share in new addition stood at about 13.7 per cent levels. At the same time, ahlibank reported credit growth of about RO 60.5 million — an increase of 7.8 per cent sequentially. Operating income of the bank increased by 48 per cent year on year led by higher growth and increasing contribution from the non interest income. While the earnings for the quarter jumped 46.9 per cent.

The loan book of Bank Sohar grew by about 3.6 per cent during the first quarter, which is lower than the industry growth. Operating income of the bank increased by 26.4 per cent, while the profit increased by 74 per cent on back of low base in last year along with higher non interest income and lower provisioning requirements. Oman International Bank (now HSBC Bank Oman) saw its operating income dropping by 3.6 per cent, while the earnings have declined by 49 per cent for the year due to higher provisioning requirements.