Local banks claw back losses

25 April 2003
The sultanate's banking sector enjoyed better times in 2002, with the aggregate profits of the big five local lenders improving sharply after the disappointments of 2001. BankMuscat was the strongest earner, posting profits of RO 22.9 million ($57 million), up from RO 7.8 million ($19.5 million) the previous year. The bank, which is understood to be eyeing merger opportunities in the UAE and India, also grew its balance sheet by more than 14 per cent to just over RO 1,542 million ($3,855 million).

Oman International Bank (OIB), established in 1975 and the oldest of the local banks, also improved its profit and loss statement, which was severely eroded by the increases in bad loan provisioning enforced on the sector in 2001 by the Central Bank of Oman (CBO). The bank's profits bounced back to RO 18.5 million ($46 million) from a slump of RO 1.9 million ($5 million) the previous year.

OIB boosted its bottom line mainly by recovering some of the bad debt already on its books and also by significantly reducing the level of provisioning. The bank recovered RO 8.8 million ($22 million) in impaired loans, compared with RO 1.8 million ($4.5 million) the previous year. According to the CBO, tighter credit administration among the banks was a major factor in reducing non-performing loan (NPL) levels.

Lending across the sector recorded only a marginal increase - up by less than 1 per cent to RO 3,270 million ($8,175 million).

'Banks are lending again but prudently,' CBO executive president Hamood Sangour al-Zadjali told MEED in mid-April. 'Much of the additional provisioning required last year to cover non-performing loans has been absorbed and banks have plenty of excess liquidity. We are now helping banks dispose of some of this through government-held certificates of deposit.'

However, shareholders in some institutions, such as National Bank of Oman (NBO), will have to wait another year before they can expect to see a dividend. The bank, which has suffered heavily from a number of major corporate defaults, slashed its losses to RO 262,426 ($656,065), from RO 7.5 million ($18.7 million) the previous year but continues to be plagued by NPLs. NBO, which has been the subject of some takeover speculation, has ongoing problems with its Egyptian satellite operation (Banking & Finance, MEED Special Report, 13:12:03, pages 33-35).

Talk of another merger in the local banking sector has intensified since the amalgamation of Bank Dhofar al-Omani al-Fransiwith the smaller Majan International Bank. The merger, approved in November, was finalised in March. All future financial reporting will see Majan's figures consolidated within those of Bank Dhofar.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications