Oman’s bank credit grows 8% to OMR18.3b

Muscat: Oman’s commercial banks have achieved a robust 8.39 per cent growth in total credit at OMR18.32 billion for 2015, from OMR16.90 billion for the previous year, according to the latest monthly statistics released by Central Bank of Oman.
The incremental credit growth in 2015 was OMR1,418 million, which was a reasonable growth considering the prevailing low oil prices.
“The credit growth is relatively strong, despite the (difficult) economic environment,” said KanagaSundar, head of research at Gulf Baader Capital Markets.
The pipeline of credit was strong, but this growth is expected to continue at a slower pace this year. There will be an anticipated demand for credit from both government and quasi-government entities towards project funding. There was a robust retail demand for credit last year, which may slowdown this year.
The demand for credit from the corporate sector is mostly for funding projects, which are either state-owned entities like Oman Oil Refineries and Petroleum Industries Company (Orpic) or semi-government-related entities.
Orpic has already signed major deals for funding its $6.4 billion-Liwa Plastics Industries Complex with international, regional and local banks. Major real estate projects, including hotels and resorts, are also driving demand for credit.
Deposit growth
Total deposits of Omani banks rose moderately at 3.44 per cent or OMR598.8 million last year to OMR17.87 billion by the end of 2015 from OMR17.28 billion for the same period of previous year.
Deposit growth in Oman and other Gulf countries are showing a slowdown mainly due to the fact that government and government-related entities have been withdrawing their deposits from banking institutions in view of low oil income, which started affecting liquidity.
“The market liquidity was tight in the second half of 2015, on the back of low oil prices. The incremental deposit addition was considerably lower since there was a considerable reduction in the inflow of deposit from (Oman) government in the second half. The government is still a major borrower,” noted Sundar.
The dearth in liquidity also started affecting interest rates across the board, which include both deposit rates and lending rates.
Oman has seven conventional banks — Bank Muscat, National Bank of Oman, BankDhofar, HSBC Bank Oman, Bank Sohar, Oman Arab Bank and ahlibank.
Total assets of commercial banks by end-2015 touched OMR28.19 billion, showing a marked growth of 13.57 per cent over the same period last year.
Sundar said that the cost of bank funds would increase this year, resulting in an increase in interest rates. This is mainly due to a dearth in liquidity and external factors like an increase in US Federal rates.