Friday, 15 September , 2017     |     1975      |      +      |     

Moody’s downgrades Oman banking outlook

Moody’s downgrades Oman banking outlook :
  • Gulf News

Moody’s Investors Service is downgrading its outlook on Oman’s banking from stable to negative, it announced on Tuesday.

It is changing its outlook to reflect “a reduction in the government’s capacity to support the country’s banks owing to fiscal deterioration”, it said.

The outlook is also being changed on account of softer economic growth and tight liquidity conditions in the region.

On July 28, Moody’s also downgraded to negative its outlook on the Omani government’s credit rating, against a weaker overall operating environment.

This is having a detrimental impact on credit growth, which Moody’s forecasts will fall to 5 percent in 2017, from 10.1 percent in 2016 and 12 percent in 2015.

“We expect a softening in Oman’s operating environment, with fiscal consolidation amid prolonged oil price weakness weighing on economic growth,” said Mik Kabeya, an analyst at Moody’s.

Slower economic growth will drive a marginal weakening in problem loans to around 3 percent of gross loans in 2017-2018, from 2.1 percent at the end of March, Moody’s latest report states.

A high concentrations of loans to single borrowers and to the real estate sector pose particular downside risks to asset quality, it adds. Profitability will decline slightly, although net interest margins will likely remain stable at around 2.4 percent over 2018.

Moody’s said it expects capital to remain sound, providing strong loss absorbency.

However, funding and liquidity conditions are expected to remain tight, it said, as high domestic government borrowing limits funds available to lend to the wider economy.

The Omani government’s recent international bond issuances, as well as slightly higher oil prices and slower credit growth will moderate the pressure, the report said.

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Category: #Gulf News, #Oman | 2017/09/15 latest update at 12:00 AM
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