Omani banks report higher profits

Omani banks boosted their net profits by around seven per cent in the first half of 2011 as they took advantage of high oil prices and better economic conditions to expand credit to the private sector, according to official data.

Net earnings by the country’s commercial banks stood at RO119 million ($308 million) in the first six months of 2011, an increase of about seven per cent over the same period of 2010, the central bank of Oman said in its monthly report.

Assets peaked at nearly RO16.34 million compared with RO15.2 million, an increase of nearly 7.2 per cent in the same period.

The report showed credit to the private sector surged by about 8.6 per cent after a period of stagnation in the wake of the 2008 global fiscal crisis and regional debt default problems. But credit to the government remained dormant, growing by only around two per cent. Lending to public establishments rocketed by nearly 62.4 per cent, the report said without giving further details.

Total credit stood at RO11.45 billion at the end of June while deposits swelled by 12.9 per cent to RO11.15 billion, including nearly RO7.3 billion in private deposits, according to the report.

Like in most other Gulf oil producers, banks in Oman have recovered and started to record higher profit growth against the backdrop of surging oil prices and accelerating growth. Although credit has remained relatively low compared with the 2007-2008 peak period, it started to pick up this year as regional economies continued their recovery and banks set aside sufficient provisions.

In the first quarter of 2011, banks in the six-nation Gulf Cooperation Council (GCC) recorded a 25 per cent increase in net profits compared with the fourth quarter of 2010, indicating the region’s banking sector is back on track after more than two years of uncertainty. The income also swelled by about 11.5 per cent in the first quarter compared with the first quarter of 2010.

“Growth in GCC banks’ profits was not supported by the top line, as the net interest income of the banks showed a minimal decrease of about 0.7 per cent in the first quarter compared with the previous quarter,” Kuwaiti-based Global Investment House said in a recent study.

“Yet on a yearly basis, the top line has showed an increase of 5.4 per cent. In the first quarter of 2011, Omani banks witnessed the largest growth of 11.8 per cent compared with the previous quarter as a result of the 24.1 per cent increase in net interest income of Bank Muscat.”

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