Oman Q1 bank loans grow at slowest pace in four years

Oman bank lending grew at its slowest pace in almost four years in the first quarter at 2.1 per cent with banks extending fewer loans to the government and public companies, central bank data showed yesterday.

Across the Gulf Arab region, banks have become more cautious about extending new loans during the global recession, leading to either gradual declines in bank lending or a slowdown in credit growth.

In Oman, total credit of commercial banks grew 2.1 per cent in the first three months of 2009 compared with the end of last year, according to data released by the central bank in a quarterly bulletin.

That is down from quarter-on-quarter growth of 6.9 per cent in the fourth quarter and was the slowest quarterly growth since the second quarter of 2005.

The decline happened as bank credit to public enterprises eased 2.8 per cent to OR455.9 million (Dh4.35 billion) and loans to the government fell 26.2 per cent to OR20.8m.

Lending to the private sector – which has witnessed a decline in Saudi Arabia, Kuwait and Bahrain – grew 2.5 per cent in the three-month period, down from expansion of 6.9 per cent in the fourth quarter, the data showed.

Banks across the world's biggest oil-exporting region have been taking provisions to guard against an expected rise in bad loans after the financial crisis brought to a close a regional economic boom late last year.

Total loans by Omani banks had doubled in the last year as banks rode a wave of economic growth spurred by an oil price rally to record levels of almost $150 last summer.

Year on year in March, bank credit growth of 29.7 per cent was the slowest since October 2007.

Deposits at Omani banks rose to OR8.65bn on March 31 from OR8.58bn at the end of the December, the central bank added.

The central bank said its foreign assets declined 3.5 per cent in March from the month earlier on a decline in securities and placements abroad.

Total foreign assets of the Gulf state's central bank fell to OR4.43bn on March 31 compared with OR4.59bn at the end of February, the central bank said in a quarterly report on its website.

Month on month, placements abroad declined 10.9 per cent to OR935.6m while holdings of securities eased 1.3 per cent.

The foreign assets were still up 34.4 per cent in March from the year earlier.

However, Omani money supply growth slowed for a fifth month to 13 per cent in March, its lowest level in almost four years, while central bank foreign assets posted a month-on-month decline, official data showed.

Money supply measured as M2 stood at OR7.59bn ($19.73bn) on March 31 compared with OR6.71bn a year earlier, the central bank said in a quarterly bulletin.

That marked the slowest pace of annual money supply growth since July 2005.

Money supply fell 0.6 per cent from February as quasi money – which includes time and savings deposits, margins and foreign currency deposits – eased 0.9 per cent to OR5.4bn.

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