Many Gulf banks are likely to be hurt by loan defaults by Saudi Arabia's Saad and Algosaibi groups, Oman's Central Bank Governor said yesterday.
Oman's biggest bank, Bank Muscat, and its unit in Bahrain are owed a combined OR66 million rials (Dh627m) by the two groups, which announced plans to restructure debt, Bank Muscat said on Thursday. Bank Muscat said the obligations were taken on through its Riyadh branch.
"Maybe there are many banks in Gulf countries and Saudi Arabia which are owed money because this group was a very large conglomerate," said Governor Hamud bin Sangur Hashim Al Zadjali in Abu Dhabi yesterday. "Regarding Bank Muscat, we follow a very transparent policy in Oman, so any bank, any institution whose shares are being traded in equity markets have to declare any major impact on their operations."
He said: "It [Bank Muscat] could be one of the least exposed banks in the region," he said.
Analysts expect a large number of banks to eventually reveal exposure that could lead them to make provisions on lending to the two, big family conglomerates, both of which are restructuring debt.
Sanjay Uppal, Chief Financial Officer of Emirates NBD, the Gulf's biggest bank by assets, declined to comment on whether it had exposure to the Saudi groups.
Bank Muscat is the only Gulf bank to announce its exposure to date.
When asked about the exposure of other Omani banks to the Saudi groups, Zadjali said: "No idea yet. As of now, only Bank Muscat, but in the banking world there could be intra-bank dealings."
Saad Group, owned by Maan Al Sanea, the Saudi billionaire who holds a stake in HSBC Holdings, said earlier this month that it is restructuring debt because of tighter credit markets.
The Saudi central bank ordered the Kingdom's banks to freeze the accounts of Al Sanea, people familiar with the instructions said last month.
Saudi Arabia's Ahmad Hamad Algosaibi & Brothers, whose Bahrain-based The International Banking Corporation defaulted last month, said it found "substantial irregularities" at its financial services unit.
The Middle East Economic Digest in May said that the Saudi family-run group had defaulted on $1 billion including foreign exchange transactions, trade finance loans and swap agreements.
Two of Saad Group's companies have $5.5bn in short- term credit facilities, according to Moody's Investors.
UAE Central Bank Governor Sultan Nasser Al Suwaidi echoed those comments, saying banks in the world's third-largest oil exporter had exposure, which was a cause for concern.
The central bank also advised lenders not to offer any new credit to Algosaibi Trading Services, Ahmad Hamad Algosaibi & Brothers, Maan Al Sanea and Saad Trading & Contracting.
Oman to issue bonds
Oil exporter Oman plans to issue bonds worth between OR50 million and OR80 million (Dh476m-Dh760m) to help finance development programmes, the country's central bank chief said yesterday.
Oman posted a 56 per cent drop in net oil revenues in the first three months of 2009 as oil prices weakened and forced the Gulf state to turn a deficit to sustain 10-per cent growth in public spending.
"There will probably be one issue of the government in the second half of this year," said Central Bank of Oman Governor Hamud bin Sangur Hashim Al Zadjali on the sidelines of a conference in Abu Dhabi. "The size is between OR50m and OR80m... we issue on behalf of the government and it is for funding development programmes," he said without elaborating.
States in the world's biggest oil-exporting region, heavily reliant on income from oil and gas exports, have witnessed sharp drops in earnings this year as oil prices tumbled to the mid-$30 a barrel range.
Oman had projected a $2.1 billion budget deficit for 2009 based on an average oil price of $45 a barrel. Oil traded at around $71 a barrel yesterday, rising from around $51 at the end of April.
"This year it is the first and only bond. An earlier bond of OR80m is maturing in the second half of this year," said Zadjali.
On Sunday, the UAE said it plans to launch an inaugural bond issue to meet infrastructure and other costs. States and corporates in the Gulf raised more than $15bn in bonds in the past four months and are eyeing more issues as spreads narrow and demand rises for high-rated debt. (Reuters)
Sultanate to stay out of GCC monetary union
Oman said yesterday it would stay out of a landmark monetary union to be launched by four other Gulf oil producers.
Omani Central Bank Governor Hamud bin Sangur Hashim Al Zadjali said the country was still sticking to its decision not to join the currency union, which is preliminary scheduled for 2009.
"There is no change in this policy… we have taken a decision not to be part of the monetary union and are still sticking to this decision," he said after a meeting of four Arab Central Banks at the Arab Monetary Fund in Abu Dhabi.
Oman announced it was quitting the monetary union planned by the Gulf Co-operation Council states two years ago, saying it was not ready for this scheme at present. The UAE followed suit last month but its decision was apparently prompted by the choice of Riyadh as the location of the GCC Central Bank.
Gulf officials said they are still pushing ahead with the world's second monetary union despite the withdrawal of the UAE and Oman.
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