Moody's Investors Service has upgraded the long-term foreign currency deposit ratings of BankMuscat (BM), National Bank of Oman (NBO), Oman International Bank (OIB) and Oman Arab Bank (OAB) to A3 with a positive outlook, from Baa1, and the long- and short-term foreign currency deposit ratings of Alliance Housing Bank (AHB) to Baa1/P-2 with a positive outlook, from Baa2/P-3, and the foreign currency senior unsecured debt rating of BM to A3 with a positive outlook, from Baa1. At the same time, Moody's has also upgraded the local currency senior debt ratings of BM to A3 with a positive outlook, from Baa1, and the long- and short-term local currency deposit ratings of AHB to Baa1/P-2 with a positive outlook, from Baa2/P-3.
These rating actions follow Moody's recent upgrade of Oman's foreign and local currency country ceiling for bonds and bank deposits to A3/P-2, with a positive outlook, from Baa1/P-2.
The upgrading of the deposit ratings for the five Omani banks and the senior unsecured debt rating of BM is based on the strong likelihood of support from the Omani authorities, should the need arise, combined with the improved capacity of the government to provide such support, as a result of the significant improvement in Oman's economic fundamentals over the past several years. Moody's believes that the four commercial banks -- BM, NBO, OAB and OIB -- are all very important institutions for the domestic banking system, and that a possible failure of any of them would lead to a systemic crisis. For this reason these banks' deposit ratings are placed at the ceiling for such deposits in Oman. Moody's believes that although AHB does not fall within the "too important to fail" category from a systemic perspective, the authorities would nevertheless provide support to the bank in the event of need, and thus a high degree of support is imputed in the ratings. However, we believe that such support might not be as timely or as certain as in the case of the larger commercial banks, resulting in the bank's ratings remaining one notch below the country ceiling for such deposits in Oman. In the past, the Omani authorities have supported domestic banks in difficulty although there is no explicit guarantee to do so, and Moody's does not anticipate any change in that policy over the medium term.
Nevertheless, any future upgrade of the rating ceiling for Omani bank deposits would not automatically result in a corresponding increase in any of the banks' ratings for deposits.
The ratings changes (by bank) are as follows:
- Alliance Housing Bank: The long- and short-term foreign currency deposit ratings upgraded to Baa1/P-2, with a positive outlook, from Baa2/P-3. The long- and short-term local currency deposit ratings upgraded to Baa1/P-2, with a positive outlook, from Baa2/P-3. The D-financial strength rating remains unchanged.
- BankMuscat: The long-term foreign currency deposit rating upgraded to A3 with a positive outlook, from Baa1. The long-term foreign currency senior unsecured rating upgraded to A3 with a positive outlook, from Baa1. The long-term local currency senior debt rating upgraded to A3 with a positive outlook, from Baa1. The outlook on the D+ financial strength rating remains positive.
- National Bank of Oman: The long-term foreign currency deposit rating upgraded to A3 with a positive outlook, from Baa1. The outlook on the D- financial strength rating remains positive.
- Oman Arab Bank: The long-term foreign currency deposit rating upgraded to A3 with a positive outlook, from Baa1. The D+ financial strength rating remains unchanged.
- Oman International Bank: The long-term foreign currency deposit rating upgraded to A3 with a positive outlook, from Baa1. The D financial strength rating remains unchanged.
At the end of September 2006, Alliance Housing Bank had total assets of OMR165.4 million (USD430.7 million); BankMuscat had total assets of OMR2.654 billion (USD6.912 billion); National Bank of Oman had total assets of OMR984.4 million (USD2.564 billion); Oman Arab Bank had total assets of OMR493.1 million (USD1.284 billion); and Oman International Bank had total assets of OMR917.4 million (USD2.389 billion). All banks are headquartered in Oman.
