Standard & Poor (S&P)'s has assigned its BBB- long-term and its A-3 short-term counterparty credit and certificate of deposit ratings to Oman-based BankMuscat. The outlook is stable, stated a press release.
These are the first full interactive ratings assigned to an Omani bank by S&P's. At the same time, the rating agency withdrew its BBpi rating on the bank. "The ratings on BankMuscat reflect the bank's dominant commercial position in Oman, good earnings profile, and improving asset quality and capitalization," said S&P's credit analyst Emmanuel Volland.
"They also reflect controlling ownership by the Government of Oman. Standard & Poor's considers that the bank's importance to the economy, its ownership structure, and status of flagship bank, mean that government support in times of difficulty would most likely be available," he added.
The ratings are constrained, however, by the small and concentrated Omani economy, the bank's partial reliance on wholesale funding, and high loan leverage.
BankMuscat is the leading bank in the small financial sector of Oman, achieving a market share of about 35 percent in loans and deposits. The bank is strengthening its franchise and reducing reliance on its small home market through selective domestic and cross-border acquisitions. In line with this strategy, it purchased a small domestic commercial lender, the Industrial Bank of Oman (IBO) in 2001, the branch of ABN AMRO in Bahrain and a local broker in 2002, and a 26 percent stake in a small private bank in India in 2003. The bank’s operations outside Oman represent about 10 percent of the bank's assets and revenues.
The stable outlook largely reflects that on the Sultanate of Oman. "BankMuscat is expected to retain its leading commercial position and adequate financial profile, with no major change in its shareholding structure," said S&P's credit analyst Anouar Hassoune. The future direction of the ratings will largely depend on the evolution of the macroeconomic environment of Oman, as well as the bank's asset quality and capital policy.
"The ratings could be raised if the bank improves its capital adequacy through further capital increases or a reduction in risk assets, or due to improvements in the external economic environment," he added. If capital ratios reduce significantly in the medium term or asset quality deteriorates, the ratings would be pressured downward. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
