Moody’s upgrades outlook on six Omani banks to positive from stable

Muscat: Moody’s Ratings (Moody’s) on Wednesday affirmed the long-term local and foreign currency deposit ratings of six Omani banks: Bank Muscat (Bank Muscat), Bank Dhofar (Bank Dhofar), National Bank of Oman (NBO), Sohar International Bank (Sohar International), Oman Arab Bank (OAB) and Bank Nizwa (Bank Nizwa).

The rating agency We has also upgraded the outlook to positive from stable on the long-term deposit ratings of the six Omani banks. At the same time, it has also affirmed the Baseline Credit Assessments (BCAs) and Adjusted BCAs of all six banks.

Bank Muscat’s long-term local and foreign currency deposit ratings were affirmed at Ba1 and its BCA and Adjusted BCA at ba1. The bank’s long-term deposit and senior unsecured debt ratings continue to be aligned with the ratings of the Government of Oman.

Moody’s also affirmed Sohar International’s long-term local and foreign currency deposit ratings at Ba1 and its BCA and Adjusted BCA at ba3. Sohar International’s long-term deposit ratings is aligned with the ratings of the Government of Oman.

For NBO, Moody’s affirmed long-term foreign and local currency deposit ratings at Ba1 and the bank’s Adjusted BCA and BCA at ba2 and ba3 respectively. NBO’s long-term deposit and senior unsecured MTN program ratings remained aligned with the ratings of the Government of Oman.

Moody’s also affirmed Bank Dhofar’s long-term local and foreign currency deposit ratings at Ba1 and its BCA and Adjusted BCA at ba3. Bank Dhofar’s long-term deposit ratings continue to be aligned with the ratings of the Government of Oman.

For OAB,  Moody’s affirmed its long-term local and foreign currency deposit ratings at Ba1 and its Adjusted BCA at ba2. It also affirmed its BCA at ba3. OAB’s long-term deposit ratings continue to be aligned with the ratings of the Government of Oman.

Moody’s also affirmed Bank Nizwa’s long-term foreign and local currency deposit ratings at Ba1 and its BCA and Adjusted BCA at ba3. Bank Nizwa’s long-term deposit ratings continue to be aligned with the ratings of the Government of Oman.

“The change in outlook on the long-term deposit ratings to positive at the Omani banks reflects the change in outlook to positive on the sovereign rating, for some banks the potential for improvement in the operating environment. An upgrade in the sovereign rating could potentially result in higher government support benefit for the banks’ ratings,” Moodys said in a statement.

The affirmation of the banks’ BCAs reflects the fact that their financial fundamentals and performance remain compatible with the current level, following the affirmation of the sovereign rating at Ba1. Bank specific drivers for the ratings affirmation are provided below.

The affirmation of the deposit ratings takes into consideration the affirmation of the BCAs and our opinion regarding the government’s willingness to provide support to banks in case of need, which is very high for all banks. The level of government support is driven by the importance of these banks in the domestic financial system and the significant government shareholdings and deposits in several banks.

The ratings could be upgraded if there was a material improvement in the sovereign’s credit profile and, for some banks, in the local operating environment. All the Omani banks could benefit from a higher level of support in case of a sovereign rating’s upgrade.

The positive outlook on the long-term deposit ratings indicates a downgrade in the near term is less likely. However, downward pressure on Omani banks’ ratings could develop through deterioration in the sovereign’s credit profile, or a material deterioration in the banks’ solvency and liquidity.