Published: Jul 08, 2014
Source: Muscat Daily

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CI raises NBO's financial strength rating to BBB+

International credit rating agency Capital Intelligence (CI) announced that it has raised National Bank of Oman’s (NBO) financial strength rating to ‘BBB+’ supported mainly by its improved liquidity position and large base of customer deposits. 

Capital Intelligence said the rating is also underpinned by the sound capital adequacy ratio of the bank, together with a high tier-1 component and its good loan asset quality. “While non-performing loans (NPLs) have increased in both 2013 and first quarter 2014, these remained fully covered by loan-loss reserves.”

“The rating also reflects the bank’s well established franchise and its good market share, as well as its supportive major shareholder who continues to provide funding support by way of a standby letter of credit,” CI said in a statement.

It said the rating is, however, constrained by NBO’s declining net profitability, its low internal capital generation and concentrations in both its loan and deposit bases, although the latter is in common with the sector.

The ratings agency also said that given the sound financial profile and the good economic prospects of Oman, NBO’s foreign currency ratings are affirmed at ‘BBB+’ long term and ‘A2’ short term, with a ‘stable’ outlook. Capital Intelligence has maintained NBO's support rating at ‘3’ underpinned by the strong likelihood of support from the government of Oman.

NBO remained the second largest bank in terms of assets in Oman at end-2013 and at the end of the first quarter of 2014. It has a long established franchise and commands a good share of both the loan and deposit markets in Oman.

Capital Intelligence said, “A major strength of the bank is its strong deposit-gathering capability, which is supported by its large network. The exceptionally high growth of customer deposits in the first three months of this year has significantly boosted the bank’s overall liquidity position to among the best in the sector.”

“Liquid asset metrics also rose to high levels, as a large proportion of surplus funds were invested in certificates of deposit (CDs) with the Central Bank of Oman. Loan based ratios also moved to very comfortable levels, given the slow loan growth in the first quarter of 2014.”

While loan asset quality had slipped slightly in both 2013 and the first quarter of 2014, with an increase in NPLs, the bank’s more than full loan loss coverage position was maintained.

“The bank remains adequately capitalised in the period under review, although its internal capital generation was weaker, given its fairly generous dividend payment compared to its peers. The total capital to total assets ratio, on the other hand, remained good and was near the peer group average,” CI added.

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