Muscat - Credit offtake at the six listed commercial banks in Oman grew by ten per cent in the first quarter of 2014, indicating an upswing in both corporate as well as retail loans.
Total lending by listed banks rose to RO13.56bn from RO12.33bn a year ago, according to the financial statements of the banks. Market experts expect credit growth of over ten per cent for the full year 2014, against a six per cent rise last year.
Deposits with banks rose 13.3 per cent to RO15.46bn in the first three months of this year, against RO13.64bn a year ago, indicating excess liquidity in the system.
Joice Mathew, head of research at United Securities, said that ample liquidity and strong money supply were the result of deposits growing faster than the loan books of banks.
He said, "Going forward, we expect this year's business volume growth to be around ten to 11 per cent, driven by continued credit offtake from the corporate sector and retail sector volume growth in selected banks in the second half of the year. We expect normalised net income of banks to grow at a slower pace of seven to eight per cent. This is because of the retail sector asset repricing pressure on banks due to regulatory actions last year."
Bank Muscat and National Bank of Oman posted a loan book growth of 8.8 per cent and 6.1 per cent, respectively, in the first quarter this year, while HSBC Bank Oman's net loans and advances declined by 4.5 per cent on a year-on-year basis. Ahlibank registered the highest loan-book growth of 20 per cent followed by BankDhofar at 17.3 per cent and Bank Sohar at 16.8 per cent.
A senior banker, who did not want to be named, said the growth in bank lending in the quarter was helped by a pick-up in retail loans, which remained sluggish over the past two years due to regulatory limits.
He said, "The ten per cent credit growth is slightly above our expectations. Most of the banks achieved growth in retail loans during the quarter that resulted in a better growth in total credit. In past two years the growth was mainly driven by corporate segment, but in last quarter it came from both corporate as well as retail segment."
"There has also been a pick-up in loans due to growth in real-estate development activities. There have been some recent deals on project loans, which will be disbursed over the next two quarters. Full-year credit growth is expected to be at the ten per cent level," the banker added.
Kanaga Sundar, head of research at Gulf Baader Capital Markets (GBCM), said, "During the first quarter, we saw a higher credit offtake from the corporate sector, driven by ongoing government investment programmes. The retail sector also saw incremental growth on a lower base, while the margins are under pressure due to higher liquidity prevailing in the banking sector."
Sundar said the credit growth for 2014 is estimated to be ten per cent year-on-year, amid strong fiscal spending, anticipated drawdowns from big-ticket project financing and increase in private-sector investments. "Credit-growth indicators remain favourable for the medium term," he added.
© Muscat Daily 2014
