Muscat – Fitch Ratings has revised its outlook on five Omani banks – Bank Muscat, National Bank of Oman (NBO), Bank Dhofar, Sohar International Bank, and Ahlibank – to positive. The rating agency has also affirmed the Long-Term Issuer Default Ratings (IDR) of all five banks.

The revision follows Fitch’s similar action on Oman’s sovereign rating on December 18 and reflects the agency’s view of Oman’s improving operating environment, which is expected to benefit the banks’ intrinsic credit profiles. The revision also underscores the government’s enhanced ability to support Omani banks.

In rating action reports, Fitch noted that business conditions for Omani banks are favorable, supported by high oil prices, which are forecast to average $70 per barrel in 2025 – around Oman’s fiscal break-even price. Additionally, the government’s commitment to economic diversification under Vision 2040 is expected to further bolster economic activity and provide growth opportunities for the banking sector.

Bank Muscat

The outlook for Bank Muscat has been revised to positive from stable, with its Long-Term IDR affirmed at ‘BB+’ and its Viability Rating (VR) at ‘bb+’. Additionally, the bank’s Government Support Rating (GSR) remains at ‘bb+’.

Fitch attributes Bank Muscat’s IDR to its solid VR and the potential for support from Omani authorities.

‘The positive outlook mirrors that of the sovereign rating and reflects the bank’s dominant position in the domestic market. As the flagship financial institution in Oman, Bank Muscat benefits from access to high-quality borrowers and significant funding from government-linked entities’, Fitch said. The agency highlighted Bank Muscat’s stable asset quality, stronger-than-peer profitability, and solid capital buffers.

NBO

NBO’s outlook has also been revised to positive from stable, while its Long-Term IDR is affirmed at ‘BB’. The bank’s VR and GSR are both affirmed at ‘bb’.

Fitch points to NBO’s strong domestic franchise and well-balanced business model as key factors supporting its rating.

It said, ‘With improving profitability and stable funding and liquidity, NBO’s IDR benefits from both its solid business foundation and potential government support. However, challenges remain, including moderate profitability and a high concentration of single obligors and industry exposure. Despite these risks, the positive outlook reflects broader economic improvements and a stable operating environment.’

Bank Dhofar

The outlook for Bank Dhofar has also been revised to positive from stable, with its Long-Term IDR affirmed at ‘BB’. The bank’s VR and GSR remain at ‘bb’.

Fitch emphasised that the bank’s IDR is supported by potential government backing, as reflected in its GSR.

‘While Bank Dhofar holds a strong domestic position, its VR is tempered by pressures on asset quality and weaker-than-average profitability. Additionally, high concentration risks remain a concern. Nevertheless, the positive outlook reflects the favorable macroeconomic environment and the bank’s ongoing efforts to strengthen its capitalisation and liquidity,’ Fitch said.

Sohar International

Sohar International Bank has seen its outlook revised to positive from stable, with its Long-Term IDR affirmed at ‘BB’. Both the VR and GSR are maintained at ‘bb’. The bank’s outlook is driven by its improved business profile following its 2023 merger with HSBC Bank Oman, according to Fitch.

Fitch noted that the merger has significantly expanded Sohar International’s deposit base, enhanced its capital position, and stabilised asset quality.

‘As Oman’s second-largest bank by total assets (19% market share as of Q3 2024), Sohar International has strengthened its pricing power, reduced funding costs, and expanded its footprint in lower-risk segments. This enhanced market position should support further growth in the coming years,’ the agency said.

Ahlibank

Ahlibank’s outlook has been revised to positive from stable, with its Long-Term IDR affirmed at ‘BB’ and its GSR at ‘bb’. The bank’s VR is also maintained at ‘bb-‘.

Fitch attributes Ahlibank’s IDR to potential government support, as indicated by its GSR. While the bank’s franchise remains moderate, its VR benefits from reasonable asset quality and profitability. The bank’s slightly higher risk appetite compared to its peers and its adequate capitalisation are noted as important factors by Fitch.

The positive outlook reflects broader economic improvements and the bank’s stable funding profile, which should support its ongoing performance, Fitch added.

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