(MENAFN- Muscat Daily) Capital Intelligence (CI) has affirmed National Bank of Oman's (NBO) financial strength rating at BBB+.
The rating is underpinned by the bank's good loan asset quality its sound capital adequacy ratio (CAR) together with its high Tier-1 capital and its improving profitability ratios - notwithstanding the marginal decline in the first quarter of this year the international ratings agency said.
An extraordinary general meeting (EGM) of NBO held on Wednesday approved the issuance of a Tier-1 instrument of up to US$300mn.
Shareholders also approved increasing the limit of an existing US$600mn Euro Medium Term Notes (EMTN) programme to US$1.5bn in the next four years depending on regulatory approvals the bank told the Muscat Securities Market on Thursday.
The EMTN programme also includes the possibility of issuing a Tier-2 instrument.
According to CI the bank's rating is also supported by its well-established franchise and its good market share. 'While the substantial tightening of liquidity ratios eased at end Q1 2015 these ratios remained higher than a number of its peers and are a constraint on the bank's rating. Another constraining factor is the customer concentrations in the both the loan book and deposit base. However this is a common feature among Omani banks largely reflecting the small market and relatively low savings rate.'
CI added that overall the bank's financial profile remained sound at the end of the first quarter of 2015 and together with its relatively solid major shareholder Commercial Bank of Qatar (CBQ).
NBO's foreign currency ratings were also affirmed at BBB+ long-term and A2 short-term. NBO's support rating was maintained at '3' underpinned by the strong likelihood of support from the Government of Oman and its majority shareholder CBQ. 'The latter continues to provide liquidity support via a large standby letter of credit. Notwithstanding the challenging operating environment in view of the lower oil prices the outlook for all the ratings is maintained at 'stable' as CI does not anticipate any significant weakening of the bank's financials until the next review.'
With slower asset growth CI said NBO has dropped one notch to be the third largest bank in terms of assets in Oman at the end of last year. 'Nonetheless with its well-established franchise the bank continued to command a fairly good share of the loans and deposit market. NBO's loan book was fairly well diversified by customer and industrial sectors with good quality indicators which were better than the peer group average.'
The bank has a fairly large network to support its deposit gathering capabilities and has a large base of current and saving accounts. Funding sources were also diversified by the five-year bond issue under an EMTN programme it added.
Last October NBO successfully concluded a US$500mn bond issue which the bank said contributed towards the diversification of its funding base as well as reduction of the cost of funds.
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