(MENAFN- Muscat Daily) Fitch Ratings has affirmed six Omani banks' long-term issuer default ratings (IDRs) and upgraded two of the banks' viability ratings. The outlooks on all six banks are stable Fitch said on Thursday.
The ratings agency said five of the Omani banks have their IDRs based on support from the Omani sovereign. They are Bank Muscat's at A- and National Bank of Oman (NBO) BankDhofar Bank Sohar and Ahlibank at BBB+. The IDR for HSBC Bank Oman has been affirmed at A+ based on support from its parent HSBC Holdings Plc.
At the same time Fitch upgraded Bank Sohar's viability rating (VR) to bb+ from bb and HSBC Oman's VR to bbb- from bb+. Fitch also affirmed Bank Muscat's VR at bbb NBO's and Ahlibank's VR at bbb- and BankDhofar's at bb+.
Fitch said HSBC Oman's VR has been upgraded mainly because it expects reduced risks with the bank's asset quality and signs of improving profitability. Bank Sohar's VR has been upgraded as a result of strengthened capitalisation leaving the bank's capitalisation in line with similarly rated peers and no longer constraining the VR.
Fitch said the IDRs and support ratings (SRs) of Bank Muscat NBO BankDhofar Bank Sohar and Ahlibank reflect its expectation of an extremely high probability of support from the Omani authorities in case of need. 'Oman's strong ability to provide support to the banking system combined with our belief that there would be a strong willingness to do so underpins Fitch's assessment' the ratings agency said.
HSBC Oman's IDRs and SR are driven by Fitch's expectation of an extremely high probability of support available to the bank from the parent. Fitch considers HSBC Oman a strategically important subsidiary of HSBC because of its importance to the group's regional strategy and franchise although Oman is not necessarily in itself a core market.
Fitch further said that Omani banks' viability ratings (VRs) benefit from a stable operating environment supported by the government's capital investment programme that drives solid GDP growth and creates lending opportunities for domestic banks.
It said Bank Muscat's VR reflects the bank's dominant franchise in Oman which supports its ability to generate healthy and stable operating profits and within the context of the operating environment resilient asset quality and sound capitalisation.
NBO's VR reflects a limited franchise and capitalisation which given high loan concentrations is only adequate in Fitch's view. The VR also factors in the bank's solid profitability sound asset quality and adequate liquidity according to Fitch.
Fitch added HSBC Oman's VR is underpinned by the bank's company profile which benefits from being part of the HSBC group. Sound capitalisation and liquidity ratios are also factored into the rating particularly as Fitch expects ample liquidity and capital would be available from the group in case of need.
BankDhofar's VR reflects the bank's modest franchise and improved capitalisation following capital-raising in second quarter of 2015 albeit still moderate in light of lending concentrations. The VR also reflects a deposit-funded loan book with satisfactory liquidity and a fairly low risk appetite which is reflected in healthy asset quality despite high lending concentrations.
Ahlibank's VR benefits from the bank being part of Ahli United Bank group and its wider regional network.
Bank Sohar's VR factors in its improved capitalisation which is now in line with that of similarly rated peers and the bank's sound asset quality Fitch said.
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