The Banking Executive Magazine - May 2024 Issue

Omani Banks Omani Banks WELL-POSITIONED TO ABSORB EXTERNAL SHOCKS Omani banks’ reasonable credit fun- damentals and improved operating conditions will enable them to with- stand potential external shocks in 2024, according to a recent report by Fitch Ratings. The report highlighted that the Omani banking sector’s continued stability provides banks with head- room to absorb potential moderate shocks arising from heightened geopolitical tensions in the region. Fitch Ratings said that the high en- ergy prices and the country’s diversi- fication strategy to boost the non-oil economy continue to support eco- nomic growth in the sultanate. Omani banks’ asset quality, accord- ing to Fitch, is expected to improve slightly over 2024 due to favorable operating conditions, and write-offs will likely reduce the sector’s im- paired loans ratio. ‘We have reassessed asset quality risks and expect asset quality metrics will improve slightly over 2024 owing to favourable operating con- ditions, while write-offs will reduce the sector impaired loans ratio,’ Fitch noted. The rating agency acknowledged that the vast majority of restructured loans in Oman, which accounted for 10% of total sector loans at the end of 2023, are in Stage 2 and ade- quately covered. Fitch does not an- ticipate any significant migration to Stage 3, despite remaining pressures on the real-estate, construction, and hospitality sectors. However, the rating agency cau- tioned that the Omani banks are ex- posed to event risk due to high single-obligor concentrations, which is largely unavoidable given the nar- row nature of the domestic economy. the BANKING EXECUTIVE 16 ISSUE 185 MAY 2024