Oman’s banking sector fares well in first half despite challenges

Muscat: Despite the recent challenges faced by the hydrocarbon sector with the drop in crude oil prices, the banking sector in Oman continued the positive growth during the first half of 2016, although some element of liquidity tightening has been experienced by some banks.
The Central Bank of Oman (CBO) plays a crucial role in maintaining financial stability, pursuing appropriate monetary policies, developing and strengthening financial institutions and markets, and supervising and regulating the banking sector.
The banking sector remained robust supporting economic diversification initiatives and credit needs of the growing young population. The total assets of conventional commercial banks increased by 6.1 per cent to OMR28.8 billion in May 2016 from OMR27.1 billion a year ago. Of the total assets, credit disbursement accounted for 66.9 per cent and increased by 10.4 per cent as at end May 2016 to OMR19.3 billion. Credit to the private sector increased by 12.2 per cent to reach OMR17 billion as at the end of May 2016.
Conventional banks' overall investments in securities stood at OMR2.9 billion as at the end of May 2016.
Investment in Government Development Bonds and Government Sukuk increased by 37.5 per cent over the year to OMR921.3 million at the end of May 2016.
Banks also invested OMR429.8 million in Government Treasury Bills as at the end of May 2016. Conventional banks' investments in foreign securities stood at OMR875.6 million in May 2016, registering an increase of 83.5 per cent over the year.
Aggregate deposits held with conventional banks registered a modest decline of 3.4 per cent to OMR17.9 billion in May 2016 from OMR18.6 billion a year ago. Government deposits with conventional banks declined by 16.4 per cent to OMR4.5 billion. Deposits of public enterprises also fell by 10.3 per cent to OMR1 billion during the same period. However, private sector deposits, which constituted 67.4 per cent of total deposits with conventional banks, increased by 3 per cent to OMR12.1 billion in May 2016 from OMR11.7 billion a year ago. The core capital and reserves of conventional banks stood at OMR3.7 billion as at the end of the May 2016, a rise of 12.3 per cent over the previous year.
With regard to the real sector activity, the Sultanate’s nominal GDP contracted by 14.1 per cent in 2015 in contrast to a 4.6 per cent growth over a year ago mainly due to the sizeable drop of 38.2 per cent in the petroleum sector GDP. However the non-oil sector witnessed a growth of 2.3 per cent during the year notably from the services sector activities. Other major increases was also witnessed in industrial activities such as mining and quarrying, electricity and water supply and construction, which grew by 13.8 per cent, 11 per cent and 8.6 per cent, respectively.
Inflation remained very low with the annual average CPI for the Sultanate at 0.6 per cent during January-May 2016 over the same period in the previous year.