Moody’s downgrades deposit ratings of six Omani banks
Moody’s Investors Service has downgraded the long-term local and foreign currency deposit ratings of six banks it rates in Oman: Bank Muscat (to Baa2 from Baa1), HSBC Bank Oman (to Baa2 from Baa1), BankDhofar (to Baa3 from Baa2), National Bank of Oman (to Baa3 from Baa2), Oman Arab Bank (to Baa3 from Baa2) and Bank Nizwa (to Ba1 from Baa3).
Moody’s also changed the outlook to ‘negative’ from ‘stable’ on the ratings of five banks and maintained the ‘negative’ outlook on the ratings of one bank (BankDhofar), according to a statement issued by the ratings agency on Tuesday.
It said the rating action follows Moody’s downgrade of Oman government’s issuer rating to Baa2 from Baa1 and the change of its outlook to negative from stable on Friday.
‘The driver underpinning the downgrade of six Omani banks’ deposit ratings is the weakening fiscal capacity of the government to provide support to banks, as signalled by the downgrade of its issuer rating to Baa2/negative from Baa1/stable’, the ratings agency said.
Moody’s said its decision to assign a negative outlook to Omani banks’ long-term deposit ratings reflects the potential further weakening in the Omani government’s support capacity, as reflected by the negative outlook on the government’s issuer rating.
‘In addition, the negative outlook also reflects the possibility that a weakening operating environment could put downward pressure on the banks’ standalone creditworthiness. This could result from lower than expected economic growth, or weaker than expected credit and funding conditions, which would pressure banks’ solvency and liquidity profiles’.
At the same time, Moody’s has affirmed the baseline credit assessments (BCAs) and adjusted BCAs of the six banks. Moody’s decision to affirm the BCAs of the six banks reflects the resilience in their financial performance, underpinned by continued solid asset quality, healthy capital buffers and relatively low market funding reliance.
‘Despite the possible challenges resulting from a weaker operating environment, we expect the creditworthiness of Omani banks to remain resilient’, Moody’s said.
Moody’s also affirmed the Ba3 corporate family rating and the B1 issuer rating of Al Omaniya Financial Services and maintained its outlook negative. Moody’s said the negative outlook on Al Omaniya’s ratings continues to reflect the potential negative impact from tighter liquidity conditions and softer economic growth on the company’s liquidity and solvency profile.