Banking assets rise 9.2% to RO 48.7 bn

MUSCAT: Oman's banking sector assets expanded by 9.2 per cent to RO 48.7 billion in 2025, as lending and deposits grew and the Central Bank of Oman (CBO) lowered its policy rate in step with the US Federal Reserve, according to the central bank's annual report.
Total bank credit rose 8.8 per cent to RO 35.3 billion, up from 6.7 per cent growth a year earlier, while customer deposits increased 7 per cent to RO 34 billion. Credit to the private sector, which accounts for 81.6 per cent of the total, grew by 6.5 per cent.
Capital and liquidity buffers remained well above regulatory minimums. The sector's capital adequacy ratio stood at 18.8 per cent against a required 13.5 per cent, while the liquidity coverage ratio reached 194.2 per cent and the net stable funding ratio 120.9 per cent — both comfortably above the 100 per cent threshold. Gross non-performing loans edged down to 4.4 per cent from 4.5 per cent, with the net NPL ratio unchanged at 1.4 per cent.
Combined net profit of conventional and Islamic banks rose 6.8 per cent to RO 565.6 million, supported by a 34.6 per cent jump in other income and a 1.6 per cent fall in provisions for non-performing assets, which offset an 8.1 per cent rise in operating expenses.
Rates track the Fed lower
The CBO cut its repo rate to 4.331 per cent in December 2025 from 5.145 per cent a year earlier, following three quarter-point reductions by the Federal Reserve that took the US target range to 3.50–3.75 per cent. Under the Rial's peg to the dollar, the CBO sets its policy rate at the upper limit of the US target rate plus a 50 basis point risk premium.
Transmission was visible across the market. The weighted average lending rate at conventional banks fell to 5.472 per cent in December from 5.775 per cent, while the average deposit rate eased to 2.468 per cent from 2.533 per cent, narrowing the rial spread to 2.930 per cent from 3.098 per cent. The average yield on 28-day treasury bills declined to 3.628 per cent from 4.086 per cent.
Banks made greater use of central bank liquidity, with the value of repo operations rising 70.3 per cent to RO 383.8 million. Treasury bill issuance fell 14.1 per cent to RO 1,910.1 million, which the CBO attributed to improved government fiscal liquidity and reduced reliance on short-term domestic borrowing.
Broad money (M2) grew 6.1 per cent to RO 26.4 billion. Currency held by the public rose 11 per cent, reversing the previous year's contraction, while growth in rial demand deposits slowed sharply to 4.1 per cent from 27.2 per cent in 2024.
Best performer in the Gulf
The Muscat Stock Exchange was the best performing market in the GCC during the year, with the MSX-30 index climbing 28.2 per cent after a 1.4 per cent gain in 2024. Market capitalisation rose 16 per cent to RO 32 billion, while total trading turnover quadrupled to RO 5 billion from RO 1.3 billion.
The CBO attributed the rally to structural factors including Oman Investment Authority IPOs, sovereign sukuk issuance, initiatives under Estidamah and the activation of liquidity providers and market makers. Government development bonds were issued in seven tranches totalling RO 582.7 million, with maturities of three to 10 years.
Islamic banking and reforms
Islamic banking entities increased assets 10.8 per cent to RO 9.5 billion, or 19.5 per cent of total banking sector assets. Their deposits rose 14.2 per cent to RO 7.6 billion and private sector financing 10.1 per cent.
The year's main regulatory milestone was the Banking Law 2025, which expands the CBO's statutory mandate, shifts supervision towards a risk-based approach and creates licensing categories for digital banks and fintech activity. The CBO also issued a digital banking framework, an open banking framework covering API standards and customer consent, tighter personal lending rules governing debt burden ratios and loan tenures; and a measure permitting partial settlement of cheques. It launched the national payment card Maal and adopted an official symbol for the Rial Omani.
Personal loans remained the largest credit category at 35.6 per cent of the portfolio, followed by manufacturing at 8.3 per cent and transport and communication at 8.1 per cent. The fastest-growing segments were non-resident lending, up 43.6 per cent, transport and communication at 23.4 per cent and mining and quarrying at 23 per cent.
Bank credit as a share of non-hydrocarbon GDP rose to 121.3 per cent from 115.7 per cent.