BUSINESS REPORTER
MUSCAT, May 7
The top eight lenders in the Sultanate witnessed subdued growth in total assets of 3.6 per cent in 2020, while net profit declined by an average of 32.5 per cent compared with 2019, professional services firm KPMG said in its annual review of the performance of GCC listed banks.
The decrease in profitability was mainly due to a significant increase in expected credit losses as a result of the ongoing pandemic and its effect on the local economy which increased by 115.1 per cent compared with 2019, the report said.
Average CAR stood at 17.4 per cent in 2020 compared with 17.3 per cent in 2019, reflecting that the Omani banking sector has sufficient capital buffers, KPMG further noted.
Commenting on the overall performance of GCC banks in general, KPMG said: “2020 was a unique year, severely impacted by Covid-19 which was reflected in the financial trends identified throughout our analysis. Despite these challenges and the resulting disruption, the GCC banking sector remained resilient by taking effective and timely measures, coupled with government support, to weather the storm. While financial challenges were faced by the entire sector, it was also a year in which banks were able to ‘redefine their business models’ and accelerate their digital plans.”
According to KPMG, the focus of the GCC banking sector turned to greater stability than growth, as Covid-19 took its toll on world economies. Banks were able to weather challenges brought by Covid-19 at the cost of profitability, given extensive government support, which helped maintain stability in the sector relative to banks in largest Western economies, it said.
Furthermore, the increase in regulatory oversight and supervision witnessed over the past few years continued in 2020 and is expected to continue in the foreseeable future, said KPMG.
“Central Banks devoted most of their attention to addressing Covid-19 related issues, while continuing the pre-existing initiatives around Anti Money Laundering, culture and conduct, Know Your Customer (KYC), corporate governance, Open Banking, and Fintech,” the report stated.
Banks also continued to focus on their customers’ ever-changing needs and requirements and looked to implement technological advancements to provide effective alternatives to routine transactions through digital channels, according to the report.
It noted in this regard an increased focus on branchless banking, cashless and cardless transactions, and online service offerings.
But despite the challenging economic environment and limited credit generation activity in the market, banks remained active in their lending activities, albeit focused on the higher-end customer base and government agencies.
“This was evidence by 9.6 per cent growth rates compared with the last year and demonstrates the ability of banks to continue to deliver despite the challenging market conditions,” KPMG adds the review.
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