Leading international rating agency Moody's has cited the improving environment in which banks operate for its decision to revise its outlook for seven Omani banks to stable from negative.
The revised outlook also comes fresh off last week’s affirmation by Moody’s of the Omani government’s rating at Ba3.
“These actions reflect Moody's expectation of continued improvements in the operating environment where the banks operate, as highlighted by the affirmation of the Government of Oman's Ba3 issuer rating and change the outlook to stable from negative,” the New York based investors’ service announced this week.
“This reflects a large reduction in external vulnerability and government liquidity pressures, mainly as a result of significantly higher oil prices since the middle of 2020, and Moody's expectation that oil prices will average above $60/barrel during the next several years, increasing the likelihood that these pressures will remain contained. Higher oil prices and ongoing implementation of the government's medium-term fiscal adjustment program will also underpin a steady decline in the direct government debt burden to the pre-pandemic level,” it further noted.
In the announcement, Moody’s affirmed the long-term local and foreign currency deposit ratings of seven Omani banks: Bank Muscat, HSBC Bank Oman (HBON), Bank Dhofar, National Bank of Oman (NBO), Sohar International Bank, Oman Arab Bank (OAB) and Bank Nizwa. Moody's has changed the outlook to stable from negative on these ratings of all seven banks.
At the same time, Moody's affirmed the Baseline Credit Assessments (BCAs) and Adjusted BCAs of the seven Omani banks. A secondary driver of the rating actions for Bank Muscat and HBON is the interlinkages between their creditworthiness and that of the sovereign, as the banks' standalone BCAs continue to be constrained at the level of the sovereign rating.
Moody's expects that the government's willingness to provide support to banks in case of need will remain high or very high, depending on the bank, reflecting the importance of the country's banks in the domestic financial system and the significant government shareholdings and deposits in several banks.
The change in outlook to stable from negative on the Omani banks' long-term deposit ratings reflects the rating agency's expectation of continued improvements in the operating environment where the banks exercise their business activities, and also mirrors the stable outlook on the sovereign ratings, it said.
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