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Bank Nizwa, Sohar International get CBO nod to explore merger

Consolidation: Both sharia-compliant lenders reported healthy bottom-lines in 2021

@conradprabhu -

The Central Bank of Oman (CBO) has given its provisional approval to Bank Nizwa and Sohar International Bank to begin the due diligence process culminating in the planned merger of the two sharia-compliant lenders.

Both institutions said in separate filings to the Capital Market Authority (CMA) on Wednesday that they had received ‘in-principle approval’ for the due diligence process to commence. It follows a disclosure made by the two banks last November affirming their interest to explore the feasibility of merging their operations.

Both banks achieved healthy bottom-lines in 2021 despite challenging economic conditions. Bank Nizwa, the first dedicated Islamic Bank to be established in the Sultanate of Oman, reported a 13 per cent increase in post-tax profit of RO 12.526 million in 2021, up from RO 11.067 million a year earlier. Total assets were up 16 per cent at RO 1.404 billion compared with the previous year’s total of RO 1.206 billion.

According to preliminary unaudited results for the 12 months ended December 31, 2021, customer deposits climbed 20 per cent to RO 1.109 billion, up from RO 924.208 million in 2020. Financing to customers also increased 13 per cent to RO 1.146 billion in 2021, up from RO 1.014 billion for the previous year.

Sohar International Bank saw its net profit climb 41.6 per cent to RO 28.34 million for the year ended December 31, 2021, up from RO 20.01 million for the previous year.

Announcing its preliminary unaudited results for the year, the lender posted a 29.0 per cent increase in net operating income (before impairment provisions) to RO 60.40 million last year, up from RO 46.83 million a year earlier. The increase was driven by growth in all revenue streams including gains in the sale of investment securities, it said.

Total assets climbed 14.5 per cent to RO 4.134 billion in 2021, compared to RO 3.611 billion in 2020 – a growth driven mainly by an increase in investment securities. Loans, advances and financing (net) increased 4.3 per cent to RO 2.612 billion, up from RO 2.503 billion in 2020. Customer deposits rose 7.3 per cent to RO 2.394 billion in 2021, up from RO 2.331 billion a year earlier.

A 19.6 per cent increase in shareholder equity to RO 396.58 million was aided by a highly successful rights issue of RO 50 million, the Bank added.

Islamic banking entities have growth robustly over the past years, according to the Central Bank of Oman. Financing provided by Islamic lenders totaled RO 4.8 billion as of end-November 2021, recording a growth of 13.1 per cent y-o-y. Total deposits held with Islamic banks and windows increased by 16.8 per cent to RO 4.4 billion. The total assets of Islamic banks and windows rose 13.1 per cent on a Y-o-Y basis to RO 5.8 billion and constituted about 15.2 per cent of the banking system's assets.

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