Banking credit climbs 3.5% to RO 27.9 billion

Credit extended by conventional and Islamic banks (collectively known as Other Depository Corporations – ODCs) rose 3.5 per cent to RO 27.9 billion at the end of February 2022. It included RO 23.5 billion in credit to the private sector, which was up 1.6 per cent (Y-o-Y).

According to a review of banking and financial sector developments by the Central Bank of Oman (CBO), the non-financial corporate sector received the highest share of the total private sector credit, over 46.6 per cent, followed by the household sector (45.1 per cent).

Total deposits held with ODCs registered a Y-o-Y growth of 4.2 per cent to reach RO 25.8 billion at the end of February 2022. Total private sector deposits increased by 2.2 per cent to RO 17.4 billion. In terms of sector-wise composition of private sector deposits, household deposits accounted for a 50.9 per cent share, followed by non-financial corporations at 32.4 per cent, financial corporations at 14.2 per cent and the other sectors at 2.5 per cent.

The combined balance sheet of conventional banks showed a Y-o-Y growth of 2.2 per cent in total outstanding credit as of end-February 2022. Credit to the private sector increased by 0.9 per cent to reach RO 19.2 billion while their overall investments in securities went up by 22.3 per cent to RO 5.3 billion as of end-February 2022.

Investment in Government Development Bonds increased by 20.4 per cent compared to the same period last year to RO 2.2 billion while their investments in foreign securities declined by 30.4 per cent to RO 0.802 billion at the end of February 2022. Aggregate deposits held with the conventional banks increased by 2.2 per cent Y-o-Y to RO 21.3 billion at end-February 2022. Government deposits with conventional banks witnessed an increase of 11.0 per cent at RO 4.9 billion, whereas deposits of public enterprises declined by 1.9 per cent to RO 1.4 billion. Private sector deposits, which accounted for 68.4 per cent of total deposits with conventional banks, decreased by 0.01 per cent as of February 2022 to reach RO 14.6 billion.

Islamic banking entities provided financing of RO 4.9 billion at the end of February 2022, recording a growth of 10.2 per cent over the previous year. Total deposits held with Islamic banks and windows increased by 14.8 per cent to RO 4.5 billion. The total assets of Islamic Banks and Windows increased by 10.7 per cent on a Y-o-Y basis to RO 5.9 billion and constituted about 15.3 per cent of the banking system's assets as of end-February 2022.

Among the indicators of monetary aggregates, broad money supply M2 at the end of February 2022 increased by 2.2 per cent to reach RO 20.3 billion. This increase was the outcome of a 0.96 per cent expansion in narrow money (M1) and 2.7 per cent increase in quasi-money (Rial Omani saving and time deposits, certificates of deposit issued by banks, margin deposits and foreign currency denominated deposits). During the same period under discussion, currency with public witnessed a decline by 4.2 per cent, while demand deposit increased by 2.6 per cent.

The weighted average interest rate on RO deposits witnessed a marginal decrease from 2.011 per cent at end February 2021 to 1.964 per cent at end- February 2022, while the weighted average RO lending rate decreased from 5.451 per cent to 5.450 per cent over the same period. Meanwhile, the overnight Rial Omani domestic inter-bank lending rate fell significantly to 0.430 per cent in February 2022 from 0.547 per cent a year ago, reflecting transmission of policy rate cuts by the CBO in line with the rate cuts by the Federal Reserve. The average Repo rate for liquidity injection by the CBO as of end-February 2022 remained at 0.5 per cent, the same as last year.

Meanwhile, the nominal GDP, per preliminary data released by the National Centre for Statistics and Information (NCSI), showed an increase of 16.1 per cent during the fourth quarter of 2021 over the same period of 2020. The expansion was driven by an increase in the output of the hydrocarbon sector by 38.5 per cent and non-hydrocarbon sector by 8.4 per cent.

The price of Omani crude averaged $76.7 per barrel during Jan-Feb 2022, which was higher by 63.5 per cent than the Jan-Feb 2021 average. Daily oil production averaged 1,032.7 thousand barrels during Jan-Feb 2022, which was higher by 8.2 per cent over the previous year.