The Muscat Securities Market closed down marginally amid attractive trading multiples and renewed interest post announcement of Bank Dhofar and NBO potential merger. The financial index recovered and was almost able to offset the losses of the other two sectors. Omantel’s Q2 results also created some confusion in the market on the last day. MSM30 ended the week down marginally by 0.21 per cent. The Industrial Index was down (1.34 per cent), Services Index was down (0.56 per cent) while the Financial Index closed up by 0.66 per cent. The MSM Shariah Index closed down by 1.24 per cent.
Oman is seeking to raise as much as $1.2bn to finance infrastructure at the country’s Duqm Special Economic Zone. Oman may raise the financing through a loan or bond with a potential maturity of 15 to 20 years as per the news reported by various media agencies. Earlier this year, the Omani government sold a $6.5 billion bond, a triple-tranche bond with maturities of five, 10 and 30 years. The Sultanate raised $1.25bn with the five-year tranche, $2.5 billion with the 10-year and $2.75 billion with the 30-year.
In a related development, Oman established a full-fledged Debt Management Office (DMO) within the Ministry of Finance. The establishment of the office was first mooted by the National Program for Enhancing Economic Diversification (Tanfeedh). The initiative aims to establish an office to ensure that the financing needs of the government are always met in time.
The number of new small and medium enterprise (SME) registrations in Oman stood at 3,059 in the first half of 2018, down from 4,778 new registrations during the same period last year, according to NCSI. Among various governorates, Muscat Governorate saw 1,123 new registrations of SME units from January to June 2018, constituting 36.7 per cent of total new registrations. The number of new SME registrations in North Al Batinah stood at 475. This was followed by Al Dakhiliyah with 348, South Al Batinah with 236, Dhofar with 200, North Al Sharqiyah with 201 and other remaining governorates recording 476 new SMEs.
Consolidation activities in the financial sector of Oman continued with lately Bank Dhofar and NBO announcing a potential merger between the two entities. The decision is subject to approvals from the respective Boards, shareholders, stakeholders and regulators. If the two banks merge, then the combined entity will be the second largest bank of Oman, with a total asset base of RO 7.68 billion ($20 billion), compared to the largest bank, Bank Muscat, which has total assets worth RO 11.54 billion, as at H1’18. Both the banks have four common shareholders. 28 per cent ownership in Bank Dhofar and 29 per cent ownership in National Bank of Oman is held by Civil Services Pension Fund, Ministry of Defence Pension Fund, State General Reserve Fund and Public Authority for Social Insurance.
Cost efficiency is expected to improve as synergies establish between the two entities post-merger. Merged financing portfolio is expected to be well diversified as opposed to the current opposing concentrations (BKDB: Retail Portfolio 44 per cent of total as of H1’18; NBO: roughly evenly split between retail and others). Combined portfolio will be roughly evenly distributed between retail and other economic sectors. The merged entity will likely be able to finance larger projects in lieu of a larger capital base and higher leverage potential.
Latest CBO data indicates that the weighted average interest rate spread (lending rate minus deposit rate) on Omani Rial expanded by 3.2bps on month-to-month (MoM) basis, at 3.529 per cent for the month of May’18, as weighted average lending rate growth outpaced deposit growth. (RO spread is 0.8bps above May’17 level). Weighted average FCY spread rose by 5.1bps in May’18 (at 3.437 per cent) over the previous month. The spread is higher by a whole percentage point when compared to May’17 and has been steadily rising over time. Weighted average interest rate on private sector RO time deposits declined slightly to 3.561 per cent, which is an average of 3.56 per cent over the last 6 months. Weighted average interest rate on all private sector deposits (RO), however, increased to 1.275 per cent in May’18 when compared to an average of 1.26 per cent over the previous 6 months.
The insurance sector of Oman witnessed many IPOs last year, we believe we need to highlight the sector performance during 1H18. The listed companies within the insurance sector of Oman were able to post net income of RO 16.0 million compared to RO 14.5 million in the same period last year, growth of 10.3 per cent. In the similar period last year, one company was in loss whereas this year all the companies were in profits. National Life and General Insurance and Al Ahlia Insurance controlled approximately 50 per cent of the net income this year as well as last. While in terms of topline, gross written premiums (GWP) rose by 8.0 per cent YoY during 1H18 to RO 205 million compared to RO 190 million in 1H17. GWPs of Oman Qatar Insurance rose the most during 1H18 by 36 per cent while that of Dhofar Insurance dropped the most during the period by 25 per cent.
(Courtesy: U Capital)
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