KPMG has released its analysis of the published results of seven Omani banks for the first half of 2020. Analyzing results for H1’20 for 54 listed commercial banks from across the region, the report, titled ‘GCC listed banks results: Six months ended 30 June 2020’, covers financial institutions across countries including the Kingdom of Bahrain, the State of Kuwait, the State of Qatar, the Sultanate of Oman, the Kingdom of Saudi Arabia, and the United Arab Emirates. It shares information on trends in the GCC on credit loss provisions reported by banks and a summary of significant regulatory support provided in each GCC country.
The report notes that a majority of Oman’s banks are feeling the impact of tightening operating conditions. Oman’s banks saw a decline in credit flow, revenue compression, and significant increase in non-performing loans. The average profits of banks in Oman for H1'20 declined by 34.2% compared to H1'19, primarily on account of increase in expected credit losses by 120.9% compared to H1'19 on loans and advances to customers.
The exception to the trend was Bank Nizwa, Oman’s leading Islamic bank, which registered a 37% growth in its net profits for first half of the year, which rose to USD 15.3 million, compared to USD 11.2 million for the same period last year.
The effect of Covid-19 and the consequent lockdowns by governments has impacted several sectors globally. The banking industry is no exception. Oman's economy and the banking sector have taken a hit due to the slowdown in the economy and the decline of oil prices.
Across the GCC, governments and central banks announced various economic support measures. Central Bank Oman, in its first stimulus package, reduced interest rates and urged banks to consider reducing the existing fees related to various banking services and avoid introducing any new fees for the duration of 2020.
Ravikanth Petluri, Partner and Head of Financial Services at KPMG in Oman, commented: “Our analysis shows that Oman’s banks are facing headwinds from the drop in global interest rates in response to Covid-19 and a low oil price environment. This impact, coupled with a negative view on the economic indicators in 2020, is clearly reflected in the H1’20 results. Barring one exception, the majority of Oman’s top banks have continued to build their loss allowances during the first two quarters of 2020. However, despite the multitude of challenges, banks have remained resilient. The CBO has taken swift action to address concerns, its relief measures including an extension of its stimulus package until the end of March 2021.”
The report can be downloaded here: GCC listed bank results
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