Credit growth in the retail segment inclusive of housing loans of the six listed Omani banks together dropped considerably to 1.9 per cent in third quarter ending September 2012 compared to its average quarterly growth rate of 8 per cent during the previous three quarters. "Personal loans including housing loans of the commercial banks grew at a lower rate compared to the corporate segment in Q3'12, against its higher relative growth in the preceding three quarters; the recent restrictions on personal loans by the Central Bank of Oman have impacted loan growth in the retail segment of banks in the third quarter", says Suresh Kumar S, Research Head at Al Maha Financial Services. The CBO in last May instructed the commercial banks not to deduct more than 50 per cent of the borrowers' salary as equated monthly instalments for personal loan, 60 per cent for housing loans, a maximum repayment period of 10 years for personal loans and 25 years for housing loans. However, on a year on year basis, the gross loans and advances of the listed banks (excluding HSBC Bank Oman) grew at a healthy rate of 17.5 per cent during the twelve months ended September 2012 to reach RO 11.33 billion, which was at a higher rate than the deposits growth of 13.4 per cent in the same period. With growth in retail segment forecast to slow down from the current quarter due to the regulatory norms, banks are turning to the corporate sector. Gulf Baader Capital Markets in its research says: "The corporate segment demand is expected to continue to report double digit growth rates. Overall credit growth drivers continue to remain favorable with the government taking up more and more projects and estimated quasi government project credit draw downs." Although top-ups of personal loans have been curbed by the CBO rules, the banks are still optimistic that there will be demand for new loans as thousands of new jobs are coming to market. Deposits of the listed banks grew at 21 per cent on year to reach RO 10.56 billion as of at the end of the first half of the year, while credit witnessed a higher growth rate compared to deposits in the last three quarters and above since the second half of 2011. Deposit growth made a gradual slowdown on a quarter on quarter basis from above 9 per cent in the second quarter of 2011 to around 3 per cent in the last quarter. Yet Omani banks are set to see stiff competition following the launch of Islamic banking operations. Bank Nizwa, the Sultanate's first Islamic bank floated an IPO in the beginning of this year and raised RO 60 million for 40 per cent of its capital. The bank is expected to commence operations in the fourth quarter of this year. Al Izz Islamic Bank has launched its IPO to raise RO 40 million for 40 per cent of its capital. Major conventional banks too, are geared up for opening their Islamic banking windows very soon. In order to comply with the CBO guidelines of a minimum capital requirement of RO 10 million and a capital adequacy of 12 per cent for starting window operations, conventional banks like Bank Muscat, Bank Sohar and ahlibank have recently mobilised RO 100 million, RO 10 million and RO 25 million respectively through rights issues. The E&Y World Islamic Banking Competitiveness Report had noted that in the GCC, market share of Islamic banking had crossed the 25 per cent threshold suggesting the growing demand for Sharia-compliant products in the region. Oman Daily Observer
