The total credit of Oman's six listed commercial banks grew by nearly 20 per cent in the first half of 2012, driven by the expansion of project-based lending to the corporate sector and government entities, along with growth in retail loan books. As local banks bolstered their loan portfolios, total loans and advances extended by the six listed banks climbed to RO11.17bn as of June 30, 2012, compared to RO9.31bn as of June 30 2011, according to the financial statements of commercial banks. Net loans and advances of HSBC Bank Oman stood at RO1.21bn in the first half of this year against RO484mn a year ago. Of this rise, RO685mn was a result of the merger of OIB and HSBC Oman and has not been included in the figures for this year. According to analysts the growth in bank credit was largely supported by higher government spending which created demand for project-based loans in the corporate segment. Lo'ai Badie Bataineh, DGM of investment and development at Oman Arab Bank, said that most of the major projects which were tendered last year secured bank financing in the first half of this year. He said, “Growth has largely been supported by loans to corporates and government entities. "However, credit growth will be less in the second half due to new regulations on retail lending and tough competition for project financing as the tendering activity is likely to slow down." “Following the new regulation on retail loans, retail portfolios of banks will decline and margins will remain under pressure. "Banks are eager to participate in infrastructure projects and they will continue to focus more and more on corporate loans," added Bataineh. Dr Fabio Sacciavillani, chief economist at Oman Investment Fund, said that during times of financial strain, banks globally prefer good-quality loans, which come mainly from government projects. He said, “Banks prefer to get involved in government projects and lend to public-sector companies. "The 20 per cent growth in credit off-take is a sign of a healthy economy. The good thing is that the growth in lending is supported by a similar growth in deposits." “We cannot be sure whether the 20 per cent growth level will be maintained or not going forward, but the Oman economy is buoyant and banks will continue to support thi Muscatdaily
