Fitch affirms Oman Arab Bank at 'BBB+'/'F2'; outlook stable

OAB's Long- and Short-term IDRs reflect the high probability of support from the Omani authorities, in case of need.

This view is based on the bank's systemic importance and the Central Bank of Oman's strong history of support.

Fitch also believes there is a high probability of support from one of OAB's shareholders; Arab Bank Group (rated 'A-' (A minus)/'F1'/Stable).

The Individual rating reflects OAB's niche corporate franchise, consistent profitability and the significant benefits gained from being a member of the Arab Bank Group.

It is constrained by OAB's relatively small size and its reliance on the domestic market for business.

OAB's performance continues to improve, backed by rapid loan growth amid buoyant economic conditions, and the ongoing boom in the local project finance segment.

OAB's margins are high, partly reflecting the substantial levels of low-cost funding it attracts.

Operating revenues have also benefited from a significant rise in fee-based income, mainly reflecting increased trade finance and investment banking activity.

Costs are well-controlled and loan impairment charges remain low, factors which also supports OAB's strong profitability ratios.

Overall, OAB's balance sheet is low-risk, as the bank mainly targets top local corporates, and its exposure to the retail segment is below average.

Liquidity is comfortable and its loan/deposit ratio is sound.

The bank is well-capitalised with a Fitch eligible capital ratio of 16.7% at end-Q108 (regulatory Tier 1 capital adequacy ratios of 13.4% and total capital adequacy ratio of 14.3% at end-Q108).

OAB is traditionally strong in corporate banking, although it also provides retail and some investment banking.

It is the fifth-largest bank in Oman (by assets) and operations are entirely domestic (38 branches).

OAB is 51%-owned by Oman International Development and Investment Company, a local investment company, and 49% by the Arab Bank Group, which also has a technical and management services contract with the bank.