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

The Support Rating Floor is affirmed at 'BBB+'.

OIB's IDRs reflect the high probability of support available from the Omani authorities, if needed. Fitch's assessment of support is based on OIB's systemic importance and the Central Bank of Oman's past history of support for the sector.

The Individual Rating considers the bank's good franchise, improving asset quality and comfortable profitability, capital and liquidity ratios.

The rating also reflects OIB's relative size, slow revenue and profit growth, its past problems in retaining senior management, as well as risks inherent in the Omani economy.

The bank has appointed a new General Manager in August 2007 and has since filled several key positions, although three vacancies remain.

In Fitch's opinion, it is important that a complete management team is in place to drive the bank forward, although the board and the existing management to date have done an adequate job in steering the bank.

Fitch welcomes OIB's new medium-term strategy which aims to resume expansion, particularly in local retail and corporate sectors.

This should be achievable given OIB's market position and franchise, although growth that is too fast could lead to a change in risk profile.

The bank is also in the process of significantly expanding its branch network, which should support plans for retail growth.


OIB's profitability indicators remain satisfactory.

However, margins have narrowed and overall core revenue generation capacity has come under some pressure.

Fitch, nevertheless, views positively the strong growth in fee-based income due to high trade finance and non-funded business volumes.

Operating profits are also supported by good cost control and high loan provision reversals.

Asset quality is improving due to large recoveries, although Fitch notes that the non-performing loan (NPL) ratio (5.2% at end-H108) remains on the high side.

OIB benefits from strong customer deposit funding and has ample liquidity, as evidenced by a low loan/deposit ratio and a high liquid asset ratio.

OIB's capital ratios are satisfactory, reporting a Basel II Tier 1 ratio of 14.5% and total capital ratio of 15.4% at end-H108. The Fitch eligible capital ratio stood at 17.3% at end-H108.

OIB is the third-largest bank in Oman with 82 branches and 105 ATMs across Oman.

International operations are limited to two branches in India and three in Pakistan.

The bank's main shareholder is Dr. Omar Al Zawawi who holds a significant stake. OIB is listed on the Muscat Securities Market.