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Credit growth expected to slow down to 10% this year.

Summary: Muscat: Growth in bank credit is expected to slow down to slightly over 10 per ...

Muscat : Growth in bank credit is expected to slow down to slightly over 10 per cent this year from around 15 per cent in 2012, mainly due to restrictions imposed by the CBO on personal loan. Market analysts said that the total net loans and advances of five listed banks (excluding HSBC Bank Oman) in the country increased by 9.6 per cent to OMR11.6 billion by end-June 2013, from OMR10.64 billion for the same period of last year. The six listed banks constitute about 85 per cent of commercial credit in Oman and HSBC Bank Oman is yet to announce its first half results. However, the credit growth on a quarter-on-quarter basis was around three per cent for March-June period of 2013. "Historically, the growth is on a higher side. But it is showing a slowdown in the second quarter," said Suresh Kumar, Manager Research, Al Maha Financial Services. The Central Bank of Oman last year said commercial banks cannot deduct more than 50 per cent of the borrowers' salary as equated monthly instalment 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. Personal loans are the key revenue drivers for Omani institutions due to high interest margins. However, another proposal of the CBO to bring down the upper ceiling of personal loan portfolio of commercial banks to 35 per cent from 40 per cent of a bank's total credit (while increasing the housing loan limit to 15 per cent from 10 per cent now) has been postponed until June, 2014. The CBO took the decision after request from commercial banks. The CBO decisions were aimed at bringing in discipline among those who take personal loan. There have been concerns that a sizeable amount of personal loan is used for conspicuous consumption, which include luxury cars, mobile phones and leisure travel. "The growth in demand for credit is expected to be lower than that of last year. The Central Bank of Oman restriction on personal loan and a slowdown in appetite for credit from large corporate customers are the major factors," said Joice Mathew, Head of Research at United Securities. However, Suresh Kumar said the demand for credit from corporate sector will improve in the second half, thanks to better business confidence in the industrial sector. "The sectoral index of industrial sector soared by 29 per cent since the beginning of the year. This is the best performing sector among all sub-sectors," Suresh Kumar said, adding; "This shows that the growth in profit will be reflected on demand for corporate loan. The corporate sector's confidence has improved and therefore, they will go for working capital and long term capital expenditure." The total net profit of five listed commercial banks (excluding HSBC Bank Oman and after making adjustments for one off gain of OMR26 million by BankDhofar and a one-time provision of Bank Muscat) touched OMR136 million for the first half of 2013, he added.

Muscat Press and Publishing House SAOC 2013

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Publication:Times of Oman (Muscat, Oman)
Geographic Code:7OMAN
Date:Jul 29, 2013
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