Fitch affirms Ahlibank’s rating at ‘BB’
Fitch Ratings has affirmed Ahlibank's long-term issuer default rating (IDR) at 'BB' with a stable outlook and a government support rating (GSR) at 'bb'. Fitch has also upgraded the bank's viability rating (VR) to 'bb-' from 'b+'.
'The upgrade of the VR captures the strengthened financial profile of the bank, following improved profitability amid a post-pandemic economic recovery, higher capitalisation metrics following a recent rights issue, and stabilised asset quality,' Fitch said in a statement.
The rating agency added that Ahlibank's long-term IDRS are driven by potential support from the Omani authorities, as expressed by its GSR of 'bb'.
'The Omani authorities have a high propensity to support the banking system given high contagion risk in the sector and the importance of the banking system in building the local economy. However, their financial flexibility and ability to provide support remain limited, despite improvements in recent years,' Fitch said.
The rating agency noted that business conditions for Omani banks continue to be supported by high oil prices, which Fitch expects to average $80 per barrel in 2024, above
Oman's fiscal break-even oil price. Fitch also highlighted the Omani authorities' commitment to diversify the economy as part of Vision 2040, providing growth opportunities for banks in lending and advisory.
According to Fitch, Ahlibank, a mid-sized Omani bank, holds a market share of 8% by assets at the end of Q3 2023. 'Ahlibank's credit growth over the past four years was above the market average, though we believe this was mitigated by reasonable underwriting and risk controls, focusing on government-related entities and lower-risk retail lending,' Fitch said.
The bank's impaired loans ratio, as per Fitch's estimates, remains one of the lowest in the banking sector, despite having increased since the pandemic. The rating agency noted that Ahlibank's profitability has recovered since the pandemic due to lower impairment charges, higher interest rates, and reasonable operating efficiency.