Moody's Investors Service has downgraded the Financial Strength Rating (FSR) of National Bank of Oman (NBO) to D- from D, with a negative outlook. The long- and short-term foreign currency deposit ratings for NBO remain unchanged at Baa3/Prime-3, one notch lower than the Baa2/Prime-2 country ceiling, imputing a high level of external support from the authorities, indicative of the bank's size and importance in the domestic market. The outlooks for the deposit ratings remain stable.
Moody's said that the downgrade reflects the rating agency's continuing concerns over the bank's weakening financial fundamentals.
NBO has experienced significant asset quality deterioration during recent years, reflecting both the serious problems experienced by its operations in Egypt and the UAE, and the systemic asset quality deterioration in the domestic banking system. The bank's non-performing loans (NPLs) have
grown at an alarming rate, both in absolute figures and relative to the balance sheet. Consequently, provisioning requirements have been significant, and have resulted in declining levels of income since 1999, including net losses for each of the last three fiscal years.
Moreover, NBO's coverage of non-performing assets by loan-loss reserves remains inferior to that of the other rated Omani banks, added Moody's.
Despite adding provisions of OMR70 million for the year ended 2003, loan-loss reserves cover just 74% of the bank's NPLs, while the uncovered portion of the bank's NPLs represent approximately 70% of the bank's equity.
Headquartered in Muscat, Oman, NBO had total assets of OMR816 million (US$2,123 million) as of December 2003. (menareport.com)
© 2004 Mena Report (www.menareport.com)
