Commercial banks' total assets rise 24.8 per cent: CBO report
Article originally published by Oman Daily Observer 04-Mar-09
MUSCAT -- The total assets of commercial banks increased by 24.8 per cent in January 2009 to reach RO 13,515.6 million in comparison to its level a year ago, primarily on account of an exceptional growth in credit of 38.4 per cent, the Central Bank of Oman (CBO) said in its monthly review of banking and monetary developments. Total growth in monthly credit, however, decelerated to 0.7 per cent during January 2009 from 1.1 per cent and 3.1 per cent during the months of December and November 2008, respectively, suggesting some signs of credit moderation in domestic markets.
"The banking system in Oman has remained largely insulated from the adverse consequences and spill-over effects of external shocks arising from the global financial crisis, even though the external environment continues to deteriorate with further deepening of the contractionary effects of the global slowdown. This has largely been the outcome of sound economic fundamentals as well as prudential and sound regulatory practices and policy initiatives of the Central Bank of Oman," the apex bank said in a statement.
"The strength and resilience of the economy to deal with the macroeconomic challenges arising from the global crisis is evident from the unchanged stable sovereign ratings affirmed recently by Moody's and Standard & Poor's," it added. Investments in securities (both domestic and foreign), which accounted for 9.1 per cent of total assets in January 2009 decreased by 22.4 per cent to RO 1,234.8 million in comparison to its level in January 2008. In particular, commercial banks' outstanding investments in CDs issued by CBO decreased from RO 1,241.8 million as at the end of January 2008 to RO 742.5 million at the end of January 2009, whereas outstanding investments in foreign securities increased from RO 113.8 million to RO 233.2 million during the same period, respectively.
Assets held in the form of cash and deposits with the CBO increased to RO 1,089.9 million at the end of January 2009 from RO 591.3 million a year ago. On a month on month basis, commercial banks' cash and deposits with CBO at the end of January 2009 decreased by RO 340.5 million over its level of RO 1,430.4 million in December 2008, reflecting the reduction in regulatory reserve requirements for commercial banks, namely the reduction in cash reserve ratio from 8 per cent to 5 per cent, which came into effect from January 1, 2009.
On the liabilities side, aggregate deposits (domestic plus foreign currency) increased year-on-year by 27.0 per cent to RO 8,532.3 million at the end of January 2009. Government deposits rose by 67.3 per cent to RO 1,506.3 million, representing 17.7 per cent of total deposits, whereas private sector deposits increased by 17.2 per cent to reach RO 6,454.1 million representing 75.6 per cent of total deposits. It may be noteworthy to mention that total deposits in January 2009 declined marginally by 0.5 per cent over its level at the end of December 2008.
Core capital and reserves increased by 23.2 per cent to RO 1,792.7 million and accounted for about 13.3 per cent of total commercial bank assets at the end of January 2009. As regards domestic monetary conditions, broad money supply (M2) increased by 20.7 per cent in January 2009 over the corresponding period in 2008. Money supply, as represented by narrow money (Ml) comprising of currency held by the public and local currency demand deposits registered a marginal increase of 1.3 per cent over the 12 month period ending in January 2009 to reach RO 2,115.3 million. While currency held by the public rose by 7.1 per cent, Rial Omani demand deposits witnessed a nominal decline of 0.9%.
Quasi money (comprising RO savings and time deposits, certificates of deposit issued by commercial banks, margin deposits and foreign currency designated deposits) increased by 30.2 per cent. With respect to sources of money supply, combined domestic assets of commercial banks and the Central Bank of Oman surged by 35.9 per cent, while net foreign assets of CBO and commercial banks expanded by 11.6 per cent owing to an accumulation of net foreign assets of CBO, which increased by 18.6 per cent, year-on-year.
Given the structure of the economy of Oman with its fixed exchange rate regime, domestic interest rates are expected to move in tandem with interest rate developments in the United States of America. Reflecting the sharp decline in the US federal funds target rate from 3.0 per cent in January 2008 to a range of 0 to 0.25 per cent in January 2009, domestic interest rates in Oman also moderated significantly during the underlined period. In light of these developments, CBO's policy interest rates for absorption of surplus liquidity in the form of CBO CDs of 28 days maturity fell from 1.485 per cent in January 2008 to 0.088 per cent in January 2009.
For injection of liquidity the average rate for repos with CBO declined to 2 per cent in relation to 5.245 per cent in January 2008. More recently, the weighted average interest rate on CBO CDs of 28 days maturity declined sharply to 0.088 per cent in January 2009 from 0.910 per cent in December 2008 suggesting no pressure on availability of Rial Omani liquidity in the system. In line with the general softening of interest rates, overnight RO domestic inter-bank lending rates declined sharply to 0.250 per cent in January 2009 from 1.563 per cent in January 2008.
With regards to commercial banks' interest rate structure, RO deposits (demand, savings and time deposits of all sectors) increased from 2.005 per cent in January 2008 to 2.585 per cent in January 2009. In particular, interest rates on private sector time deposits in local currency have gradually increased from 4.354 per cent in November 2008 to 4.639 per cent in December 2008 and further to 4.795 per cent in January 2009 indicating some signs of marginal tightening in the cost of funds (deposits) for commercial banks. The average RO lending rate also followed a similar pattern from 6.955 per cent to 7.099 and further to 7.237 per cent during the same corresponding period.
By Staff Reporter
© Oman Daily Observer 2009
