Oman seeks consolidation in financial sector
Muscat , February 25, 2013
Oman's financial regulator, the Capital Market Authority (CMA), is encouraging consolidation in the country's crowded financial sector, aiming in the long term for local banks to build a regional presence in the Gulf region.
"Maybe we are overbanked in a way, so limiting the number of banks would be better for the market, especially for banks starting from scratch," Abdullah Salem Al Salmi, CMA's executive president, said in an interview. "We would like to see some consolidation."
Growth in the banking sector has slowed. Assets in commercial banks in Oman grew 13.9 percent in 2012, compared to 17.6 percent in 2011, central bank data showed.
There are now 18 banks in the sultanate, after last year's merger between the local business of HSBC Holdings and Oman International Bank. The merger created the country's second largest bank by market capitalisation, HSBC Bank Oman, which last month posted a 62.7 percent slump in 2012 net profit.
Also last year, the country's first full-fledged Islamic banks, Al Izz Islamic Bank and Bank Nizwa, were established; they will start operations this year.
Oman's three largest lenders account for approximately two-thirds of banking assets.
The crowded field could lead to cut-throat competition, which would be unhealthy for the market and cause new entrants to struggle, Al Salmi added.
"It will take some time, especially for the full-fledged new Islamic banks, to stabilise and become profitable," he said.
On Monday, both Oman's Bank Sohar and Bank Dhofar denied rumours that they might be involved in mergers. Consolidation is also being considered by Oman's eight state-run pension funds.
Al Salmi did not specify any ways in which the CMA might encourage consolidation.
TAKAFUL AND SUKUK
The country's insurance sector is also seen as overcrowded, with premiums estimated at around 300 million rials ($779 million), Al Salmi added.
"We are talking about 23 insurance companies operating in Oman and I think that is too many for the size of our market."
The CMA has approved three takaful (Islamic insurance) licences, one of which is for a conventional insurer to convert its operations, Al Salmi said. He did not give a preferred number of institutions or a time frame for any mergers.
"There is no particular number, but a smaller amount will be better for the market, shareholders and policyholders as well."
The CMA has drafted specific rules for takaful and sukuk (Islamic bonds), but the final versions are yet to be published.
"We hope to see the regulations out very soon. There is an urgency for these rules to be issued and I think we have to have the full chain in place, otherwise we will anticipate some problems."
Islamic banks will be able to operate more efficiently if the local financial market includes a full range of sharia-compliant products, including takaful and sukuk.
Even though the rules have not been finalised, the CMA has approved sukuk issuance by two financial institutions, Al Salmi said, declining to name them.
"We have approved at least two issuance of sukuk already even before the regulations, considering the need for these instruments to be there." - Reuters
More Finance & Capital Market Stories
- Bahrain firms plan IPOs
- Serbia wins $1bn Abu Dhabi loan
- Key equity banker resigns from Saudi Fransi
- DMCC to boost Islamic commodity trade with tie-ups
- IDB, KIA units to invest in Morocco
- First Gulf to set up $1bn sukuk in Malaysia
- Singapore’s UOB Bullion and Futures joins DGCX
- Infrastructure investment ‘key to growth’
- BKIC declares 30pc dividend
- StanChart profit falls 16pc in 2013
- Veteran Saudi banker to head AMF
- Dubai World prepays $284m to creditors
- EFG-Hermes sells Damas stake to Mannai
- Ultra rich number to grow 35pc in Mideast
- Saudi IPO market 'set for big year'
- RAK 'exploring' ceramics unit stake sale
- Bahrain Bourse wins key UK award
- Alba backs Euromoney forum
- URC bond rating upgraded to stable outlook
- GCC urged to set up onshore financial centres
- Consolidation push paying off for Bahrain banks
- Mubadala to focus more on US, Europe
- Six banks join plan for shared customer data register
- UAE economy grows 4pc in 2013
- Egypt foreign reserves up to $17.3bn
- StanChart opens second branch in Iraq
- Oil below $90 to hit GCC economies
- Payfort offers zero deposit scheme to SMEs
- In a first, NCB Capital names female CEO
- Du enters $1.17 billion financing deals