Oman’s Bank Dhofar Mulls Options For Up To $300m Capital Raising

Bank Dhofar, Oman’s third-largest lender by assets, plans to raise its capital by up to $300 million at the earliest opportunity, with a Tier 1 capital-boosting bond its preferred method, the bank said in a statement on Thursday.

It is the latest Gulf lender to consider capital instruments as a way to sustain strong growth, diversify sources of funding and prepare for new banking rules known as Basel III.

Should Bank Dhofar pursue a Tier 1, or core, capital-raising bond, it would be the first such issue by an Omani bank.

The format still needs the approval of the sultanate’s central bank, meaning any issuance was likely to take more time to arrange than other options it was considering to raise its capital, Bank Dhofar said.

Those options included issuing non-voting or preference shares, convertible bonds, or a rights issue, the latter two amounting to around OMR100 million ($259.8 million), it said.

Its plans are subject to approval by shareholders, the central bank and other regulatory approvals, it said.

Bank Dhofar had a total capital adequacy ratio (CAR) of 12.93 per cent at the end of September, down from 13.17 per cent at the same point of 2013, according to its third-quarter financial statement. In comparison, Bank Muscat, Oman’s largest bank, had a CAR of 15.6 per cent, while National Bank of Oman, the country’s second largest bank by assets, had a CAR of 13.8 per cent at the end of September.

In September, Bank Dhofar raised $75 million in debt to bolster its Tier 2, or supplementary, capital.

Unlike European peers that have been dogged by capital concerns in recent years, Gulf banks have increasingly turned to capital-enhancing bonds for positive reasons, seeking to build on existing growth and diversify their sources of capital.

Other Gulf banks to explore capital-boosting bonds include Dubai Islamic Bank, which earlier this month completed a $1 billion perpetual Tier 1 sukuk at 6.75 per cent.

Qatar Islamic Bank and Doha Bank announced plans in recent days for issuance of sukuk and bond respectively.

Bank Dhofar, which remains in merger talks with its smaller rival Bank Sohar, posted a 9.2 per cent rise in fourth-quarter net profit to OMR10.2 million in the three months to Dec. 31.