Oman’s top banks see 34.2 percent decline in profits: KPMG
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Oman’s top banks see 34.2% decline in profits: KPMG

Oman’s top banks see 34.2% decline in profits: KPMG

Increase in non-performing loans squeezed banks’ profits in the GCC country

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The average profits of Omani banks declined by 34.2 per cent for the first half of 2020 compared to the same period in 2019, as a reduction in credit flow, revenue compression and increase in non-performing loans squeezed returns.

An analysis by KPMG shows that Omani banks’ credit losses on loans and advances to customers rose by 120.9 per cent this year compared to H1 2019

Only Bank Nizwa bucked the trend, registering a 37 per cent growth in its net profits for the first half of the year. Oman’s largest Islamic bank’s profits rose to $15.3m compared to $11.2m for the same period last year.

Oman’s economy and the banking sector have taken a hit due to the slowdown in the economy as a result of Covid-19 and the subsequent decline in oil prices.

Read: The growth trajectory of Oman’s startup sector

Across the GCC, governments and central banks announced various economic support measures. The Central Bank Oman, in its first stimulus package, reduced interest rates and urged banks to consider reducing the existing fees related to various banking services and avoid introducing any new fees for the duration of 2020.

“Our analysis shows that Oman’s banks are facing headwinds from the drop in global interest rates in response to Covid-19 and a low oil price environment,” said Ravikanth Petluri, partner and head of Financial Services at KPMG in Oman.

“This impact, coupled with a negative view on the economic indicators in 2020, is clearly reflected in the H1 2020 results analysed by KPMG for Oman’s banks. Barring one exception, a majority of Oman’s top banks have continued to build their loss allowances during the first two quarters of 2020.”

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