MUSCAT: Oman’s two full-fledged Islamic banks have yet to post a profit but their customer deposits are surging, increasing pressure on authorities to develop Sharia-compliant money market tools and make a long-awaited sukuk issue.
They reached a combined 440.4 million rials ($1.14 billion) against 154.8m rials a year earlier, according to Reuters calculations based on company financial statements.
This compares with 4.5 per cent and 15.1pc increases in deposits at Bank Sohar and Ahli Bank respectively during the same period. HSBC Bank Oman saw a 0.1pc drop in deposits.
Oman was the last country in the GCC to introduce Islamic finance, granting licences to Al Izz Islamic Bank and Bank Nizwa in 2013.
Combined customer deposits at the two Islamic banks and Bank Muscat, which operates the largest Islamic window in Oman, almost tripled in the year to March.
While the Islamic banks’ deposit growth is welcome, it puts them in a difficult position, because in contrast to conventional banks whose markets are much more developed, they still have few tools which they can use to manage the money profitably. This could hurt their bottom lines, and may already be doing so.
Al Izz saw financing receivables grow five-fold for the quarter to March compared to a year earlier, but total income was insufficient to cover expenses; it posted a net loss of 1.6m rials for the quarter, compared to a 1.5m rial loss in the same period last year.
Bank Nizwa saw net losses after tax of 1.6m rials in the latest quarter. That figure was 19pc smaller than its losses a year earlier.
Islamic banks elsewhere in the Gulf use sukuk to manage their liquidity, but Oman has so far seen only one issue of corporate sukuk and bankers say sovereign issuance is needed to energise the market.
A sovereign deal has been delayed by the plunge of oil prices and the uncertainty it is creating over state finances, however. The sultanate now plans to make its first sovereign issue of sukuk, a 200m rial ($520m) deal, by mid-2015, the head of Oman’s central bank said last month.
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