Fitch lowers five Omani banks

Fitch Ratings said it downgraded Bank Muscat's long-term issuer default rating to BBB+ from A- and National Bank of Oman's, Bank Dhofar's, Bank Sohar's and Ahli Bank SAOG's long-term issuer default rating to BBB from BBB+.

The outlooks are stable.

The downgrades follow a review of Fitch's assessment of Oman's ability to support domestic banks.

At the same time, the agency affirmed HSBC Bank Oman's issuer default rating at A+ based on support from its ultimate parent, HSBC Holdings plc (HSBC; AA-/stable). The outlook was revised to negative from stable.

Fitch said the downgrades reflect its view that the Omani sovereign's ability to support the banking system has weakened. Lower oil prices and higher-than-budgeted government expenditure have led to a major deterioration of Oman's fiscal position. The IMF estimates that the fiscal deficit will reach double digits, estimated at 14.8% of GDP in 2015 and 11.6% in 2016, from a deficit of 1.5% in 2014. The scale of the budgetary shock highlights Oman's dependence on hydrocarbons. Fitch forecasts an annual average oil price of $65/bl in 2015 and $75/bl in 2016.

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