Muscat – Fitch Ratings has upgraded the long-term issuer default ratings (IDRs) of five Omani banks – Bank Muscat, Sohar International Bank, National Bank of Oman (NBO), BankDhofar and Ahlibank.

The upgrades follow Fitch’s recent upgrade of Oman’s sovereign credit rating to investment-grade BBB-, driven by sustained improvements in the country’s public and external balance sheets and greater confidence that Oman will maintain prudent policies in a lower oil price environment.

Fitch upgraded Bank Muscat’s long-term IDR to BBB- from BB+, while the long-term IDRs of Sohar International, NBO, BankDhofar and Ahlibank were raised to BB+ from BB. The outlook on all five banks is stable.

Fitch also upgraded Bank Muscat’s Viability Rating (VR) and Government Support Rating (GSR) to ‘bbb-’ from ‘bb+’. The upgrades reflect the bank’s strong financial metrics, leading market position, balanced risk profile and Fitch’s assessment of an improved operating environment in Oman. This is evidenced by the revision of the operating environment score to ‘bbb-’/stable from ‘bb+’/positive.

Fitch said Bank Muscat’s long-term IDR is driven by its VR and underpinned by potential support from the Omani authorities. ‘The VR reflects the bank’s leading market status in Oman, which provides access to high-quality borrowers and significant funding from the government and related entities. It also considers Bank Muscat’s stable asset quality, stronger profitability than domestic peers, reasonable capital buffers, solid funding and healthy liquidity,’ the agency noted.

Fitch added that business conditions remain favourable for Omani banks, supported by high, though moderating, oil prices. The agency said the authorities’ commitment to economic diversification under Vision 2040 should create further growth opportunities for banks. It also highlighted the authorities’ strong propensity to support the banking system, given the sector’s systemic importance and high contagion risk.

Fitch Ratings upgraded Sohar International Bank’s long-term IDR to ‘BB+’ from ‘BB’, and its VR and GSR to ‘bb+’ from ‘bb’. The agency said the upgrades reflect improving operating conditions for Omani banks following the revision of the operating environment score to ‘bbb-’/stable from ‘bb+’/positive. ‘We expect these favourable conditions to benefit Sohar International’s business and financial profiles,’ Fitch said.

Sohar International’s IDRs are driven by its VR and supported by potential government backing, as reflected in its GSR. ‘The VR captures the bank’s improved business profile since 2023, following its merger with HSBC Bank Oman, its larger deposit franchise, adequate capitalisation and stabilising asset quality,’ Fitch added.

Fitch also upgraded NBO’s long-term IDR to ‘BB+’ from ‘BB’, along with its VR and GSR to ‘bb+’ from ‘bb’. Fitch said NBO’s ratings are driven by its VR and supported by potential government assistance. The VR reflects the bank’s strong domestic franchise, balanced business model, improved profitability, reasonable capitalisation, stable funding and liquidity, and recovering asset quality, while also taking into account high concentration risks.

Fitch upgraded BankDhofar’s long-term IDR to ‘BB+’ from ‘BB’ and its GSR to ‘bb+’ from ‘bb’, while affirming its VR at ‘bb’. The agency said the rating is driven by potential government support. ‘The VR reflects the bank’s strong domestic franchise and adequate capitalisation and liquidity. These strengths are partly offset by pressure, although easing, on asset quality, weaker-than-average profitability and high concentration risks,’ Fitch said.

Ahlibank’s long-term foreign- and local-currency IDRs were upgraded to ‘BB+’ from ‘BB’, while its GSR was raised to ‘bb+’ from ‘bb’. Fitch affirmed the bank’s VR at ‘bb-’. The agency said the VR reflects Ahlibank’s moderate franchise, slightly higher risk appetite compared to domestic peers and limited capital buffers, alongside reasonable asset quality and profitability and an improved funding profile.