Oman's Banking Outlook Remains Favourable

**Tim Elliott** (0:00)
This is the Morning Drive. It's Mira Business FM. Regional conflict continues to keep markets on edge, but the Gulf banking sector is proving, I think it's fair to say, more resilient than most people expected. A new Fitch Ratings report says, operating conditions for Omani banks remain favorable despite ongoing geopolitical risks. So what does that tell us about the outlook for banks and for the broader financial landscape right here in the UAE?
And to some extent, I guess, beyond as well. Joining us to talk this through is Amin Sakhri, Director of Financial Institutions at Fitch Ratings. Amin, welcome to the program. Thank you for joining us.

**Amin Sakhri** (0:44)
Good morning. Thank you for having me.

**Tim Elliott** (0:46)
When we look at the headline risks, geopolitical flashpoints and market jitters, they're all intensified in recent weeks. It feels like banks should be sort of battling down the hatches, Amin. Why are operating conditions for banks in Oman and I guess across parts of the Gulf, holding firm in the face of the headwinds that we're seeing?

**Amin Sakhri** (1:12)
Well, the first thing really is that many banks enter the conflict from a position of relative strength. And to be fair, this could be said for GCC banks overall. We published a paper on this quite earlier on during the conflict. But in the case more specifically on Omani banks, in addition to healthy financial profiles, ahead of the crisis, the operating environment and business conditions have been favorable for banks. This resulted in us upgrading the operating environment score in 2025, in December 2025, to triple B minus, from double B plus previously.
And it's due down to a number of factors. A key factor was that the sovereign has been strengthening, which resulted in also an upgrade on the sovereign to triple B minus for double B plus. And this has been underpinning a favorable momentum for banks' operating environment. Things like the commitment of the authorities to consolidation has been supporting government initiatives, in particular in the context of Oman investment authority strategy to diversify the economy, expand the private sector. Now, specifically when it comes to the conflict, Oman in a GCC context remains the most insulated country to the conflict, primarily for the reason that its exports are less reliant on the straight.
That's an important element. The political stance of Iran vis-a-vis Oman makes it less of a target, albeit not completely immune. And, you know, last but not least, the high oil price is significantly higher than the break-even oil price of Oman, and it would likely remain the case for the whole of 2026 So this means essentially a significant amount of the positivity that the banks enter the conflict with is sort of perpetrated during the crisis. Obviously, as you just said in introduction, I mean, the situation is evolving, in particular now with the ceasefire no longer in place, but the risk of credit risks materializing in the region and you know, man could increase.

**Tim Elliott** (3:21)
I mean, for the conversations we have in this studio, I mean, banks in Oman, banks across the Gulf, as you say, showing impressive resilience, that's kind of the reading. But there's something of a paradox here, isn't there? Because rising regional conflicts alongside strong bank performance, not kind of natural bandmates.

**Amin Sakhri** (3:43)
Yeah, I mean, that's fair to say. I mean, that's a fair observation. I mean, in terms of, again, I mean, the, you know, let us first be reminded that GCC banks overall, and the way we look at it from a ratings perspective, or the vast majority are driven by the strengths of the sovereign. And sovereign has proven, the sovereign have proven quite resilient throughout the crisis with very limited negative rating action. And again, this supports operating environment for banks, more specifically on the underlying strengths of banks, you know, GCC banks and Omani banks, are no exception to that, have very, you know, strong capital buffer with very high average CET1 ratios.
You know, so all these elements are supporting, the resilience of the financial sector. And things like liquidity, for instance, liquidity remains a key strength of banking sectors across the region, with a large amount of deposits coming from the government. And, you know, these deposits are further supported by the high oil prices at the moment.

**Tim Elliott** (4:54)
Yeah, so when you assess these, when you assess the risk regionally at Fitch, talk me through the sort of primary kind of structural cushions, you know, the sovereign banking, liquidity levels that you speak of there, capitalization that are insulating Gulf lenders from external shocks.

**Amin Sakhri** (5:17)
Yeah, I mean, the, you know, the, as I was saying earlier, I mean, the strengths of the sovereign is really key in the region. I mean, we have the vast majority of the rating that are being supported by that. I mean, when you're looking at, at, you know, liquidity factors, for instance, you have, you have around 86% of the banking sectors that is funded by deposit, which is quite significant. And a third of that is coming, is coming from government, you know, government deposit.