Oman: Banks mulling to raise capital via rights issue
Omani banks are planning to raise their capital base to meet an anticipated asset growth on the back of better demand for credit. Two leading banks - BankMuscat and Bank Sohar - have already announced their plans, while others are expected to follow suit. BankMuscat said it is going to raise RO100 million through a rights offer sometime in the second quarter of this year.
The shares will be offered to the existing shareholders at a 20 percent discount to the market price. The rights issue is part of a capital planning process aimed at meeting the capital adequacy ratio in the medium term. The bank is anticipating a good growth in credit next year and it is getting ready for it. Several big ticket projects that were awarded towards the end of 2011 will reach implementation stage by early this year and the banks need additional capital to meet high demand for credit.
Private placement Off late, BankMuscat has been trying to raise additional capital through various options, including private placement of subordinated debt. The bank last year raised around $300 million syndicated-clubbed loan from foreign banks to meet its long-term requirements for dollar dominated project finance. Further, the bank signed a $170 million loan agreement with IFC Capitalisation Fund to strengthen its capital base. This would also help in supporting the creation of dollar long-term funding base for the bank. The board of Bank Sohar also decided to float a right issue to the tune of RO10 million to be used as capital for establishing Islamic banking window.
The Central Bank of Oman recently said the minimum capital requirement for Islamic banking window operation is RO10 million for conventional banks, which is over and above RO100 million required for a commercial bank in the Sultanate of Oman. Bank Sohar is putting in place frameworks, systems and procedures to facilitate the roll-out of Sharia-compliant products and services.
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