Bank Muscat, one of the biggest lenders in Oman, reported a 27 per cent drop in its first-quarter net profit as impairments and other losses rose amid low oil prices and the coronavirus pandemic.
Net profit for the three months ending March 31 declined to 33.25 million Omani rials (Dh316.16m), the lender said in a statement to the Muscat Securities Market, where its shares trade.
Net impairment for credit and other losses almost doubled year on year to 25.73m rials during the period.
“The increase [in impairments] is mainly on account of precautionary and collective provisions being made on a forward-looking basis given the emerging stress in the economic and business conditions as a result of the impact of Covid-19 and the continued pressure on oil prices,” Bank Muscat said on Sunday.
Net interest and Islamic financing income increased by 3 per cent to 81.23m rials but other operating income fell 8.4 per cent to 34.39m rials.
Operating expenses climbed 4.2 per cent year on year to 50.60m rials.
Net loans and advances, including Islamic financing receivables, were 1.2 per cent lower year on year due to the "prepayment of certain large corporate exposures in the last quarter of 2019", the bank said.
Customer deposits, including Islamic customer deposits, increased 2 per cent year on year to 8.1bn rials during the period.
Lenders across the globe are at risk of a decline in profitability as loan growth slows and interest rates fall amid the Covid-19 pandemic, which had infected more than 2.3 million worldwide and killed more than 161,000 people as of Sunday, according to Johns Hopkins University. More than 598,000 people have recovered.
The International Monetary Fund last week projected a 3 per cent contraction in global output this year 2020 and said the outlook for the world economy is worse than the aftermath of the 2008 global financial crisis.
Last month, Oman's central bank introduced an 8bn rial incentive package for financial institutions to ease Covid-19's effects on its economy.
The central bank also cut its repo rate by 75 basis points to 0.5 per cent and ordered banks to cut fees, adjust their capital and credit ratios and be flexible with repayments for up to six months, especially for small and medium-sized businesses.