The Malaysian Reserve

Omani Islamic bank Alizz gets good ratings

Alizz was established in late 2012 and received its Islamic banking licence in September 2013. As at the end of the first quarter of 2018 (1Q18) (Source Alizz Islamic Bank)


Six-year-old Alizz Islamic Bank of Oman has received positive ratings though it was observed that the bank is still largely untested in the long run.

International rating agency Capital Intelligence Ratings Ltd (CI Ratings) has affirmed the long- and short- term ratings on Alizz at ‘omA+’ and ‘omA1’ respectively.

“Nonetheless, given the bank’s short history, the financing portfolio remains largely unseasoned in the sense that a large proportion will have been added in recent years. However, asset quality is generally good in the Omani banking system, despite some weakening in 2017, and regulatory oversight remains stringent,” the rating agency said in a statement.

It added that coupled with the bank’s good underwriting standards, the likelihood of significant deterioration would appear to be fairly limited.

Alizz was established in late 2012 and received its Islamic banking licence in September 2013. As at the end of the first quarter of 2018 (1Q18), the bank had assets totalling 633.7 million Omani riyal (RM6.6 billion) and an equity base of 77.9 million Omani riyal. It reported its first net profit of 309,000 Omani riyal in 1Q18.

CI Ratings said the ratings remain on a ‘Stable’ outlook, noting that given the still relatively short his- tory of the bank, some of the main supporting factors still remain non-financial.

“These include strong shareholders, an experienced management team, and well-developed policies and procedures. An additional and important supporting factor is the close regulatory oversight by the Central Bank of Oman. In financial terms, the main supporting factor at present is the still solid Common Equity Tier 1 ratio and the rapid expansion of the customer deposit base,” it said.

It noted that the main constraints to the ratings include the possible future asset quality trends in what is still a largely unseasoned financing portfolio, coupled with the rapid financing growth, the high customer deposits concentration and the still fairly tight liquidity ratios, despite the improving trend, and in particular the low net liquid asset ratio.

It added that a further constraining factor is still challenging opera- ting environment, as the economy and public finances remain negatively impacted by the relatively low oil prices and the ensuing delayed government payments, which have led to a weakening of loan asset quality for the banking sector.

The bank had recently announced that it is offering a home financing product based on diminishing musharakah contract, which refers to a joint partnership contract between the financier and its client. It had earlier made available financing modes using the ijarah and forward ijarah contracts.

Musharakah literally means partnership. Under the partnership financing mode, the financial institution and its client jointly own a property. The bank’s portion of the property is divided into a number of equal shares, and the client, based on his promise to purchase, will gradually purchase shares of the bank’s portion until the client owns the whole property. It is an option that is based on the principle of partnership between two parties, where the bank and the client jointly purchase and acquire the property the client chooses, the bank explained in its website.

Commenting on its ratings, CI Ratings said Alizz continued to register robust growth in 2017 and in the first three months of 2018. — TMR