Bank Sohar successfully closed the issue of up to 100,000 perpetual capital securities (including a greenshoe option) on a private placement basis, at a price of OMR1,000 per capital security, aggregating to RO100mn.
The capital securities was issued with an initial interest rate of 7.75 per cent. The results of the private placement were approved by the Capital Market Authority (CMA).
According to an official statement by the bank, CMA allotted the capital securities to successful subscribers in line with the terms and conditions of its prospectus. Post CMA approval, the capital securities were listed on the Muscat Securities Market (MSM).
“Bank Sohar has successfully closed the issue last month as planned. The over-subscribed issue further strengthens our capital base and credit rating offering an initial coupon of 7.75 per cent, which compares well with the perpetual bonds issued by other banks in Oman,” said, Sasi Kumar, acting chief executive officer of Bank Sohar.
“The reset of coupon rate after 5 years provides potential return protection to investors, if interest rates rise. A perpetual bond is a good investment opportunity as the banking sector in Oman is well regulated and has been resilient to systemic risks in the international banking sector. Also, reputed and quasi-government principal shareholders are expected to support the Bank at all times,” he added.
Sasi Kumar said that the board’s vision in issuing these bonds is to augment the Bank’s Tier 1 capital. During the bank’s extra ordinary meeting (EGM) in August, the board approved the issuance of Additional Tier I Capital Securities amounting to OMR100,000,000 (70,000,000 perpetual capital securities issue with a green shoe option of an additional 30,000,000 capital securities). The funds were to be issued in the form of perpetual bonds through a private placement with a nominal value of OMR1,000 per bond.
With the over-subscribed closing of its perpetual capital securities issue, the bank has taken another step towards building a successful strategy for growing its market share and expanding liquidity. In addition, the bank has also strengthened its capital base through a rights issue and capitalisation of profits. Bank Sohar’s non-performing assets (NPAs) are one of the lowest at approximately 1.61 per cent of net loans and advances.
On all parameters the bank has recorded strong performance in first half of 2017. It is one of two conventional banks to report growth in net profit, an increase of 31.24 per cent to OMR11.566 million in first half of 2017 as compared to OMR8.813 million during the same period in 2016.
Deposits from customers have remained stable during the period. The loan book growth has been funded through an increase in inter-bank borrowings with maturities in excess of one year, overseas syndicated borrowings with maturity of three years and shareholders’ equity.
Within a short period of 10 years, the bank has achieved a relatively significant market presence. As of December 31, 2016, its market share was 8.83 per cent in Total Credit, 9.22 per cent in credit to private sector, 8.50 per cent in deposits from private sector, 7.59 per cent in total deposits and 8.59 per cent in total banking assets. Interest income has grown at a compound annual growth rate (CAGR) of 29 per cent per annum from 2007 to 2016.
Profitability of the bank almost doubled by 2015 after it reported its first profits in2009. Profit of the bank increased to OMR19 million in 2016 compared to a loss of OMR1.5 million in 2007. The bank recorded 13 per cent per annum growth in profits from 2009 to 2016.