This study investigated the effects of the change in oil price to the bank‟s profitability and stability in the Sultanate of Oman. The decreasing oil prices and the role of banks in the country‟s economic diversification goals are the researcher‟s primary motivation to embark on the study. Trend and financial ratio analysis and simple linear regression were used to examine the association between oil price and bank performance. Findings of the study include downward trend on the ROE and ROA of banks but upward trend on CAR in the last ten years. The study also found strong positive correlation between oil price and ROE where the impact of oil price to ROE is statistically significant. There was moderate positive correlation between oil price and ROA and oil price and CAR but these associations were statistically insignificant. Findings of this research can be useful for the authorities in setting policies related to economic diversification efforts and to bank management for policies to improve bank performance.

This study investigated the effects of the change in oil price to the bank‟s profitability and stability in the Sultanate of Oman. The decreasing oil prices and the role of banks in the country‟s economic diversification goals are the researcher‟s primary motivation to embark on the study. Trend and...