BankMuscat profit soars on back of government investment drive

BankMuscat, Oman¿s biggest bank by assets, has reaped the rewards of a government investment drive.

BankMuscat, Oman's biggest bank by assets, reaped the rewards of a government investment drive as profit for last year surged 38 per cent over 2009.

The bank yesterday reported earnings for the year of 101.7 million Omani rials (Dh970.3m), without providing fourth-quarter figures.

Much of the increase in profit came as provisions for bad loans mandated by the central bank of Oman fell by more than half, said one analyst, who asked not to be named.

"Most of the Omani banks booked for all the bad debts during 2009," she said. "So [now] they have cleaner balance sheets."

BankMuscat's impairments for credit losses last year fell 52.5 per cent to 46.6m rials compared with the previous year. Meanwhile, the bank's lending also helped spur an increase in profit, with net interest income rising 7.3 per cent to 187.2m rials, compared with 2009.

Customer deposits last year rose 14.7 per cent to 3.68 billion rials.

However, the bank's operating expenses increased 25.3 per cent to 102.9m rials, which it attributed to an expansion of its business through investments in technology.

Mahin Dissanayake, an analyst at Fitch Ratings, said that after a difficult 2009, the bank was now well positioned.

Last week, Fitch affirmed the bank's long-term credit rating as "A minus" with a "stable" outlook.

"In 2010, they really cleaned up their books. They were exposed to some of the Saudi Arabian companies that defaulted, and they had some exposure to Dubai World," Mr Dissanayake said. Led by changes to regulations made by the central bank, BankMuscat had also shown some improvement in asset quality, he said, but its biggest advantage had been its size.

"It's the largest bank in Oman, with a huge market share, and it's also the main bank of government," Mr Dissanayake said.

The Omani government has recently been on a huge investment drive, he added.

The bank's stock rose 0.49 per cent to close at 1.028 rials on the Muscat Securities Market yesterday.