Capital Intelligence raises Bank Muscat's foreign currency long-term rating to A

This follows the recent upgrade in the foreign currency ratings of the sovereign. As the country's largest bank with a major share of the Omani banking sector assets BM can expect to receive considerable support from the sovereign in case of need. The government is also its
largest single shareholder. The ratings are underpinned by the Bank's good management, diversified business base and sound overall financials.

BM's financial strength rating is maintained unchanged at A-. Any future upgrade of the financial strength rating will depend on the expansion of the balance sheet and overseas diversification which will be challenging given the strong competitive pressures in target markets the Bank performed well in 2007, with the robust increase in business, a wider interest differential and strong growth in non-interest revenues contributing to its overall good profitability. A booming local economy and healthy corporate performances underpin the Bank's continuing sound assets quality.

Nonperforming loans are at a low level and are more than sufficiently covered by provisions. Corporate lending opportunities are plentiful in Oman and Capital Intelligence expects sector concentrations in consumer loans to gradually fall over the coming years. The Bank has demonstrated its ability to raise fresh capital when needed. Shares issued to a new strategic shareholder, a Dubai government entity, last year have improved BM's prospects in the UAE apart from strengthening its capital ratio. Liquidity has tightened due to the substantial increase in lending, but key ratios continue to be satisfactory overall. BM has managed its maturity gaps well despite the growing long-term credit exposures on its books.