BankMuscat H1 net profit at OR60.4m up by 4.5%

The Board of Directors approved the H1 results on Tuesday (28 July 2009).

"In an unusually challenging environment for financial institutions around the world, the Bank recorded a resilient performance during the period in question,"

AbdulMalik bin Abdullah Al-Khalili, Chairman, said.

The net profit for the first half 2009 includes OR53.2m of post-tax gain on sale of HDFC Bank investment. The Bank had sold its remaining stake in HDFC Bank, India in June 2009 and as a result, the total post-tax gain of OR53.2m is reflected in the 2009 H1 Income Statement.

During the second quarter of 2009, the Bank has made provision for credit losses amounting to OR40.2m. This includes provisions on the Bank's exposures to two large business groups in Saudi Arabia - Al Gosaibi and Saad Group.

Net interest income increased by 12% to OR83.4m during the 6-month period ended June 30, 2009 from OR74.7m reported during the corresponding period in 2008.

Non-interest income has grown by OR42.0m to OR84.7m in the first half 2009 as compared to OR42.7m for the same period in 2008 mainly on account of the gain on HDFC Bank investment. However, non-interest income, excluding the gain on HDFC Bank investment and realised losses on Available-for-Sale investment, was lower by 9% compared to the same period in 2008.

In Q1 '09, the Bank accounted for OR7.5m in respect of realised and unrealised losses on the AFS investment portfolio. In Q2 '09, an additional OR1.9m of realised and unrealised losses on the AFS investment portfolio was accounted.

The Bank successfully contained the operating expenses in 2009. Operating expenses for the first half 2009 at OR42.4m was lower by OR1.1m compared to the same period in 2008. Impairment for credit losses for the first half 2009 was OR51.5m as against OR13.1m, an increase of OR38.4m.

Share of loss from associates was at OR4.7m for the six months ended June 30, 2009 mainly due to share of loss from BMI Bank, Bahrain and Silkbank, Pakistan. BMI Bank posted a loss during the second quarter as it has made provisions for exposures to the Saudi groups.

The Bank's net Loans and Advances of OR3,811m as of June 30, 2009 has grown by 20% as compared to the position on June 30, 2008. Customer deposits, including CDs have seen a growth of 14% from OR2,816m as of June 30, 2008 to OR3,214m as of June 30, 2009.

Strategic initiatives

During the second quarter, the strategic initiatives by the Bank included the OR60m 8% subordinated bond, which closed with encouraging response, leading to exercising the Green shoe option of OR15m, thereby increasing the issue size and allotment to OR75m.

Meanwhile, the ongoing CD issuance programme by the Bank accepted a total amount of OR94.10m of bids till the 7th auction. The Bank targets a total of OR250m from the CD issuance programme within a one-year timeframe.

BankMuscat, through its subsidiary Muscat Securities House Company (MSH), recently received approval from the Capital Market Authority to commence business in the Kingdom of Saudi Arabia. The company is a "Greenfield" operation and the Bank does not expect immediate profits from it.