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Monday, November 9 - 2009

Moody's changes the outlook on National Bank of Oman's D- FSR from stable to positive

Moody's Investors Service has changed the outlook for National Bank of Oman's (NBO's) D- financial strength rating (FSR) from stable to positive. The long- and short-term foreign currency deposit ratings of Baa1/P-2 remain unchanged and carry a stable outlook.

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The decision to change the outlook on the FSR from stable to positive recognises the improvement in the bank's financial fundamentals over the recent reporting periods, and our expectation that these positive trends will continue. Specific credit improvements include the bank's enhanced capitalisation levels, which are superior to those of the other Omani
commercial banks and provide ample scale to support the bank's growth, as well as considerable downside protection. In addition, the level of problem loans in NBO's portfolio, while still high, has declined materially over the past year, and they are now covered by significantly higher levels of provisioning. Finally, NBO's recurring and bottom-line
profitability remain on an upward trajectory, supported by widening net interest margins and improving cost efficiency.

The change in outlook further reflects our expectation that the strategic shareholder, Commercial Bank of Qatar (CBQ), rated A1/P-1/C- by Moody's and which now controls nearly 35% of NBO, occupies four seats on the bank's Board and has managerial control through a three-year management agreement, will continue to materially improve the bank's credit risk
profile through a combination of recoveries, write-offs and provisioning, as well as put in place the necessary risk management culture, policies and procedures to prevent a recurrence of large-scale deterioration in the bank's credit quality. At the same time, NBO is expected to gradually achieve both cost and revenue synergies through its cooperation with CBQ, although such synergies will be likely to fully manifest themselves over the medium term, rather than the near term.

An upgrade of NBO's FSR will be dependent on further improvements in the bank's asset quality, a continued trend or improving profitability, and on the specific strategy developed and implemented for the bank by its new management team. Moreover, should synergies with the strategic shareholder begin to materialise as expected in the form of enhanced
revenues and greater cost efficiency, NBO's FSR rating could have significant upside potential over the medium term.

National Bank of Oman is headquartered in Muscat, Oman, and had total assets of OMR881.7 million (USD2.294 billion) as at end-March 2006.
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Notes and media contacts

Mardig Haladjian
General Manager
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Limassol
George Chrysaphinis
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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