Bank Dhofar reports full year results

Pretax profit growth (adjusted for extraordinary expenses of OR26.1m pertaining to a legal case in 2011) came in higher by 2% YoY and operating profits came in higher by 4% YoY. However, on a sequential basis, this quarter the bank registered a decline in operating profit, pretax profit and net income of 3%, 2% and 3% QoQ.

Bank Dhofars' Cost to income ratio came in at 48.2% in Q4 '12 on the back of a 20% YoY growth in operating expenses, the highest in the last 8 quarters and posted a deterioration of 1.5% YoY in the metric from 42.6% in 2011 to 44.1% in 2012. This was due to higher operating expenses of 10% versus a year ago, possibly reflecting expenses incurred towards setting up Islamic Banking operations during the year. The bank intends to launch their Islamic banking services under the 'Maisarah' brand and awaits Central Bank of Oman approval for the same.

Net loans and advances grew 12% YoY and deposits grew 8% YoY. However, QoQ growth rates came in substantially slower on both these metrics translating to a flat growth in assets over the previous quarter. LDRs came in marginally lower relative to the last quarter at 102.3% in Q4'12 but significantly higher than those posted at YE 2011 - 98.4% as loan growth outpaced deposit taking in 2012.

Bank Dhofar trades at a PE based of 10.78x on FY12 EPS and its Price to book stands at 1.56x on declared shareholders equity in 2012. The stock price trades at a dividend yield of 2.7% as per consensus DPS estimates for 2013.