MUSCAT, 26 January 2010 – BankMuscat, the leading financial services provider in the Sultanate, has proposed 45 per cent dividend for the year 2010, 30 per cent in the form of cash and 15 per cent in the form of bonus shares.

The meeting of the Board of Directors chaired by Sheikh AbdulMalik bin Abdullah Al Khalili, Chairman, yesterday (26 January 2010) approved the 2010 financial report and dividend payout, subject to approval of the Central Bank of Oman and shareholders of the Bank.

Under the proposed dividend payout, BankMuscat shareholders would receive cash dividend of RO 0.030 per ordinary share of RO 0.100 each aggregating to RO 40.39 million on the Group’s existing share capital. In addition, they would receive bonus shares in the proportion of one share for every 6.666 ordinary shares aggregating to 201,962,571 shares of RO 0.100 each amounting to RO 20.196 million. The proposed cash dividend and issuance of bonus shares are subject to formal approval of shareholders at the Annual General Meeting.

The Bank achieved a net profit of RO 101.6 million for the year ended 31 December 2010 as against RO 73.7 million reported in 2009, an increase 37.8%. The net profit for the year ended 31 December 2009 included RO 53.2 million of post-tax gain on sale of HDFC Bank investment, RO 10 million losses on available-for-sale investment portfolio and around RO 60 million of provision for credit losses towards Saudi branch exposures. Excluding these one-off items, the adjusted net profit for the year 2009 was RO 90.5 million. Thus, on a like to like comparison, the net profit for the year ended 31 December 2010 showed an increase of 12.3 per cent over the year 2009.

Sheikh AbdulMalik bin Abdullah Al Khalili said: “The Bank has a strong reputation and is confident of retaining its leading position in the country. With robust policies and procedures on cross-border country/bank exposures to effectively mitigate future challenges, the Bank pursues global best practices in the field of risk management. Key lessons learnt from the global financial crisis will ensure in making risk management practices followed by the Bank more relevant and up to date.”

Net interest income increased by 7.3% from RO 174.4 million in 2009 to RO 187.2 million in 2010 supported by improvement in net interest margin and asset growth. Non-interest income was RO 78.3 million in 2010 as against RO 116.7 million (including gain on sale of HDFC investment) in 2009.  Non-interest income was higher by 22% compared to the year 2009, excluding the gain on HDFC Bank investment and realised losses on Available-for-Sale investment.

Operating expenses for the year ended 31 December 2010 was RO 102.9 million, an increase of 25.3% as compared to 2009. The increase in operating expense is attributable to the long-term vision and strategy to develop the banking infrastructure by way of technology investments, expansion of business and delivery channel network to provide better service and maintain the leadership position. The Cost to Income ratio for the year 2010 was 38.7% as compared to 35.6% for the year 2009, excluding the gain on HDFC Bank investment.

Impairment for credit losses for the year ended 31 December 2010 was RO 46.6 million as against RO 98.2 million in 2009.  During the year 2010, the Bank recovered RO 13.6 million from impairment for credit losses compared to RO 10.6 million in 2009. The Bank holds a non-specific loan loss provision of RO 56.1 million as at 31 December 2010 as per the requirements of the Central Bank of Oman. Share of loss from associates was RO 12.6 million in 2010 as against RO 10.5 million in 2009. Higher share of loss from associates was driven by net loss from BMI Bank due to higher credit losses.

The Bank’s net loans and advances portfolio grew by RO 169 million or 4.4% to RO 4,008 million as at 31 December 2010 compared to RO 3,838 million as at 31 December 2009. Customer deposits as at 31 December 2010 was RO 3,527 million as compared to RO 3,068 million as at 31 December 2009, higher by RO 14.9% mainly due to increase in demand deposits and savings deposits as the Bank continued its efforts to mobilize low cost deposits. The Bank’s savings deposits grew by 12.8% from RO 817 million as at 31 December 2009 to RO 922 million as at 31 December 2010 and demand deposits grew by 28.1% from RO 964 million in 2009 to RO 1,235 million as at 31 December 2010.

The return on average assets improved from 1.2% in 2009 to 1.74% in 2010.  The return on average equity was 14.6% in 2010 as compared to 10.9% in 2009. The basic earnings per share was RO 0.075 in 2010 as against RO 0.068 in 2009. The Bank’s capital adequacy ratio stood at 15.4% as on 31 December 2010 before the appropriation for dividend for the year 2010 against the minimum required level of 12% by the Central Bank of Oman.