Bankmuscat Regs Regulatory News (BKM)

26 Jan 2009 11:24



BankMuscat net profit up 11.2 per cent at RO 93.7 million

50 per cent dividend - 20 pc cash, 30 pc bonds - proposed

MUSCAT, 25 January:  BankMuscat, the leading financial institution in the Sultanate, on Sunday (25 January) announced its 2008 annual results, approved by the Board of Directors. 

The Bank achieved a net profit of RO 93.7 million as against a net profit of RO 84.2 million reported in 2007, an increase of 11.2 per cent.

Net interest income increased by 29.8% from RO 124.8 million in 2007 to RO 162.1 million in 2008. Non-interest income grew from RO 48.1 million in 2007 to RO 74.7 million in 2008, an impressive growth of 55.3% as a result of increased business volumes and cross selling. Operating expenses of RO 84.2 million in 2008 are higher by 19.8% than RO 70.3 million incurred in 2007. The Cost to Income ratio for the year was at 35.6% as compared to 40.7% in 2007 mainly due to higher income growth.

Impairment for credit losses on loans portfolio was RO 24.6 million during the year compared to RO 18.2 million for the year ended 31 December 2007. The impairment charge of RO 24.6 million for the year 2008 includes RO 12.2 million towards non-specific loan loss provisions as per the requirement of Central Bank of Oman. The Bank holds a non-specific loan loss provision of RO 52.2 million as at 31 December 2008. During the year 2008, the Bank recovered RO 12.6 million from impairment for credit losses compared to RO 7.7 million in 2007.

The Bank achieved an operating profit of RO. 152.6 million for the year ended 31 December 2008 as against an operating profit of RO. 102.6 million for the year ended 31 December 2007, an increase of 48.7%. However due to certain one-off impairment losses, the net profit for the year reflected an increase of only 11.2% over 2007.

During the last quarter of 2008, the global market conditions substantially changed as a result of the global financial crisis. This affected the market value of some of the strategic and non-strategic investment portfolio of the Bank. As a measure of prudence, the Bank has considered the following impairment losses which are exceptional in nature in the results for the year 2008:

1) The Bank holds a strategic shareholding of 35% in Saudi Pak Commercial Bank (SPCB), Pakistan and accounts this investment as "Investment in associate" under equity method. Subsequent to the investment in March 2008, the economic situation has deteriorated in Pakistan which has affected the value of this investment. The Bank appointed an independent audit firm to assess the value of this investment considering the current economic and business environment in Pakistan. Even though this investment is strategic in nature, as a measure of prudence, the Bank has considered an impairment loss of RO 17 million, including share of loss from SPCB based on the independent valuation performed in December 2008. This impairment loss was considered in accordance with International Financial Reporting Standards (IFRS). The carrying value of this investment after the impairment loss would be RO 17.9 million. 

2) As per the IFRS and in accordance with recent circular from CBO, the Bank is considering impairment loss of RO 10.9 million on its "available for sale (AFS)" investment portfolio. Out of the total impairment loss of RO 10.9 million, RO 8.2 million relates to local portfolio. In normal circumstances, the mark-to-market impact on "AFS" investment portfolio goes through equity. However, due to the substantial decline in the market value, the unrealised loss was considered for impairment and reflected in Income Statement. 

The return on average assets was at 1.8% in 2008 as compared to 2.3% in 2007. The return on average equity was 14.8% in 2008 as compared to 25.8% in 2007. The basic earnings per share was RO 0.087 in 2008 as against RO 0.090 in 2007.

The Bank's net loans and advances portfolio grew by RO 1,041 million or 38.7% to RO 3,728 million as at 31 December 2008 compared to RO 2,687 million as at 31 December 2007. Customer deposits increased by RO 851 million or 36.6% to RO 3,173 million as at 31 December 2008 compared to RO 2,322 million as at 31 December 2007. Savings deposits had a growth of 17.3% from RO 655 million as at 31 December 2007 to RO 768 million as at 31 December 2008.

Share of loss from associates amounted to RO 3.2 million in 2008 as against share of profits of RO 5.5 million in 2007. The share of loss mainly related to SPCB. The Bank's another associate, BMI, Bank in Bahrain reported a net loss for the year 2008 due to certain impairment losses. The Bank's share of BMI Bank's net loss for the year 2008 was RO. 1.4 million.

The Bank's capital adequacy ratio stood at 13.02 per cent as on 31 December 2008 against the minimum required level of 10 per cent.

The Board of Directors recommended a dividend of 50% - 20% in the form of cash and 30% in the form of mandatory-convertible bonds. Thus, shareholders would receive cash dividend of RO 0.020 per ordinary share of RO 0.100 each aggregating to RO 21.54 million on the Bank's existing share capital. In addition, they would receive mandatory-convertible bonds in lieu of dividend of RO 0.030 per ordinary share of RO 0.100 each aggregating to RO 32.31 million. The mandatory-convertible bonds will carry a coupon rate of 7% per annum. On maturity, the bonds will be converted to ordinary shares of the Bank by using a "conversion price" which will be calculated by applying 20% discount to 3 month average share price of the Bank on the Muscat Securities Market prior to the conversion.

Fifty per cent of the bond amount will mature after a period of 3 years and the remaining after a period of 5 years from the date of issuance. The bonds will be listed on the Muscat Securities Market. 

The proposed cash dividend and issuance of mandatory-convertible bonds are subject to formal approval of the Annual General Meeting of the shareholders and regulatory authorities.

The Bank holds a minority stake of 2.67 per cent in HDFC Bank, India. As on 31 December 2008, the market value of the investment was RO 88.6 million against the cost of investment of RO 19.8 million, resulting in unrealised gain of RO 68.8 million, which is not reflected in the Income Statement as it goes through the equity of the Bank. When the investment is sold, the Bank would reflect the gain in the Income Statement. 

http://www.rns-pdf.londonstockexchange.com/rns/2348M_1-2009-1-26.pdf