Leading international rating agencies affirm BankMuscat's ratings

Muscat. October 4, 2004: In a series of quick developments, the Central Bank of Oman, the apex bank in the Sultanate of Oman and the Capital Markets Authority have announced their 'in principle' approvals to the merger proposal of BankMuscat (SAOG) and National Bank of Oman. With this, the merger proposal is pending approval only from the Ministry of Commerce & Industry, Government of Oman and the shareholders of the two banks.

Speaking on the decision of the apex bank to flag on the merger proposal, HE Hamoud Sangour Al Zadjali, Executive President, Central Bank of Oman said:

"The Central Bank of Oman has taken a measured view of developments at the two banks and has decided to accord its 'in principle' approval to the merger between BankMuscat and National Bank of Oman. The Central Bank has always believed in the need for strong banks with visionary management, transparent systems & procedures and adequate control mechanisms; banks that would have the best interests of customers and other stakeholders at heart. The merger, we are sure, will help in the creation of an entity that will be well poised to provide better value to the people and investor community in the country, while considerably strengthening the base of the banking industry in the Sultanate." 

Showering the CMA's blessings on the merger proposal, HE Yahya bin Said Al Jabri, President, Capital Markets Authority, Sultanate of Oman said:

"The CMA is glad to forward its 'in principle' approval to the proposal put forth by the Board of Directors of the two leading financial institutions. The merger of BankMuscat (SAOG) and the National Bank of Oman (SAOG), we are sure, will create a significant financial entity that will be far better equipped to meet the needs of an emerging market, provide much better value to its stakeholders, and compete on par with some of the finest banks across the GCC region, which shows every sign of becoming one of the fastest growing and most competitive regions across the world." 

The banking industry in the Sultanate has traditionally played a critical role in the development of the national economy, bolstering domestic consumption patterns, providing liquidity and support to the corporate and commercial sector, and much sought after employment opportunities for young, educated people across the country. The merged entity, it is expected, will be in better position to play this role and provide greater support to several key growth industries and large-scale infrastructure development projects, that are expected to come up in the near future.

Speaking on these developments on the merger proposal, BankMuscat Chairman Sheikh AbdulMalik bin Abdullah Al Khalili said:

"We are extremely grateful to the Central Bank of Oman and the Capital Markets Authority for their prompt response to the merger proposal. The confidence shown by the key regulators and captains of industry to the merger proposal, many of whom who have come forward to shower us with letters and messages of congratulations from Oman and across the region, only goes to confirm and strengthen our belief that the merger will help us build an even stronger, more customer focused bank."

Looking ahead at the milestones that must be reached in the merger process, Sheikh AbdulMalik went on to add: 

"We believe that the Ministry of Commerce & Industry, Government of Oman has been carefully reviewing the merger proposal between the two Banks. With the Central Bank and Capital Markets Authority having blessed the proposal, we are hopeful of hearing from the Ministry shortly.  

After that, it is up to the shareholders of the two banks to decide on how they wish to repose their faith. BankMuscat has always been committed to providing the greatest value to its family of stakeholders. The merger, we believe, will only help us strengthen our overall value proposition." 

The Boards of Directors of the two banks, it may be recalled, approved the merger proposal between BankMuscat (SAOG) and National Bank of Oman (SAOG) on September 23. The respective Boards had also resolved to put forth the merger proposal before the shareholders of the respective banks for final approval. Both BankMuscat and National Bank of Oman are expected to schedule their Extraordinary General Meetings in the month of November.

The merged entity, which will continue under the name of BankMuscat (SAOG), will command significant stature across the region with a combined asset base of USD 6.65 billion dollars and an overall GCC wide ranking of No.22. This is large jump over the No 28 slot that BankMuscat currently fills.

BankMuscat, which has a history of successful mergers to its credit, is expected to work very closely with the management of National Bank of Oman to integrate the finer qualities / best practices and of course, human capital of both organizations, in its attempt to fully reap the benefits of the proposed merger.

In another significant development international rating agencies Fitch and Standard & Poor's have affirmed their ratings of BankMuscat after carefully considering the merger proposal between BankMuscat and the National Bank of Oman.

In separate statements released from their respective offices, the two rating agencies said: 

"Fitch Ratings, the international rating agency, has today affirmed Oman-based BankMuscat's ("BM") ratings at Long-term 'BBB', Short-term 'F3', Individual 'C' and Support '2'. The Outlook remains Stable.  

The merger will create a bank with a market share of loans and deposits in excess of 50%, with 139 branches in Oman, five in Egypt and one each in Bahrain and Abu Dhabi. This will also give the bank the size and scale necessary to execute large value transactions. Such a franchise strengthens further the current strong likelihood of support from the Oman government, should it ever be required." 

And again: 

"Standard & Poor's Ratings Services affirmed all its ratings on Oman-based BankMuscat S.A.O.G. (BankMuscat), including its 'BBB-/A-3' counterparty credit and certificate of deposit ratings on the bank. The outlook on the bank remains stable. 

The rating action reflects the expected dominant domestic commercial position of the new entity and its controlling ownership by the Government of Oman and related entities....The new entity's importance to the economy, its ownership structure, and status of flagship bank, mean that government support in times of difficulty would most likely be available."

While the Ministry of Commerce & Industry, Government of Oman and the shareholders of the two banks are expected to share their vote of confidence on the merger proposal over the next few months, the rapid progress over the weekend seems to indicate that, subject to the remaining approvals coming through, the Sultanate will see the emergence of a banking powerhouse come January 1, 2005.

-Ends-

About National Bank of Oman (NBO)
National Bank of Oman, the first local bank in the Sultanate of Oman, was founded in 1973 and is today the second largest bank in Oman with a paid up capital of RO 70 million and a net worth of RO 97 million as at December 31, 2003.  

National Bank of Oman continues to strive to be the Bank of choice, providing tailor-made products and services to its Corporate, Institutional and Consumer customers, serving the communities in which it operates, and providing opportunities for career development to all its employees. 

The business of the bank is spilt into various segments - Consumer Banking, Corporate Banking, Investment Banking, Treasury and Overseas Branches. It serves its customers through 49 branches, two service centers and 74 ATMs in Oman, as well as 5 branches in Egypt and 1 in Abu Dhabi (UAE).

About BankMuscat (SAOG):
BankMuscat (SAOG) is the largest banking entity in Oman with a strong presence in Corporate Banking, Retail Banking, Investment Banking, Treasury, Private Banking and Asset Management. BankMuscat has a market share of 36.35% in terms of total assets, 37.96% of total credit, 34.49% of total deposits and 34.52%of savings deposits in the Sultanate as on 30 June 2004. The Bank has a network of 90 branches in Oman, a branch in Bahrain and a representative office in Dubai (UAE). The Bank has also recently acquired a 33% stake in Centurion Bank, a new private sector bank in India.  The Bank had achieved an Omanization level of 91.18% as of June 30, 2004. 

The international financial and banking community has lauded BankMuscat's performance and pioneering efforts at setting new standards of excellence in the Banking industry in Oman and in the countries in which it operates across the region for several years now.  The Bank was awarded the 'Best Corporate Bank' and 'Best Retail Bank' in Oman by The Banker Middle East magazine in February this year. It also received the 'Best Trade Finance Bank, Provider' and 'Best Forex Bank and Provider' and 'Best Consumer Internet Bank' in Oman awards by Global Finance magazine this year. 

BankMuscat also holds the rare distinction of being voted the 'Best Bank' in Oman by Euromoney and Global Finance Inc., for the fourth time in a row and three times by The Banker. The Bank has also been awarded the People Development Award 2003 at the recently concluded Oman Awards for Excellence.  

For further information, please contact:
Sukanti Ghosh, Head
Corporate Communications 
E-mail: sukantig@bankmuscat.com                                             
Mobile: + 968 9261325
Fax: + 968 787768

© Press Release 2004