* Pending issues resolved. Merger formalities to now gather momentum

* Change in milestones leading up to the merger; Shareholders to know final consideration price at the time of approving merger proposal

* Discussions with KPMG for due diligence in an 'advanced stage'

Muscat. January 3, 2005: The proposed merger between BankMuscat (SAOG) and National Bank of Oman (NBO) is now well poised to move on to the fast track with the two banks agreeing upon a future course of action on all pending issues leading up to the merger.

The merger, which was delayed due to certain procedural issues, is now expected to be completed during the first quarter of 2005. In the light of last financial year coming to a close, it has now been agreed that instead of both banks jointly appointing an independent auditor to review the reasonableness of the provisions made by NBO as at 30 September 2004 as originally planned, an independent auditor would be appointed by BankMuscat to review the reasonableness of the provisions made in NBO's books of accounts, as at 31 December 2004. Bank Muscat intends to appoint KPMG, an International accounting firm, as the independent auditor.

Following the acceptance of the independent auditors report to be presented to BankMuscat, both banks, would call for an Extraordinary General Meeting (EGM) where the merger proposal shall be put forth before the shareholders of both banks for approval. While this marks a change from the steps leading up to the completion of merger formalities proposed earlier - the merger proposal was earlier to be put forth before the shareholders before the completion of independent audit - this move is expected to result in a significant increase in shareholder confidence as shareholders would now know the exact consideration that is to be exchanged as part of the merger.

Confirming these developments, Sheikh AbdulMalik bin Abdullah al Khalili, Chairman, BankMuscat (SAOG) said: 

"Though we were extremely keen to complete all merger formalities by the beginning of the year, the revision in timelines, and earlier proposed formulae, is only logical given the fact that we are already at the close of the last financial year. The change in approach is also expected to significantly enhance shareholder confidence as shareholders of both banks will now be far better informed when the merger proposal is put before them for approval. BankMuscat has always prided itself on the levels of transparency it has sought to adopt, this fits in perfectly into our overall management philosophy."

The merger proposal between the two banks, it may be recalled, had been put forth and approved by the Boards of Directors of National Bank of Oman and BankMuscat (SAOG) on 23 September this year, and had also met with approvals from the Central Bank of Oman and the Capital Markets Authority, Sultanate of Oman, shortly thereafter. The merger proposal is subject to the approval of the shareholders of the two organizations and due approval and registration with the Ministry of Commerce & Industry, in accordance with the Commercial Companies Law of Oman.

Speaking on the new road map leading up to the merger, Sheikh Suhail Bahwan, Chairman National Bank of Oman said: 

"Both BankMuscat and National Bank of Oman have always had the best interests of their stakeholders at heart. The new approach, we believe, will significantly re-affirm our belief in the eyes of our shareholders that the merger will result in the creation of a significant banking entity that will be capable of providing far more shareholder and stakeholder value than before. We are glad that the merger proceedings look well poised to gather momentum and soon come to a logical conclusion." 

The merger, it may be recalled, is expected to create a US 6.65 billion dollar entity that will offer customers in Oman an enhanced range of new generation banking products and services and,

"will also be in a far better position to fend off the higher levels of competition that is expected with the opening up of the nation's borders, post the implementation of the Basel II accord and the WTO directives, in the coming years", Sheikh AbdulMalik added.

-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 36.73% in terms of total assets, 37.64% of total credit, 35.52% of total deposits and 34.6%of savings deposits in the Sultanate as on 30 September 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 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 24787768

© Press Release 2005