Investor Subject: Presentation Department: June 2017 Agenda I. - - PowerPoint PPT Presentation

Subject: Department:

Investor Presentation

June 2017

Agenda

• I. bank muscat introduction

4

• II. Operating Environment

7

• III. bank muscat Business Overview

12

• IV. Financial Performance

20

• V. Annexure

25

Note: The financial information is updated as of 30 June 2017, unless stated otherwise.

I. bank muscat introduction

bank muscat at a Glance

Overview Ownership bank Muscat Growth

• #1 Bank in Oman with a significant active customer base in excess of 2 million clients

and a workforce of 3,743 employees as of 30th June 2017

• Established in 1982, headquartered in Muscat with 154 branches across Oman, 2

branches overseas, and 3 representative offices

• Fully diversified commercial bank offering corporate and retail banking services
• Primarily domestic dominated operations with over 95% of operating income

generated in Oman

• Meethaq – pioneer of Islamic Banking services in Oman, officially launched in January

2013 with full fledged product and services offering

• Long term Bank Rating: Moody’s Baa1(stable), S&P BB+ (Negative)
• Listed on the Muscat Securities Market (with a market cap of USD 2,646 million as of

30th June 2017), London Stock Exchange & Bahrain Stock Exchange

4

Key Financials

Source: bank muscat audited financial statements and interim financials

Merger with Commercial Bank of Oman Meethaq launched Merger between Bank

• f Muscat

& Bank Al Ahli Al Omani Listed on the MSM in 1993 Acquisition of the Bahraini operations of ABN AMRO Acquisition of 49% stake in BMI Bank 1st Branch in Saudi Arabia 1st Branch in Kuwait Muscat Capital LLC launched Dubai Rep Office Singapore Rep Office Establishment

• f Bank of

Muscat Merger of BMI Bank with Al Salam Bank, Bahrain 1982 2013 1993 2002 2004 2007 2010 2012 1996 2009 2000 2014

Footsteps of a Leader Throughout Decades

IFC becomes a 5% shareholder

In US$ M illions, unless

• therwise stated

Jun‐17 2016 2015 2014

Total Assets 28,512 28,104 32,581 25,268 Gross Loans 21,880 21,483 19,810 18,298 Deposits 19,418 19,369 17,502 16,481 Operating Income 535 1,081 1058 995 Net Income 219 459 455 424 Tier 1 14.58% 14.75% 13.50% 13.00% Total CAR 17.66% 16.90% 16.10% 15.90% Loans to Deposit Ratio 108.23% 106.69% 99.40% 96.90% NPL Ratio 3.00% 2.91% 2.80% 2.80% Cost/Income 43.26% 40.40% 41.90% 41.20% ROA 1.58% 1.64% 1.60% 1.80% ROE 10.95% 12.50% 13.00% 12.90%

bank muscat – Key Highlights

Management

• Largest Bank in Oman by total assets of 35.35%, as of 31st

May 2017, 3 times larger than the 2nd largest Omani Bank

• Market Capitalisation of USD 2,646 million as at 30th June

2017.

• Largest branch network with 154 domestic branches
• The only bank in Oman to be designated a “D‐SIB”

Strong Financial Metrics Stable Operating Environment Highest Government Ownership Dominant Franchise in Oman

• Highest Government Ownership

among Omani Banks

• Royal Court Affairs: 23.63%
• Direct and indirect Government
• wnership of around 35% through

various entities

• Most profitable bank in Oman
• Strong and sustainable profitability

metrics:

• Operating profit 2012‐2016 CAGR
• f 6.5%
• Net profit 2012‐2016 CAGR of 6.2%
• Solid macroeconomic conditions
• Stable banking sector
• Prudential regulatory environment
• Stable and experienced management with

proven track record of successful organic and inorganic growth

• Good corporate governance

Solid Capital Position

• Strong capitalization levels offering

room for substantial growth

• CAR of 17.66% as of 30th June 2017

Stable Asset Quality

• Conservative lending approach
• Strong risk architecture and policies
• Adequate asset quality metrics

5

Source: bank muscat audited financial statements and interim financials

• II. Operating Environment

Sultanate of Oman – Overview

Overview GDP Growth GDP Composition

US$ Million

(1) Source: Central Bank of Oman website, Rating Reports: Moody’s and S&P as of May 2017

• 2nd Largest country in the GCC with an area covering approx. 309.5 thousand km2,

strategically located, sharing borders with Saudi Arabia and UAE

• Stable Political System, excellent diplomatic relations in the region
• Oman explicitly aims to create a neo‐liberal free market economy, where the

private sector is the driver of the economy as opposed to the state

• Population of 4.57mn ‐ predominantly represented by Omani Nationals who

account for 55% of the total population

• The economy will continue to grow at high rates driven by several factors, such as:
• The increase in hydrocarbon production
• The Government’s balanced support for the economy with disciplined fiscal policy

measures

• Strengthening and growing local demand; increasing services and activities

contribution to GDP

• “Vision 2020” – focuses on diversification, industrialization and privatization, with

the objective of reducing economic reliance on oil revenues and the hydrocarbon sector contribution to GDP

As of December 31st 2016 Source: National Center for Statistics and Information, figure as of Q2 2017

7

Oman Saudi Arabia UAE Qatar Bahrain Kuwait

As of December 31st 20166

Petroleum Activities, 26.86% Agri & Fishing, 1.94% Manufacturing & Mining, 8.83% Const., Elec. & Water supply, 10.89% Transport & Comm., 5.48% Financial Int., 5.99% Public admin. & Defence, 14.58% Wholesale & retail trade, 7.34% Real Estate Services, 5.20% Other services, 12.89% 37,532 23,784 18,151 48,470 49,792 50,083 ‐3.8% ‐2.9% ‐23.7% 8.9% 6.7% 0.6% 2014 2015 2016 ‐30.0% ‐20.0% ‐10.0% 0.0% 10.0% ‐ 20,000 40,000 60,000 80,000 100,000 2014 2015 2016 Non Oil GDP in Current Prices (US$Mn) Oil GDP in Current Prices (US$Mn) % Change % Change

Key Indicators

(1)

2016 2017 Sovereign Ratings Moody's\S&P Baa1/BBB‐ Baa1/BB+ Budget Surplus\Deficit ‐5.3 Bn ‐2.0 Bn Surplus\Deficit % of total revenue ‐61.6% Est ‐34.4% Net Public Debt (% GDP) 29.0% Est 41.0%

Oman Banking Sector – Overview

Overview

• The Omani banking sector comprises of 7 local banks, 2 specialized banks, 9

foreign commercial banks and two full fledged Islamic Banks

• The top 3 banks after Bank Muscat contribute around 37.06% of total

sector assets. bank muscat represents 35.35%

• f total banking sector

assets as of May 2017

• Conservative and Prudent Regulator
• A number of regulations and caps in place to support the growth, stability

and sustainability of the Omani banking sector

• Adequate asset quality

with relatively low impaired assets and sound capitalization

• Implementing Basel 3 regulation with effect from Jan 2014

Loans and Deposit Growth

Gross Loan: +10.9% Deposits: +10.0% US$ billion

Oman in the GCC banking sector context(1) Asset Quality(2)

Notes: (1) Central Bank websites based on the latest available figures for the GCC banking sectors. US$/ AED: 3.67, US$/ SAR: 3.75, US$/ QAR: 3.64, KD/ US$: 0.304, US$/ BD: 0.37 and OMR/ US$: 0.385

8

Source(1) GDP data is estimated for FY 2017 (Source: World Bank) Source: National Central Banks

2) Central Banks, EIU and Bloomberg data as of May 2017 for Oman, Qatar, Kuwait, & UAE, KSA as of June 2017 & Bahrain as of Mar 2017

697 595 341 208 58 80 375 650 177 116 33 70 186% 92% 192% 180% 178% 114% 0% 50% 100% 150% 200% 250% 100 200 300 400 500 600 700 800 UAE Saudi Arabia Qatar Kuwait Bahrain Oman

Assets as a % of GDP

Total Assets in $ Bn GDP in $ Bn Assets as a % of GDP

bank muscat – Unrivalled Leading Market Position in Oman

Total Assets Gross Loans Deposits Net Profit

US$ million US$ million US$ million US$ million Source: Banks’ financial Statements. Based on June 2017.

9

Notes: OMR/ US$: 0.385

bank muscat – Dominant Domestic Franchise in the Region

Market Share ‐ Assets Market Share – Deposits Asset Quality Adequate Capitalization

Assets as % of Total Sector Assets Deposits as % of Total Sector Deposits

15.6% 20.7% 17.8% 18.2% 17.66% 17.5% 16.1%

Source: GCC Central Banks. Banks’ financial Statements. (1) Information for all banks as of June 2017.

10

Total Capital Adequacy Ratio

Key: Qatar National Bank “QNB”, bank muscat “BM”, National Bank of Kuwait “NBK”, National Commercial Bank “NCB”, Emirates NBD “ENBD”, National Bank of Abu Dhabi “NBAD”, Bank of Bahrain and Kuwait “BBK”

18.1%

5.6% 1.9% 1.6% 3.0% 3.1% 1.2% 1.3% 6.1% 84.3% 110.2% 150.0% 131.4% 111.6% 371.4% 51.0% 123.3%

0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 300.0% 350.0% 400.0%

CBQ QNB NCB BM NBAD NBK BBK ENBD

NPL/GL LLR/NPL

15.6% 18.3% 16.6% 16.0% 14.58% 15.4% 14.6% 17.0% 0.0% 2.4% 1.2% 2.2% 3.08% 2.1% 1.5% 1.1% QNB ENBD NBAD NCB BM NBK CBQ BBK

Tier 1 Tier 2

• III. bank muscat

Business Overview

bank muscat Strategy – Key Pillars

Consolidate Leading Position in Oman

• Capitalize on growth opportunities in Oman
• Infrastructure development projects and Government focus on economic diversification and developing tourism
• Omanis entering the workforce; over 45% of the population is less than 19 years old
• Leverage large network of branches and other delivery channels
• Platform to focus on the growth potential
• Cross sell opportunities among business lines and customer segments
• Continue to focus on customer acquisitions and retention
• Focus on fee based income
• Scale up fee driven businesses both in the wholesale banking (transaction banking, investment banking, treasury)

and personal banking (credit card, bancassurance, private banking)

Leverage on technology and infrastructure investments

• Pioneering investments in technology supporting growth plans
• Multiple digital banking channels for sales and services
• Technology driven banking to enhance customer experience and improve internal efficiency
• Customer Convenience and Service Quality
• Innovative products and services offering
• Customer centric approach through “We Can Do More” philosophy

Regional Expansion

• Strengthen regional presence through focused and controlled expansion in GCC
• Leverage existing regional presence to scale up business growth
• Focus on opportunities for controlled expansion in GCC and the region

Focus on Islamic Banking Developments in Oman

• Meethaq – Islamic banking platform
• Be the market leader in Islamic Banking Business
• Endeavor to offer full fledged products and services
• Expansion of branch and channel network

12

Financial strength

• Further enhance financial strength
• Strong capitalization and stable returns
• Further enhance the diversified funding mix and large CASA deposit base.
• Efficient management of operating costs

bank muscat – Business Lines

Key Highlights Asset Contribution Profit Contribution Wholesale Banking(1) Corporate Banking

• Leading Corporate Bank Franchise
• ffering the full array of corporate

banking services

• c. 3,550 corporate customers in

Oman

• Strong expertise in project finance
• US$ 10.3bn
• 35.6% of total

assets

• US$108.7mn
• 37.6% of total

profit

Global Institutions, Investment Banking & Treasury

• Comprise of treasury, corporate

finance, and asset management

• Financial Institutions
• US$ 5.8bn
• 19.9% of total

assets

• US$ 67.2mn
• 23.2% of total

profit

Personal Banking

• Leading Retail Bank platform in

Oman

• Over 1.80 million retail customers

in Oman

• Largest distribution network
• US$ 7.8bn
• 26.8% of total

assets

• US$100.7mn
• 34.8% of total

profit

Meethaq – Islamic Banking

• OMR 50mn (c.US$130mn) capital

assigned to this business

• Officially

launched in January

• 2013. Currently operating through

17 full fledged Islamic branches.

• US$ 3.0bn
• 10.4% of total

assets

• US$ 8.9mn
• 3.1% of total

profit

International Operations

• Presence

in GCC, Iran and Singapore through

• verseas

branches, rep

• ffices

and subsidiary

• US$ 2.0bn
• 7.3% of total

assets

• US$ 3.6mn
• 1.3% of total

profit

Deposits Loans & Advances

(1) Definition of Wholesale Banking has changed since 1st January 2016

13

Source: bank muscat unaudited financial statements as of June 2016

Ministries & Other Gov Orginisations 25% Private Commercial 29% Financial Institutions 2% Individual & Others 43% Services 10% Mining and quarrying 5% Manufacture 6% Real estate 4% Wholesale and retail trade 3% Import trade 5% Financial institutions 5% Utilities 6% Transport 9% Construction 5% Government 0% Agriculture and allied activities 0% Export trade 0% Others 1% Personal and Housing loans 41%

Wholesale Banking

Source: bank muscat audited financial statements and interim financials as of June 2017.

Corporate Loans – Peer Comparison Asset Growth Operating Income Overview Opportunities Strategy

• Leading Corporate Banking Franchise
• Extensive and expanding range of products

and services

• Strong project finance capabilities
• Large corporate client portfolio with c.6,200

customers and lead bank for top tier Omani corporate entities

• High level of sophistication differentiated

through technology led investments

• Commitment to maintain strong control over

asset quality

• Large number of infrastructure/ Industrial

projects in the pipeline

• Privatisation and diversification drive by

Government

• Increasing business flows between Oman and

regional countries

• Leverage on leading position and expertise
• Reinforce presence in Oman across all

segments in the value chain

• Benefit from large infrastructure and

industrial projects in Oman

• Focus fee income generating business
• Transaction banking business to enhance fee

income

• Explore cross sell opportunities among

business lines

• Utilize presence in regional markets
• Grow GCC trade flows share

US$ billion US$ million US$ million

14

Corporate Banking

10.98 4.19 3.99 3.66 2.41 2.60 2.58 BankMuscat Bank Dhofar NBO Bank Sohar HSBC Oman Ahli Bank Oman Arab Bank

Source: bank muscat audited financial statements and interim financials

Securities portfolio (1) Asset Growth Operating Income Overview Opportunities Strategy

• Treasury: funding, asset and liability

management requirements, offer structured solutions to corporate clients

• Corporate Finance: Leader in corporate advisory:

series of successful transactions and track record

• utside Oman
• Financial Institutions: trade, DCM and

correspondent banking services

• Asset Management: Largest Omani mutual fund

manager with potential for growth and expanding outside Oman. Investment solutions for high net worth individuals

• Significant cross‐sell opportunities to other

wholesale banking clients

• Leverage transaction experience in attracting

new corporate finance mandates

• Leverage regional expansion to introduce new

products

• Strong growth potential in the high net worth

market segment

• Strengthen Bank Muscat’s leading position in

specialised areas

• Utilize the presence in regional markets to

expand business

• Leverage specialised product expertise in other

markets

• Leverage on expertise built to further grow the

market share and increase the market potential

US$ million US$ million (1)Securities portfolio represents Bonds & T‐Bills. (2) Others include Baa1 to Baa3 securities and unrated Banks. Data as of June 2017.

15

Wholesale Banking

Global Institutions, Investment Banking & Treasury

Personal Banking

Source: bank muscat audited financial statements and interim financials as of June 2017.

Personal Loans – Peer Comparison Asset Growth Operating Income Overview Opportunities Strategy

• Leading Personal Banking Franchise in Oman
• Over 1.80 million customers
• Front‐runner across retail banking segments

including cards, bancassurance and remittances

• Largest delivery channel network in Oman (154

branches, 424 ATMs, 216 CDMs and the best

• nline platform in Oman)
• Substantial low cost retail deposit base
• Merchant acquiring market share of over 80%

by volume in 2015 and leading ecommerce business in Oman

• Government spending resulting in job creation
• Increase in salaries through various government

initiatives

• Favorable demographics
• Over 45% of the population less than 19

years old

• Housing finance
• Leveraging on leading presence in the retail

segment

• Increase penetration and cross sell
• Explore new business and product lines
• Technology‐led product development and

service offerings

• Enhance process efficiency and customer

convenience

• Focus on development and utilization of

e‐delivery channels

US$ million US$ million US$ billion

16

8.74 3.83 3.51 1.66 1.97 1.64 1.26 BankMuscat Bank Dhofar NBO Ahli Bank Oman Arab Bank Bank Sohar HSBC Oman

Meethaq – Islamic Banking

Source: bank muscat audited financial statements and interim financials

Financing Portfolio Meethaq – Product and Portfolio Development

2017 Consumer

• Child saving accounts, employee saving

funds, Ijara products

Corporate

• Government checking accounts with profit

distribution

Investment & Treasury

• Sukuk issue and advisory, FX hedging

products

Asset Management

• Real estate and
• Equity Funds

Overview Opportunities Strategy

• One of the most successful Islamic banking
• peration in Oman since 2013
• 17 dedicated branches become operative

throughout the Sultanate

• Innovation in product offering and services to

create niche

• Established Sharia Board comprising of

experienced and reputable Sharia scholars

• Growth momentum continued in the second

year of launch indicating potential in the market

• Shari’a governance structure ensures

transparent banking

• Large network at disposal to leverage business
• Awareness drives on Shari’a compliant banking

to increase customer base

• To be the market leader by far
• Full fledged product and service offerings
• Increase Meethaq exclusive branch network to

an optimum level

• Customer Centric approach and transparency
• Technology driven customer service delivery

within the Shari’a compliance ambit

17

739 1,060 1,727 2,221 2,374 500 1,000 1,500 2,000 2,500 2013 2014 2015 2016 June 2017

Loans (USD)

International Operations

Source: bank muscat audited financial statements and interim financials

Assets Operating Income Overview Opportunities Strategy

• Presence in GCC and Singapore
• Branches in Saudi Arabia and Kuwait
• Rep offices in UAE, Iran and Singapore
• 99.99% stake in Muscat Capital LLC – Saudi

based, CMA licensed entity

• 14.7% stake in Al Salam Bank Bahrain
• Large banking markets in Saudi Arabia and

Kuwait

• Pan GCC network offering opportunities for

business and trade synergies

• Increasing trade/business opportunities

between GCC and Asia

• Efficiency: rationalization of back‐office costs –

sharing of operational costs

• Received all regulatory approvals to proceed

with representative office (non‐transactional) in Iran

• Focus on existing GCC operations
• Solidify position and increase profitability
• Drive synergies within the group
• Scale up business volumes to attain desired

return

• Capture trade / business flows between GCC

and Asia

US$ million US$ million (1) Includes US$25 million being gain on acquisition of BMI bank by Al Salaam Bank, Bahrain

18

IV . Financial Performance

Operating Performance and Profitability

Operating Income Composition Profitability Overview Operating Income & Cost to Income

• Resilient operating performance through the financial turmoil
• Solid top line income growth – 5 year CAGR of 6.5%
• Stable cost to income ratio in spite of business and infrastructure

expansion

• Solid profitability
• Stable Return on assets
• Strong core revenue generation with net interest income and

commission and fees contributing to over 78% of total operating income

• Increasing focus on top line commission and fee income

generation

US$ million US$ million CAGR: + 6.5% 41.9% 41.2% 42.2% 41.8% 43.2%

(1) Other income: FX Income, Profit on sale of non‐trading investments, Dividend income and other income

Source: bank muscat audited financial statements and interim financials

20

Cost to Income

US$ million

Operating Income

Asset Quality

Gross Loans – Sector Breakup Impaired Assets and Provisioning Overview Loan Growth

• Stable loan book growth
• Conservative lending approach
• Focus on high quality assets with access to top tier borrowers
• Strong project finance capabilities
• Diversified loan portfolio across sectors
• Adequate provisioning of impaired asset
• Conservative approach – provisioning in line with the higher of

either IFRS or CBO requirements

• Non specific loan loss provisions of 2% on retail portfolio and 1%
• n corporate portfolio

Source: bank muscat audited financial statements and interim financials

21

US$ million US$ million

16,521 18,298 19,810 21,483 21,880 6,360 7,045 7,627 8,271 8,424 2.65% 2.84% 2.75% 2.90% 3.00% ‐ 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2013 2014 2015 2016 June 2017 Gross Loans US$ Gross Loans OMR NPL/GLs

Services 10% Mining and quarrying 5% Manufacture 6% Real estate 4% Wholesale and retail trade 3% Import trade 5% Financial institutions 5% Utilities 6% Transport 9% Construction 5% Government 0% Agriculture and allied activities 0% Export trade 0% Others 1% Personal and Housing loans 41%

Funding and Liquidity

Source: bank muscat audited financial statements and interim financials

Liquid Assets Capital Adequacy Ratio Overview Funding Mix

• Stable funding structure with a diversified funding base
• Largest deposit base in Oman with significant granularity
• Retail deposits comprise 40% of total deposits
• Top 20 depositors represent 31% of total deposits and comprise of

top tier Omani institutions

• Strong capitalization levels
• Highest CAR among Omani peers and one of strongest among

GCC peers

• Adequately capitalised, with total capital ratio at 17.66% and Tier 1

at 14.58%, above the 13.65% and 10.65% ratio required by the CBO

US$ million US$ million

31,545 25,268 22,043 27,141 16.90% 16.10% 15.92% 16.50% 27,416

22

Total Capital Adequacy Ratio Total Assets

17.66%

Subject: Department:

مـكـل ًارــكـش Thank You

• VII. Annexure

Balance Sheet

Source: bank muscat audited financial statements and interim financials

25

Profit and Loss

Source: bank muscat audited financial statements and interim financials

26