Investor Presentation March 2021 Table of Contents
I. Introduction 3
II. Operating Environment 6
III. Business Overview 14
IV. Financial Performance 23
V. Annexure 28
2 I. Introduction
3 Bank Muscat at a glance
Overview Major Shareholders % as of Mar 2021 Largest Bank in Oman with a significant active customer base with over 2 million clients and a workforce of 3,841 employees as of 31st Mar 2021. Royal Court Affairs, Bank Muscat is rated Ba3 by Moody’s (negative), B+ by S&P (stable) and BB- by 23.63 Fitch (negative) Others, 35.12 Established in 1982, headquartered in Muscat with 174 branches across Oman, 2 branches overseas, and 3 representative offices Dubai Financial . Fully diversified commercial bank offering corporate and retail banking services Group LLC, 11.77 . Primarily domestic dominated operations with over 97% of operating income Public Authority for Jabreen generated in Oman Social Insurance, International . Meethaq – pioneer of Islamic Banking services in Oman, officially launched in 5.14 Development, 9.99 2013 with full fledged product and services offering Ministry of Defence Civil Service Listed on the Muscat Securities Market (with a market cap of USD 3,583 million as of Pension Fund, 6.49 Pension Fund, 7.86 31st Mar 2021), London Stock Exchange & Bahrain Stock Exchange Key Financials Bank Muscat Footsteps
In US$ Millions, unless Mar'21 2020 2019 2018 otherwise stated Merger of BMI Merger between Bank WITH Al Total Assets 32,732 32,347 31,925 31,917 Bank of Muscat Acquisition of Salam Bank, Bahrain Gross Loans 25,210 24,242 23,875 24,073 & Bank Al Ahli Al the Baharaini Omani Listed on 1st Branch in operartions of 1st Branch in Meethaq Deposits 21,938 21,761 20,894 21,981 the MSM in 1993 ABN AMRO Saudi Arabia Kuwait launched Operating Income 315 1,186 1,227 1,160 Net Profit 122 424 482 467 1982 1993 2000 2002 2004 2007 2009 2010 2013 2014 Tier 1 19.16% 19.74% 18.78% 17.98% Total CAR 20.04% 20.77% 19.72% 19.22% Acquisition Muscat Loans to Deposit Ratio 109.84% 106.69% 110.37% 105.63% Establishment Mergerwith of 49% Capital LLC of Bank of Commercial stake in launched NPL Ratio 3.58% 3.62% 3.25% 3.09% Muscat Bank of BMI Bank Cost/Income 38.79% 39.39% 41.50% 42.61% Oman ROA 1.51% 1.32% 1.51% 1.53% ROE 10.17% 9.08% 10.73% 10.88%
4 Bank Muscat has demonstrated strong financial resilience in 2020 & Q1 2021 with an increased asset base supported by high capitalization and stable operating income Bank Muscat – Key Highlights
Dominant Franchise in Oman » Largest Bank in Oman by total assets of USD 32.7bn and a dominant domestic market share of 35.8%, as of 31st Mar Strong Financial Metrics 2021, slightly over the size of next 3 Omani banks Highest Government Ownership combined » Stable and consistent financial performance » Highest Government Ownership among Omani » Largest branch network with 174 domestic branches Banks . Solid topline income growth » The only bank in Oman to be designated a “D-SIB” . Royal Court Affairs: 23.63% . Stable cost-to-income ratio despite business and infrastructure expansion » Significant direct and indirect Government ownership through various entities » Strong and sustainable profitability metrics: . Operating income 2017-2020 CAGR of 1.6% Stable Operating Environment
» Stable banking sector Solid Liquidity & Capital Position . Prudent regulatory environment » Stable political system in the Oman with » High liquidity with 21.9% of the balance sheet excellent diplomatic relationship in the region composed of liquid assets » Positioned to benefit from growth in Oman with » Strong capitalization levels offering room for economic diversification focus, favourable substantial growth population demographics and clear policy » CAR of 20.04% as of 31st Mar 2021 measures that would lead to the reduction of the deficit
Stable Asset Quality Management
» Conservative lending approach » Stable and experienced management with proven track » Strong risk architecture and policies record of successful organic and inorganic growth » Strong Board of Directors and corporate governance » Solid asset quality metrics practices
5
Source: Financial results as of Mar-21, Central Bank of Oman Statistical Bulletin II. Operating Environment
6 Sultanate of Oman – Fiscal Adjustment The Government made substantial fiscal adjustments to respond to the decline in oil prices after mid-2014. These efforts resulted in a much lower fiscal deficit reduced by cumulative of 9.7% of GDP from 2015 to 2019…
Non-hydrocarbon Tax revenues Non-hydrocarbon non- revenues (USD mn) tax revenue 2020 MTFP 69.7 63.6 (USD mn) (% GDP) CIT increase 56.4 79.7 Current and capital 51.3 3,075 5.1% (12% to 15%) 46.0 6,902 2,345 budgets for civil, security 40.1 59.9 3,629 1.8% 50% excise and defence reduced by 50.6 tax on alcohol 10% 33.2 SOE current and capital 44.9 2015 2019 2015 2019 2015 2019 expenditures reduced 15.5 Current expenditure Oman Investment Current expenditure Wages and benefits Defense & security excl. interest down 3.6% Authority is established to (9.0) (7.8) (excluding interests (USD mn) (% GDP) (13.4) (16.4) maximize dividends from (17.5) (17.7) (USD mn) Reduction in fuel (M91) 8,856 8,722 and electricity subsidies the GREs 26,356 25,419 14.1% 11.6% Defense and security Excise tax raised on 2015 2016 2017 2018 2019 2020 spending down 13% alcohol and sweetened drinks Wages and benefits flat VAT law issued Government deficit (% GDP) Government debt (% GDP) Oil price (USD/bbl) 2015 2019 2015 2019 2015 2019 on a nominal basis Introduction of Income Tax … following the establishment of Oman’s Tawazun Program is designed to achieve fiscal sustainability by mobilizing non-oil revenues and reducing spending in order to ensure a stable macroeconomic foundation for continued growth and development
Government Deficit With Fiscal Measures (% GDP) Government Debt With Fiscal Measures (% GDP)
(0.5) 82.7 (2.0) 81.0 (5.9) 79.7 (8.6) 75.7 (16.4) 71.7
2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 7
Source: IMF WEO, forecast prices for 2020 Strong Growth Prospects Oman’s growth prospects remain promising as energy prices recover and critical diversification projects approach completion. Oman has the foundation and dynamics for a strong post COVID-19 recovery
Overview Real GDP Growth and Real GDP
» While the pandemic has impacted the Omani economy, the government has (USD bn, %) taken measure to support the economy and promote growth including: . Tanfeedh initiatives, Dqum developments, number of large projects in certain sectors including oil & gas, infrastructure, tourism and others 76.0 75.5 74.7 74.9 74.9 9.00% 75.0
. Introduction of or revising key legislations with regard to foreign investments, 7.00% 74.0 4.7% Public Private Partnership, Bankruptcy law, Banking law, Tax laws, 5.00% Commercial Companies law etc. 73.0 5.0% 3.00% 72.0 71.1
. Key framework for Vision 2040 to navigate the economy in the long term. 1.00% 71.0
-1.00% 70.0 0.9% . Short terms measures include job sector reforms initiated, Job Security Fund 0.3%
-3.00% established, prioritization of Govt. capital expenditure, key development 69.0 (0.8%) projects, rationalizing current and administrative expenditure of various 68.0 -5.00% ministries and government entities. 2015 2016 2017 2018 2019
. Announced number of relief measures to support the economy and Real GDP Real GDP Growth Rate businesses in the near term which include tariff reduction or waiver, deferral instalments and others. Real GDP Growth Growth Rates by Sector
8% (Compound Annual Real GDP Growth for the Period 2015-2019)
9.0% 6% 7.2% 7.3% 5.0% 4.7% 7.0% 6.2% 4%
5.0% 4.3% 2% 3.8% 0.9% 2.6% 0% 0.3% 3.0% 2.0% (0.8%) 1.0%
-2% 1.0%
-4% 2015 2016 2017 2018 2019 -1.0% (1.2%)
Real Petroleum GDP Real Non Petroleum GDP Real GDP -3.0% Total Total non- Hotels and Financial Buildings and Mining and Transport, Public Manufacturing 8 Petroleum Petroleum Restaurants Intermediation Construction Quarrying Storage & Administration activities activities Communication and Defence
Source: National Center for Statistics & Information, World Bank Development Indicators Oman Banking Sector - Overview
Overview Loans and Deposit Growth
» The Omani banking sector comprises of 7 local banks, 2 specialized banks, 9 USD bn Gross Loan: +6.1% Deposits: +4.8% foreign commercial banks and two full fledged Islamic Banks » The top 3 banks after Bank Muscat contribute around 33.1% of total sector 69.3 70.6 65.1 67.1 63.2 64.3 assets. Bank Muscat represents 35.8% of total banking sector assets as of Mar 59.7 59.2 61.4 54.5 2021 » Conservative and Prudent Regulator . A number of regulations and caps in place to support the growth, stability and sustainability of the Omani banking sector . Implemented Basel 3 regulation with effect from Jan 2014 » Banking sector has demonstrated resilience in spite of lower oil prices and challenging economic situation and is well positioned with sound capital and 2017 2018 2019 2020 Mar'21 stable liquidity level Gross loan Deposits
Yield and cost evolutions on loans and deposits1 Capitalization evolution2
USD mn 5.41% 5.47% 5.15% 5.25% 18.5% 4.88% 4.91% 18.2% 17.7% 17.1% 5.05% 4.79% 16.2% 12,984 12,079 12,633 3.93% 11,501 3.71% 10,302 2,854 2,684 2,790 2,526 2.91% 1.74% 1.95% 1.96% 2.46% 1.64% 1,922 1.21% 14.2% 14.4% 0.91% 1.65% 13.8% 1.62% 13.4% 1.25% 13.2% 0.85% 0.92% 0.99%
2015 2016 2017 2018 2019 2020 8,379 8,975 9,395 9,842 10,130 Local Curreny Loans Yield Foreign Curreny Loans Yield Local Currency Deposit Cost Foreign Currency Deposit Cost 2016 2017 2018 2019 2020 9 CET1 capital AT1 and Tier 2 capital Total Capital Ratio CET1 ratio
Source: Central Bank of Oman Statistical Bulletin; Financial results of Oman banks as of Dec-20, Note: OMR/USD exchange rate equal to 2.597 1 Yield on loans and cost of deposits calculated as 12 months average figures, 2 Aggregation of capital across 7 local banks of Oman across years: Bank Muscat, Bank Dhofar, National Bank of Oman, Sohar International, Oman Arab Bank, Ahli Bank and HSBC Oman COVID-19 Response Measures The Government’s timely and supportive measures using a wide array of policy tools to limit the impact of the COVID-19 crisis showcase the effectiveness of decision-making. Government is Well Positioned to Contain The Crisis Spread of Virus has been Contained
» The government’s management of the crisis showcases its proactive leadership and the (COVID-19 daily cases in Oman) effectiveness of its decision-making 3,000 » In March 2020, a Supreme Committee (“SC”) was formed to supervise and oversee the 2,500 government’s response to the COVID-19 outbreak and to take all decisions related to the national response 2,000 » The SC and CBO have taken proactive and well-targeted fiscal, monetary and civil measures 1,500
» The government was proactive in its 2020 Budget by incorporating new fiscal measures and 1,000 introducing a new conservative oil price assumption of $47.6/barrel vs. $58/barrel earlier. The oil price assumption has been further reduced to a conservative $45/barrel on the 2021 500 budget. 0 » Moreover, banks in Oman are well capitalised, allowing them to endure headwinds and Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 withstand impact on capital from provisions taken in anticipation of non-performing loans
Key Measures taken by the Central Bank to support the economy
» Loan installment deferral package offered to impacted businesses and individual » Relaxation in risk classification on availing deferral package borrowers extended till Mar’21 » Additional liquidity support provided at concessional rates, limits and tenors » Modification of loan repayment terms for Government & Private Sector Retirees to banks and Pensioners » Lending ratio limit relaxed providing scope for additional lending » Waiver of interest in cases of job loss / salary reduction. » Capital stimulus by reducing regulatory limits. Prudential filter on IFRS 9 ECL » Waiver of certain fees for businesses and individuals introduced » Reducing the housing loan margin from 20% to 10% for first time home buyers » Reducing the minimum LCR limit from 100% to 75% for affected banks only
10
Source: WHO, Sultanate of Oman’s Base Prospectus Bank Muscat - Unrivalled leading Market Position in Oman
Total Assets (USD mn) Gross Loans (USD mn)
Bank Muscat 32,732 Bank Muscat 25,210
Bank Dhofar 11,727 Bank Dhofar 8,966
National Bank of Oman 9,800 National Bank of Oman 7,982
Sohar International 9,751 Sohar International 6,930
HSBC Bank Oman 6,442 Ahli Bank 6,070
Oman Arab Bank 8,574 Oman Arab Bank 7,179
Ahli Bank 7,327 HSBC Bank Oman 3,662
Deposits (USD mn) Net Profit (USD mn)
Bank Muscat 21,938 Bank Muscat 122
Bank Dhofar 8,073 National Bank of Oman 18
National Bank of Oman 6,748 Bank Dhofar 23
HSBC Bank Oman 5,200 HSBC Oman 9
Oman Arab Bank 7,130 Sohar International 18
Sohar International 5,956 Oman Arab Bank 9
Ahli Bank 5,057 11 Ahli Bank 12
Source: Financial results as of Mar-21, Note: OMR/USD exchange rate equal to 2.597 Bank Muscat - Unrivalled leading Market Position in Oman
Market Share – Total Assets1 and Deposits2 Asset quality3 – Coverage ratio and NPL Ratio
40.0% 35.8% 7.00% 160.00% 34.1% 6.02% 35.0% 6.00% 140.66% 5.65% 140.00% 30.0% 125.09% 120.00% 5.00% 4.55% 4.63% 25.0% 100.00% 4.00% 3.58% 95.66%3.60% 20.0% 12.6% 10.5% 92.85% 87.84% 89.62% 88.06% 12.2% 3.03% 80.00% 15.0% 10.2% 10.1% 8.1% 9.3% 11.1% 3.00% 8.9% 60.00% 10.0% 7.6% 7.9% 6.7% 2.00% 5.0% 40.00% 0.0% 1.00% 20.00% Bank Muscat Bank Dhofar National HSBC Bank Sohar Ahli Bank Oman Arab 0.00% 0.00% Bank of Oman International Bank Bank Muscat Bank Dhofar National HSBC Bank Sohar Ahli Bank Oman Arab Oman Bank of Oman International Bank Oman Total Assets Mkt Share Total Deposits Mkt Share NPL Ratio Coverage Ratio Profitability – RoAE4 Capitalization
20.04% 17.18% 16.10% 20.91% 18.52% 16.37% 15.22% CAR%
100%
98% 0.88% 1.00% 0.76% 8.3% 0.80% 1.06% 0.89% 5.5% 96% 1.22% 3.8% 2.1% 1.4% 2.2% 94% (2.4%) 92% 19.16% 19.91% 15.61% 15.30% 17.46% 14.33% 90% 15.96% Bank Muscat Bank Dhofar National Bank Sohar Int. Oman Arab Ahli Bank HSBC Oman of Oman Bank Oman 88% Bank Muscat Bank Dhofar National HSBC Bank Sohar Ahli Bank Oman Arab Bank of Oman International Bank Oman 12 Tier 1 Tier 2 Source: Financial results as of Mar-21, Central Bank of Oman Statistical Bulletin. Notes: 1 Ranked by total assets market share which is calculated as bank total assets / total conventional and Islamic banking assets as per CBO; 2 Calculated as bank total deposits / total conventional and Islamic deposits, 3 NPL Ratio calculated as Gross NPL / Gross Loans and Coverage Ratio as (Loan Loss Provisions + Non-funded provisions) / Gross NPL, 4 Return on average equity calculated as Net profit attributable to Equity holders after deduction of Tier 1 capital cost for FY20 Bank Muscat - Dominant domestic franchise in the region1
Domestic Market Share – Assets Capitalization
20.0% 19.2% 19.1% 18.5% 18.4% 17.8% 16.5% CAR%
0.8% 1.0% 2.4% 1.0% 1.1% 2.1% 1.1%
64.0% 19.2% 18.2% 18.1% 17.4% 16.0% 15.7% 15.4% 41.8% 35.8% 28.5% 21.7% 20.2% 9.6% BM NCB QNB ENBD NBK CBQ FAB QNB NBK BM FAB ENBD NCB CBQ (Ba3/B+/BB-) (A1/BBB+/A-) (Aa3/A/A+) (A3/-/A+) (A1/A/AA-) (A3/BBB+/A) (Aa3/AA-/-) (Aa3/A/A+) (A1/A/AA-) (Ba3/B+/BB-) (Aa3/AA-/-) (A3/-/A+) (A1/BBB+/A-) (A3/BBB+/A) Tier 1 Tier 2
Net interest margin over avg. assets2 Return on avg. assets2
3.02% 2.07% 2.60% 2.32% 2.13% 2.06% 1.67% 1.32% 1.22% 1.21% 1.41% 1.01% 0.86% 0.84%
NCB BM ENBD QNB CBQ NBK FAB NCB BM QNB FAB ENBD CBQ NBK (A1/BBB+/A-) (Ba3/B+/BB-) (A3/-/A+) (Aa3/A/A+) (A3/BBB+/A) (A1/A/AA-) (Aa3/AA-/-) (A1/BBB+/A-) (Ba3/B+/BB-) (Aa3/A/A+) (Aa3/AA-/-) (A3/-/A+) (A3/BBB+/A) (A1/A/AA-)
13
Source: Financial results as of Dec-20, Central Bank of Oman Statistical Bulletin. Notes: 1 Data as of December2020, 2 Net interest margin over average assets and Return on average assets for FY20. III. Business Overview
14 Banks Vision & Strategic Pillars
» Leading financial services provider with largest branch network & innovative product and service offering Bank Muscat » High quality service and customer centric approach through “To Serve you better, everyday” philosophy Brand value » Technology driven with multiple digital channels for sales and services » Dominant position size & proven resilience Customer » Strong financial position, business capabilities and shareholding Centricity » Strong capital and liquidity positions Strong Financial » Lending power / single borrower size Position » Strong profitability coupled with conservative credit provisioning policies Efficiency& » Market share leadership in loans and deposit Productivity
Leverage on » Pioneering investments in technology supporting growth plans Technology And » Multiple digital banking channels for sales and services Infrastructure » Technology driven banking to enhance customer experience and improve internal efficiency Bank Muscat Investments » Innovative products and services offering
Experienced » Stable and experienced management with proven track record of successful organic and inorganic growth Management & Agility & Young Workforce » Talented and young workforce Innovation
Focus on Islamic » Meethaq – Islamic banking platform Banking . Be the market leader in Islamic Banking Business Market Developments in . Endeavor to offer full fledged products and services Leadership Oman . Expansion of branch and channel network
» Ensure sustainable best practices in core business activities: Creating . Contribution to economic performance Sustainable . Development from within Value . Empowering the community . Banking while adhering to the Bank’s corporate values
15 To serve you better, everyday Leading in everything we do by offering simplified & integrated banking solutions. Current Situation and Strategy
Health Risk
» The Bank has been managing the current situation with a well planned approach.
» Focus has been to support customers with number of measures while providing safe and secure working environment to our employees
Liquidity Risk
» Very strong liquidity position to ensure long-term sustainability
» Continue to focus on stable deposit growth
Security Capital Position
» Continue to have strong capital adequacy ratio
» Capital mix is driven by strong core equity ratio
Credit Risk
» Continue to follow a conservative and prudent credit policy
» Prudent provision policy and good level of provision coverage
16 “Safety, Security and Sustainability” Bank Muscat Business Lines
Business Lines Breakdown Loan, Advances & Deposits Breakdown
Key Highlights Asset Contribution Profit Contribution Construction, 3.40% Real Estate, 3.10%
FIs, 4.40% Personal Loans, » Leading corporate Banking franchise 24.50% Mining & Quarrying, offering the full array of corporate » USD 11.53 bn » USD 38.1 mn 7.40% Corporate banking services • 35.2% of total • 31.2% of total Banking Manufacturing, » ~ 7,200 corporate customers in Oman assets profit 7.60% » Strong expertise in project finance Others*, 7.70% » Leading Retail Bank platform in Oman » USD 9.40 bn » USD 38.3 mn Housing Loans, Personal » Over 2 million retail customers in Oman 16.70% Utilities, 7.90% Banking » Largest distribution network (150 • 28.7% of total • 31.3% of total Advances Loans & assets profit Transport, 8.20% conventional branches) Services, 9.10%
» Comprise of treasury, corporate finance, » USD 7.05 bn » USD 41.5 mn Wholesale asset management and financial Banking • 21.5% of total • 33.9% of total Private Commercial institutions assets profit 19.8% Individual & Others , 51.0%
» RO 120 mn (c.USD 311 mn) capital assigned to this business » USD 4.02 bn Meethaq – » USD 7.7 mn Islamic » Officially launched in January 2013, • 12.3% of total • 6.3% of total profit Banking currently operating through 23 full assets fledged Islamic branches Deposits Ministries & Other » Presence in Saudi Arabia & Kuwait » USD 0.71 bn » USD (3.3 mn) Gov. Orginisation International 29.2% through a branch, and 3 Rep offices Operations • 2.1% of total • (2.7%) of total across Asia assets profit 17
*Others include: Import trade (2.9%), Wholesale & Retail Trade (1.8%), Government (1.20%), Export Trade (0.3%), Agriculture/Allied Activity and Others (1.3%) Corporate Banking
Overview Opportunities Strategy
» Leading Corporate Banking Franchise » Large number of infrastructure/ Industrial projects in » Leverage on leading position and expertise . Extensive and expanding range of products and the pipeline . Reinforce presence in Oman across all segments in services » Privatisation and diversification drive by Government the value chain . Strong project finance capabilities » Increasing business flows between Oman and regional . Benefit from large infrastructure and industrial » Large corporate client portfolio with c.7,200 customers countries projects in Oman and lead bank for top tier Omani corporate entities » Focus fee income generating business » High level of sophistication differentiated through . Transaction banking business to enhance fee technology led investments income » Commitment to maintain strong control over asset . Explore cross sell opportunities among business quality lines » Utilize presence in regional markets . Grow GCC trade flows share
Corporate Loans - Peer comparison (Q1 2021) Asset Growth Operating Income
USD bn USD mn USD mn
14.85
11,596 373 377 357 5.76 11,501 11,532 343 4.40 4.48 4.11 4.47 11,232 2.51 10,846 87
NBO 2017 2018 2019 2020 Mar'21 2017 2018 2019 2020 Mar'21
Bank
Sohar
Ahli Bank Ahli
Oman Arab Oman
HSBC Oman HSBC BankMuscat Bank Dhofar Bank Total Assets Operating Income
18 International
Source: Bank Muscat unaudited financial statements as of Mar 2021. Personal Banking
Overview Opportunities Strategy
» Leading Personal Banking Franchise in Oman » Government spending resulting in job creation » Leveraging on leading presence in the retail segment . Over 1.90 million customers » Increase in salaries through various government . Increase penetration and cross sell . Front-runner across retail banking segments initiatives . Explore new business and product lines including cards, Bancassurance and remittances » Favorable demographics » Technology-led product development and » Largest delivery channel network in Oman (173 . Over 35% of the population less than 19 years old service offerings branches, 476 ATMs, 129 CDMs, 166 FFMs and the best online platform in Oman) » Housing finance » Enhance process efficiency and customer » Substantial low-cost retail deposit base convenience » Merchant acquiring market share of over 70% by » Focus on development and utilization of volume as of Dec 2020 and leading e-commerce e-delivery channels business in Oman
Retail Loans - Peer comparison (Q1 2021) Asset Growth Operating Income
USD bn USD mn USD mn
10.36
9,408 539 9,127 509 489 521 3.21 3.58 8,940 2.71 2.45 1.96 8,553 1.15 8,148 140
NBO 2017 2018 2019 2020 Mar'21 2017 2018 2019 2020 Mar'21
Bank
Sohar
Ahli Bank Ahli
Oman Arab Oman
HSBC Oman HSBC BankMuscat Bank Dhofar Bank Total Assets 19 International Operating Income
Source: Bank Muscat unaudited financial statements as of Mar 2021. Wholesale Banking
Overview Opportunities Strategy
» Treasury: funding, asset and liability management » Significant cross-sell opportunities to other wholesale » Strengthen Bank Muscat’s leading position in requirements, offer structured solutions to corporate banking clients specialised areas clients » Leverage transaction experience in attracting new » Utilize the presence in regional markets to expand » Corporate Finance: Leader in corporate advisory: corporate finance mandates business series of successful transactions and track record » Leverage regional expansion to introduce new » Leverage specialised product expertise in other outside Oman products markets » Financial Institutions: Trade, Debt Solutions and » Strong growth potential in the high net worth market » Leverage on expertise built to further grow the market correspondent banking services segment share and increase the market potential » Asset Management: Largest Omani mutual fund manager with potential for growth & expanding outside Oman. Investment solutions for high net worth individuals
Securities Portfolio Asset Growth Operating Income
USD mn USD mn 1.91%
Aaa to Aa3 24.95% A1 to A3 6,678 6,657 6,859 7,052 0.00% 193 198 Baa1+ to 5,169 162 172 Ba3 73.14% Unrated 61
2017 2018 2019 2020 Mar'21 2017 2018 2019 2020 Mar'21
20 Total Assets Operating Income Source: Bank Muscat unaudited financial statements as of Mar 2021. Meethaq – Islamic Banking
Overview Opportunities Strategy
» One of the most successful Islamic banking operations » Growth momentum continued since the launch » Full fledged product and service offerings in Oman since 2013 indicating potential in the market » Increase Meethaq exclusive branch network to an » 24 dedicated branches throughout the Sultanate » Shari’a governance structure ensures transparent optimum level banking » Innovation in product offering and services to create a » Customer Centric approach and transparency niche » Large network at disposal to leverage business » Technology driven customer service delivery within the » Established Sharia Board comprising of experienced » Awareness drives on Shari’a compliant banking to Shari’a compliance ambit and reputable Sharia scholars increase customer base
Gross Financing Portfolio Operating Income
USD mn USD mn 4,000 3,517 90 81 3,500 3,283 79 78 3,096 80 2,940 70 3,000 70 2,566 2,500 60 2,000 50 40 1,500 30 24 1,000 20 500 10 0 0 21 2017 2018 2019 2020 Mar'21 2017 2018 2019 2020 Mar'21
Source: Bank Muscat unaudited financial statements as of Mar 2021 International Operations
Country Entity Overview & Strategy
» Focus on bulk deposits from large corporate and HNI clientele Bank Muscat » Enhance scale through continued focus on corporate, trade and treasury businesses Riyadh Branch » Selective approach to asset growth – medium-size ticket, contract-backed funded & unfunded business. » Cost containment and increase shared resources with Head Office
» Focus on brokerage, asset / wealth management and corporate finance advisory services » Scale up business volume while containing costs » Focus on institutions and select HNW customers in KSA (for brokerage and wealth management) » Leverage expertise built in Oman in Corporate Finance/Advisory
Kingdom of SICO Acquisition Saudi Arabia In March 2021, Parent Company sold 72.71% stake in its wholly owned subsidiary, Muscat Capital Company (cjsc) (MC), based in Riyadh, Kingdom of Saudi Arabia to SICO BSC (c), a leading regional asset manager, broker, market maker and Muscat Capital investment bank (licensed as a wholesale bank by the Central Bank of Bahrain), after obtaining all relevant approvals. Company The acquisition took place by way of a share swap valued at RO 5.6 million, with 38,563,894 of SICO’s treasury shares swapped for a majority stake amounting to 4,362,491 shares out of MC’s 6,000,000 total outstanding shares. As a result of the transaction, SICO owns 72.71 per cent of MC while Bank Muscat owns a 9 per cent stake in SICO.
Due to above transaction, the Parent Company shareholding in MC was effectively reduced from 100% to 27.29%. The Group lost control over MC due to disposal of 72.71% stake with control to SICO. Resultantly, MC has been accounted for as disposal of subsidiary and retained stake of 27.29% has been recognized as an FVOCI investment. The statement of profit or loss contains income and expenses of MC up to the date of disposal and assets and liabilities of MC (before acquisition accounting) have been derecognized in full in the statement of financial position at 31 March 2021. Fair value of net assets de-recognised is RO 6.7 million.
» Focus on corporate, trade and treasury businesses » Focus on corporate customers for corporate, trade and treasury products, as well as contract financing for Govt. and related entities. Bank Muscat State of Cautious approach to credit growth Kuwait Branch Kuwait » Scale up business volumes with a focus on quality lending » Leverage off low operating cost base 22 IV. Financial Performance
23 Financial Highlights – Q1 2021
Bank Muscat continued to weather the global and regional challenges in Q1 2021 and achieved a Net Profit of USD 122.46mn in Q1 2021 (c.41.8% increase vs. 2020)
Operating Profit reached USD 193.01 mn in Q1 2021 (c. 14.3% increase vs. 2020), demonstrating Bank Muscat’s strong revenue generation capabilities despite the global challenges witnessed during the same period.
Other Income achieved in Q1 2021 was USD 97.87 mn (c. 9.6% higher vs. 2020).
Operating Expenses were USD 122.36 mn in Q1 2021 (c. 6.9% lower compared to 2020). The drop is primarily due to prudent and proactive cost management measures taken by Bank Muscat
Net Loans increased by USD 524 mn or 2.2% to USD 24,099 mn compared to USD 23,574 mn in 2020. Customer Deposits Including Islamic customer deposits increased by USD 459 mn or 2.1% to USD 21,938 mn reflecting trust of customers in Bank Muscat
Net Interest Income and Income from Islamic financing reached USD 217.5 mn in Q1 2021 (c. 3.1% higher vs. 2020)
Net Impairment on financial assets was USD 46.96 mn (c. USD 19.8 mn lower vs. 2020). The increase is mainly due to precautionary and collective provisions made in Q1 2020 on a forward-looking basis given as a result of the impact of COVID-19 and drop in oil prices
24 Operating Performance & Profitability
Overview Net Interest Spread
» Resilient operating performance 4.41% 4.61% 4.44% 5.00% 4.18% 4.35% . Stable top line income growth over the years 4.50% 4.00% » Stable cost to income ratio with marginal growth in costs: 3.50% 2.51% 3.00% 2.57% 2.53% 2.54% 2.58% . Solid profitability 2.50% 1.88% 1.61% 2.10% 1.81% . Stable Return on Assets 2.00% 1.86% 1.50% » Strong core revenue generation with net interest income and commission & fees 1.00% over 90% of total operating income 0.50% 0.00% . Increasing focus on top line commission & fee income generation 2017 2018 2019 2020 Mar'21 » Stable Net Interest Margin over the last few years Yield % Cost % Spread %
Operating Income & Cost to Income Profitability
80% 71% 68% 67% 467 482 26.00% 65% 62% 470 459 424 60% 420 21.00% 42.2% 42.6% 41.5% 39.4% 38.8% 370 40% 16.00% 320 11.44% 10.88% 21% 22% 22% 20% 23% 10.73% 9.08% 10.17% 11.00% 14% 270 20% 10% 11% 10% 8% 122 220 6.00% 0% 170 2017 2018 2019 2020 Mar'21 1.00% 120 1.61% 1.53% 1.51% 1.32% 1.51% Net Interest Income Net Commission & fees 70 -4.00% 2017 2018 2019 2020 Mar'21 Other Income Cost to income ratio 25 Net Profit RoAE RoAA
Source: Bank Muscat unaudited financial statements as of Mar 2021 Asset Quality
Overview Loan Growth (USD Mn)
» 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
» Conservative provisioning of impaired assets:
. Provisioning in compliance with IFRS 9
Asset Quality1 Impaired Assets & Provisioning (USD Mn)
145.0% 90.0% 140.7% 75.9% 78.9% 78.7% 80.0% 71.1% 138.5% 70.0% 140.0% 60.0% 50.0% 135.0% 40.0% 27.1% 128.7% 127.5% 1,268 30.0% 21.9% 1,215 130.0% 18.5% 18.8% 987 20.0% 959 745 902 774 877 10.0% 1.8% 2.2% 2.6% 2.5% 125.0% 0.0% 2018 2019 2020 Mar'21 120.0% Stage 1 Stage 2 Stage 3 2018 2019 2020 Mar'21 26 Credit Provision NPL LLR/NPL Source: Bank Muscat unaudited financial statements as of Mar 2021 1NPLs and impairments as at 31 March 2021 reflect the application of CBO measures which allow for loan payment deferrals and restructuring without requiring changes in risk classification or NPL reporting. Funding & Liquidity
Overview Funding Mix » Stable funding structure with a diversified funding base 4% 4% 4% 6% » Largest deposit base in Oman with significant granularity . Retail deposits comprise 46% of total deposits 16% 17% 17% 17% 8% 10% 8% 8% » Top 20 depositors represent 23% of total deposits and comprise of top tier Omani institutions (March 2021) » Strong capitalization levels 72% 69% 71% 70% . Highest CAR in Omani peers and one of strongest in GCC peers » Robust capital position . Total CAR at 20.04% & Tier 1 at 19.16% (March 2021) 2018 2019 2020 Mar'21 . Minimum regulatory requirement of 13.25 % and 11.25% respectively Deposits Borrowings Equity Others » CASA contributing to nearly 66% of total deposits (March 2021). Bank Muscat also has the highest market shares in saving deposits Liquid Asset (USD Mn) Capital Adequacy Ratio
21.00% 20.77% 1.03% 20.04% 20.88% 22.62% 22.91% 21.97% 20.00% 19.72% 19.22% 0.88% 0.94% 19.00% 2,031 1,434 1.24% 2,428 3,394 18.00% 19.74% 3,023 3,743 19.16% 2,080 18.78% 2,589 17.00% 17.98% 2,260 1,538 1,237 2,016 2017 2018 2019 2020 16.00% Bank Placements T Bills & GDBs 2018 2019 2020 Mar'21 27 Cash & equivalent Liquid Assets to Total assets Tier 1 Ratio Tier 2 Ratio Source: Bank Muscat unaudited financial statements as of Mar 2021 V. Annexures
28 Balance Sheet
29 Profit & Loss Statement Amounts in USD Mn 31-Mar-21 31-Dec-20 31-Dec-19 31-Dec-18 Net interest income 196 764 756 719 Net income from Islamic financing 22 72 68 72 Other operating income 98 349 403 370 Operating income 315 1,186 1,227 1,160 Operating costs (122) (467) (509) (494) 193 719 718 666 Net impairment losses on financial assets (47) (210) (145) (112) Gain/(loss) from associates - - - - Profit before Tax 146 508 572 554 Taxation (24) (84) (90) (88) Net Profit 122 424 482 467
Key ratios Cost/income ratio 38.8% 39.4% 41.5% 42.6% Return on average assets 1.51% 1.3% 1.5% 1.53% Return on average equity 10.17% 9.1% 10.7% 10.88% Basic EPS (US$) 0.03 0.034 0.16 0.16 Share price (US$) 1.003 0.997 1.127 1.065
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