Subject:Investor Presentation Department: 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 #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 generatedinOman . 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 bank Muscat Growth Key Financials
Footsteps of a Leader Throughout Decades In US$ M illions, unless otherwise stated Jun‐17 2016 2015 2014
Merger between Bank Total Assets 28,512 28,104 32,581 25,268 of Muscat Gross Loans 21,880 21,483 19,810 18,298 & Bank Al Ahli Acquisition of the Merger of BMI Bank Deposits 19 , 4 18 19 , 3 6 9 17 , 5 0 2 16 , 4 8 1 Al Omani Muscat Capital LLC Meethaq Bahraini operations of with Al Salam Bank, Operating Income 535 1,081 1058 995 Listed on the MSM in launched launched ABN AMRO Bahrain Net Income 219 459 455 424 1993 Tier 1 14 . 5 8 % 14 . 7 5 % 13 . 5 0 % 13 . 0 0 % Total CAR 17.66% 16.90% 16.10% 15.90% 1982 199319962000 2002 2004 2007 2009 2010 2012 2013 2014 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% Establishment Dubai Rep Merger with Acquisition of 1st Branch in 1st Branch in Singapore ROA 1. 5 8 % 1. 6 4 % 1. 6 0 % 1. 8 0 % of Bank of Office Commercial 49% stake in BMI Saudi Arabia Kuwait Rep Office ROE 10 . 9 5 % 12 . 5 0 % 13 . 0 0 % 12 . 9 0 % Muscat Bank of Oman Bank
IFC becomes a 5% shareholder
4 Source: bank muscat audited financial statements and interim financials bank muscat – Key Highlights
Dominant Franchise in Oman Largest Bank in Oman by total assets of 35.35%, as of 31st nd Strong Financial Metrics May 2017, 3 times larger than the 2 largest Omani Bank Highest Government Ownership Market Capitalisation of USD 2,646 million as at 30th June Most profitable bank in Oman 2017. Highest Government Ownership among Omani Banks Strong and sustainable profitability Largest branch network with 154 domestic branches . Royal Court Affairs: 23.63% metrics: The only bank in Oman to be designated a “D‐SIB” . Operating profit 2012‐2016 CAGR Direct and indirect Government of 6.5% ownership of around 35% through . Net profit 2012‐2016 CAGR of 6.2% various entities
Solid Capital Position Stable Operating Environment
Strong capitalization levels offering Solid macroeconomic conditions room for substantial growth Stable banking sector th CAR of 17.66% as of 30 June 2017 . Prudential regulatory environment
Stable Asset Quality Management
Conservative lending approach Stable and experienced management with Strong risk architecture and policies proven track record of successful organic and inorganic growth Adequate asset quality metrics Good corporate governance
5 Source: bank muscat audited financial statements and interim financials II. Operating Environment Sultanate of Oman – Overview
Overview
2nd Largest country in the GCC with an area covering approx. 309.5 thousand km2, Kuwait strategically located, sharing borders with Saudi Arabia and UAE Bahrain Stable Political System, excellent diplomatic relations in the region Qatar UAE Oman explicitly aims to create a neo‐liberal free market economy, where the Saudi private sector is the driver of the economy as opposed to the state Arabia Population of 4.57mn ‐ predominantly represented by Omani Nationals who Oman account for 55% of the total population The economy will continue to grow at high rates driven by several factors, such as: (1) 2016 2017 . The increase in hydrocarbon production Key Indicators . The Government’s balanced support for the economy with disciplined fiscal policy Sovereign Ratings Moody's\S&P Baa1/BBB‐ Baa1/BB+ measures Budget Surplus\Deficit ‐5.3 Bn ‐2.0 Bn Surplus\Deficit % of total revenue ‐61.6% Est ‐34.4% . Strengthening and growing local demand; increasing services and activities Net Publi c Debt (% GDP) 29.0% Est 41.0% contribution to GDP
“Vision 2020” – focuses on diversification, industrialization and privatization, with (1) Source: Central Bank of Oman website, Rating Reports: Moody’s and S&P as of May 2017 the objective of reducing economic reliance on oil revenues and the hydrocarbon sector contribution to GDP GDP Growth GDP Composition Other services, US$ Million 12.89% 2014 2015 2016 100,000 6.7% 10.0% Petroleum 8.9% ‐2.9% Real Estate Activities, 26.86% 80,000 48,470 49,792 0.0% Services, 5.20% 50,083 60,000 ‐3.8% ‐10.0% Wholesale & 37,532 40,000 retail trade, 23,784 18,151 0.6% ‐23.7% ‐20.0% 7.34% 20,000 Non Oil GDP in Current Prices (US$Mn) ‐ ‐30.0% Oil GDP in Current Prices (US$Mn) Agri & Fishing, 2014 2015 2016 % Change 1.94% % Change Public admin. & Manufacturing & As of December 31st 2016 As of December 31st 20166 Defence, 14.58% Mining, 8.83%
7 Source: National Center for Statistics and Information, figure as of Q2 2017 Financial Int., Const., Elec. & 5.99% Transport & Water supply, Comm., 5.48% 10.89% Oman Banking Sector – Overview
Overview Loans and Deposit Growth
US$ billion The Omani banking sector comprises of 7 local banks, 2 specialized banks, 9 Gross Loan: +10.9% foreign commercial banks and two full fledged Islamic Banks Deposits: +10.0% . The top 3 banks after Bank Muscat contribute around 37.06% of total sector assets. bank muscat represents 35.35% of 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
Oman in the GCC banking sector context(1) Asset Quality(2)
Assets as a % of GDP 800 250% 697 700 650 595 200% 600 192% 186% 180% 178% 500 150% 375 400 341 114% 300 100% 92% 208 177 200 116 50% 80 70 100 58 33 0 Total Assets in $ Bn GDP in $ Bn Assets as0% a % of GDP UAE Saudi Arabia Qatar Kuwait Bahrain Oman 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
8 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 bank muscat – Unrivalled Leading Market Position in Oman
Total Assets Gross Loans
US$ million US$ million
Deposits Net Profit
US$ million US$ million
9 Source: Banks’ financial Statements. Based on June 2017. Notes: OMR/ US$: 0.385 bank muscat – Dominant Domestic Franchise in the Region
Market Share ‐ Assets Market Share – Deposits
Assets as % of Total Sector Assets Deposits as % of Total Sector Deposits
Asset Quality Adequate Capitalization
15.6% 20.7% 17.8% 18.2% 17.66% 17.5% 16.1% 18.1% 400.0% 84.3% 371.4% 123.3% 350.0% 2.4% 300.0% 1.2% 2.2% 1.1% 51.0% 0.0% 3.08% 2.1% 250.0% 1.5% 111.6% 15.6% 131.4% 6.1% 200.0% 17.0% 150.0% 150.0% 18.3% 16.6% 5.6% 110.2% 16.0% 14.58% 15.4% 14.6% 100.0% 3.0% 3.1% 50.0% 1.9% 1.6% 1.2% 1.3% 0.0% CBQ QNB NCB BM NBAD NBK BBK ENBD QNB ENBD NBAD NCB BM NBK CBQ BBK NPL/GL LLR/NPL Tier 1 Tier 2 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” 10 Source: GCC Central Banks. Banks’ financial Statements. (1) Information for all banks as of June 2017. III. bank muscat Business Overview bank muscat Strategy –Key Pillars
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 Consolidate Leading . Platform to focus on the growth potential Position in Oman . 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)
Further enhance financial strength . Strong capitalization and stable returns Financial strength . Further enhance the diversified funding mix and large CASA deposit base. . Efficient management of operating costs Pioneering investments in technology supporting growth plans Leverage on technology . Multiple digital banking channels for sales and services . Technology driven banking to enhance customer experience and improve internal efficiency and infrastructure Customer Convenience and Service Quality investments . Innovative products and services offering . Customer centric approach through “We Can Do More” philosophy Strengthen regional presence through focused and controlled expansion in GCC Regional Expansion . Leverage existing regional presence to scale up business growth . Focus on opportunities for controlled expansion in GCC and the region Meethaq – Islamic banking platform Focus on Islamic Banking . Be the market leader in Islamic Banking Business Developments in Oman . Endeavor to offer full fledged products and services . Expansion of branch and channel network
12 bank muscat – Business Lines
Key Highlights Asset Contribution Profit Contribution Deposits
Ministries & Other Leading Corporate Bank Franchise Gov Orginisations 25% offering the full array of corporate US$ 10.3bn US$108.7mn Corporate banking services Banking c. 3,550 corporate customers in . 35.6% of total . 37.6% of total Individual & assets profit Others 43% Wholesale Oman Banking(1) Strong expertise in project finance
Private Financial Commercial 29% Global Institutions, Comprise of treasury, corporate US$ 5.8bn US$ 67.2mn Institutions 2% Investment finance, and asset management . 19.9% of total . 23.2% of total Banking & Treasury Financial Institutions assets profit
Leading Retail Bank platform in Oman US$ 7.8bn US$100.7mn Personal Over 1.80 million retail customers Banking . 26.8% of total . 34.8% of total in Oman assets profit Loans & Advances Largest distribution network
OMR 50mn (c.US$130mn) capital Services 10% assigned to this business US$ 3.0bn US$ 8.9mn Mining and quarrying 5% Meethaq – Islamic Banking Officially launched in January . 10.4% of total . 3.1% of total 2013. Currently operating through Personal and Manufacture 6% assets profit Housing loans 17 full fledged Islamic branches. 41% Real estate 4% Wholesale and retail trade 3% Import trade 5% Presence in GCC, Iran and Government 0% Financial US$ 2.0bn US$ 3.6mn institutions 5% Singapore through overseas Others 1% Export trade 0% Utilities 6% International Operations . 7.3% of total . 1.3% of total Agriculture and branches, rep offices and Construction 5% allied activities Transport 9% assets profit 0% subsidiary (1) Definition of Wholesale Banking has changed since 1st January 2016
13 Source: bank muscat unaudited financial statements as of June 2016 Wholesale Banking Corporate Banking
Overview Opportunities Strategy Leading Corporate Banking Franchise Large number of infrastructure/ Industrial Leverage on leading position and expertise projects in the pipeline . Extensive and expanding range of products . Reinforce presence in Oman across all and services Privatisation and diversification drive by segments in the value chain Government . Strong project finance capabilities . Benefit from large infrastructure and Increasing business flows between Oman and industrial projects in Oman Large corporate client portfolio with c.6,200 regional countries customers and lead bank for top tier Omani Focus fee income generating business corporate entities . Transaction banking business to enhance fee High level of sophistication differentiated income through technology led investments . Explore cross sell opportunities among Commitment to maintain strong control over business lines asset quality Utilize presence in regional markets . Grow GCC trade flows share Corporate Loans – Peer Comparison Asset Growth Operating Income
US$ billion US$ million US$ million 10.98
4.19 3.99 3.66 2.41 2.60 2.58 NBO Arab Bank
Sohar Oman
Dhofar
Bank Ahli Bank Oman HSBC BankMuscat Bank
14 Source: bank muscat audited financial statements and interim financials as of June 2017. Wholesale Banking Global Institutions, Investment Banking & Treasury
Overview Opportunities Strategy
Treasury: funding, asset and liability Significant cross‐sell opportunities to other Strengthen Bank Muscat’s leading position in management requirements, offer structured wholesale banking clients specialised areas solutions to corporate clients Leverage transaction experience in attracting Utilize the presence in regional markets to Corporate Finance: Leader in corporate advisory: new corporate finance mandates expand 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, DCM and Strong growth potential in the high net worth Leverage on expertise built to further grow the correspondent banking services market segment market share and increase the market potential Asset Management: Largest Omani mutual fund manager with potential for growth and expanding outside Oman. Investment solutions for high net worth individuals
Securities portfolio (1) Asset Growth Operating Income
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 Source: bank muscat audited financial statements and interim financials 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 1.80 million customers Increase in salaries through various government . Front‐runner across retail banking segments initiatives . Increase penetration and cross sell including cards, bancassurance and Favorable demographics . Explore new business and product lines remittances Largest delivery channel network in Oman (154 . Over 45% of the population less than 19 Technology‐led product development and branches, 424 ATMs, 216 CDMs and the best years old service offerings online platform in Oman) Housing finance Enhance process efficiency and customer Substantial low cost retail deposit base convenience Merchant acquiring market share of over 80% Focus on development and utilization of by volume in 2015 and leading ecommerce e‐delivery channels business in Oman
Personal Loans – Peer Comparison Asset Growth Operating Income
US$ billion US$ million US$ million 8.74
3.83 3.51
1.66 1.97 1.64 1.26 NBO Arab Bank
Sohar Oman
Dhofar
Bank Ahli Bank Oman HSBC BankMuscat Bank
16 Source: bank muscat audited financial statements and interim financials as of June 2017. Meethaq – Islamic Banking
Overview Opportunities Strategy
One of the most successful Islamic banking Growth momentum continued in the second To be the market leader by far operation in Oman since 2013 year of launch indicating potential in the market Full fledged product and service offerings 17 dedicated branches become operative Shari’a governance structure ensures Increase Meethaq exclusive branch network to throughout the Sultanate transparent banking an optimum level Innovation in product offering and services to Large network at disposal to leverage business Customer Centric approach and transparency create niche Awareness drives on Shari’a compliant banking Technology driven customer service delivery Established Sharia Board comprising of to increase customer base within the Shari’a compliance ambit experienced and reputable Sharia scholars
Financing Portfolio Meethaq – Product and Portfolio Development
2017
Loans (USD) Child saving accounts, employee saving 2,374 Consumer 2,500 2,221 funds, Ijara products 1,727 Government checking accounts with profit 2,000 Corporate distribution 1,500 1,060 739 Sukuk issue and advisory, FX hedging 1,000 Investment & Treasury products 500 Real estate and 0 Asset Management 2013 2014 2015 2016 June 2017 Equity Funds
17 Source: bank muscat audited financial statements and interim financials International Operations
Overview Opportunities Strategy
Presence in GCC and Singapore Large banking markets in Saudi Arabia and Focus on existing GCC operations Kuwait . Branches in Saudi Arabia and Kuwait . Solidify position and increase profitability Pan GCC network offering opportunities for . Rep offices in UAE, Iran and Singapore Drive synergies within the group business and trade synergies . 99.99% stake in Muscat Capital LLC – Saudi Scale up business volumes to attain desired Increasing trade/business opportunities based, CMA licensed entity return between GCC and Asia . 14.7% stake in Al Salam Bank Bahrain Capture trade / business flows between GCC Efficiency: rationalization of back‐office costs – and Asia sharing of operational costs Received all regulatory approvals to proceed with representative office (non‐transactional) in Iran
US$ million AssetsUS$ million Operating Income
(1) Includes US$25 million being gain on acquisition of BMI bank by Al Salaam Bank, Bahrain
18 Source: bank muscat audited financial statements and interim financials IV. Financial Performance Operating Performance and Profitability Overview Operating Income & Cost to Income
Resilient operating performance through the financial turmoil US$ million . Solid top line income growth –5 year CAGR of 6.5% CAGR: + 6.5% Stable cost to income ratio in spite of business and infrastructure 42.2% 41.2% 41.9% 41.8% 43.2% 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
Operating Income Cost to Income
Operating Income Composition Profitability
US$ million US$ million
(1) Other income: FX Income, Profit on sale of non‐trading investments, Dividend income and other income
20 Source: bank muscat audited financial statements and interim financials Asset Quality
Overview Loan Growth
Stable loan book growth US$ million . Conservative lending approach 35,000 3.00% 2.90% . Focus on high quality assets with access to top tier borrowers 2.75% 30,000 8,271 8,424 2.84% 2.65% 7,627 Strong project finance capabilities 25,000 7,045 Diversified loan portfolio across sectors 6,360 20,000 Adequate provisioning of impaired asset 15,000 21,880 . Conservative approach –provisioning in line with the higher of 19,810 21,483 16,521 18,298 either IFRS or CBO requirements 10,000
. Non specific loan loss provisions of 2% on retail portfolio and 1% 5,000 on corporate portfolio ‐ Gross Loans US$ Gross Loans OMR NPL/GLs 2013 2014 2015 2016 June 2017
Gross Loans –Sector Breakup Impaired Assets and Provisioning
US$ million Services 10% Mining and quarrying 5%
Personal and Manufacture 6% Housing loans 41% Real estate 4% Wholesale and retail trade 3% Import trade 5%
Government 0% Financial institutions 5% Others 1% Export trade 0% Utilities 6% Agriculture and Construction 5% allied activities Transport 9% 21 Source: bank muscat audited financial statements0% and interim financials Funding and Liquidity
OverviewUS$ million Funding Mix
Stable funding structure with a diversified funding base
Largest deposit base in Oman with significant granularity 22,043 25,268 31,545 27,141 27,416 . 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
Total Assets
Liquid Assets Capital Adequacy Ratio
US$ million 16.50% 15.92% 16.10% 16.90% 17.66%
Total Capital Adequacy Ratio
22 Source: bank muscat audited financial statements and interim financials شـكــراً :Subjectلـكـم
ThankDepartment: You VII. Annexure Balance Sheet
25 Source: bank muscat audited financial statements and interim financials Profit and Loss
26 Source: bank muscat audited financial statements and interim financials