www.bankmuscat.com Investor Presentation September 2012 Agenda Introduction Omani Economy BankMuscat Overview and Strategy Financial Performance and Capital Appendix Note: • Financial figures are as at 30 Sep 2012 unless otherwise stated. • All numbers in this presentation have been translated from the respective local currency into US$ for convenience of the readers. Exchange rate used: 1$ = 0.385 RO. BankMuscat follows IFRS. 2 Introduction 3 BankMuscat Summary #1 bank in Oman #1 Omani bank with a 37.80% market share with assets of ($19.8 billion) as at 30 Sep 2012 Established and well-recognised domestic brand Well-positioned to benefit from growth opportunities in Oman Significant infrastructure development expected to contribute to banking sector growth Substantial product cross-sell opportunities Sizeable “unbanked market”; over 49% of population less than 25 years old Expansion in Gulf Co-operation Council (GCC) countries – direct presence in Bahrain, UAE, Saudi Arabia and Kuwait. In direct presence in Qatar. Presence in India leveraging customer links and market’s growth potential Focused geographic diversification Financial Strength Strong shareholder support Stable and experienced management team Return on average equity of 15.31% - Sep 12 Net profit CAGR 2003 – 2011 of 20.1% Investment grade credit ratings Only Omani bank to have the largest shareholding by Royal Court Affairs (Omani Government) Financial investment by Dubai Financial Group with 13.21% Members of existing senior management team in place for over 10 years Proven track record of successful organic growth and acquisitions Re-energized management team with new organisation chart to enhance synergies between various business functions 4 Omani Economy 5 Sultanate of Oman Total size: approx. 309,500 square kilometres Population: 2.77 million* Political system: Monarchy (Sultanate) advised by Council of Ministers Constitution: Basic Law of the State issued in 1996 Oman is a member of GCC, UN, IMF, IBRD, Islamic Development Bank and WTO Well-regulated banking and capital markets through Central Bank of Oman (CBO) and Capital Markets Authority (CMA) Credit ratings: A (S&P) and A1 (Moody’s) Source: Ministry of National Economy (MONE). Omani population per 2003 Census 2.3 mn. 6 * Preliminarily 2010 Census GDP Growth 50.0% 22.7% 70,000 44.9% 22.7% S million 60,000 (20.5%) 50,000 19.0% 40,000 59,151 24.8% 30,000 7.2% 20,000 10,000 72,585 13.8% 21,756 299 40.0% 300 30.0% 250 20.0% 10.0% 60,653 0.0% 13.7% 24,740 350 mn barrels 80,000 Increasing Oil Production 36,756 30,883 48,205 - 282.6 269 297 103.0 0 76.6 65.2 50.3 100 -20.0% 27.8 61.7 56.7 34.4 •** Preliminary 7 60 0 Prodcution •Provisional 80 20 -30.0% GDP - growth nominal 120 40 2003 2004 2005 2006 2007 2008 2009*2010*2011** GDP in current prices (USD mn) 323 100 101.1 150 -10.0% 316 259 200 50 41,846 285.4 277 Oil Price $ / barrel GDP growth driven by Oil price A New Omani Economy by 2020 GDP components under “Vision 2020” GDP components at the end of 2011* Agri. & fishing Financial inst. 1% 4% Others 12% Others 17% Transport & communication 5% Petro activities 19% Manuf., mining & construction 15% Agri. & fishing 5% Financial inst. 8% Transport & communication 8% Trade, tourism and real estate 12% Trade, tourism and real estate 26% Manuf ., mining & construction 17% Petro activities 51% Source: Central Bank of Oman’s Annual Report 2010 . * Preliminary 8 BankMuscat Overview and strategy 9 BankMuscat – Oman’s #1 Bank Market capitalization $2,912 million Retail customers 1,230,654 Market share by assets 37.80% Branches 135 Employees 3,182 Total customer deposits $12.9 billion (Customer deposits and CD’s) Total assets $19.9 billion Net loans and advances $13.9 billion Major shareholders Royal Court Affairs (Omani Government) Dubai Financial Group Strategic investments 49% in BMI Bank, Bahrain 43% in Mangal Keshav Holdings Limited, India Other regional locations Dubai RO (UAE), Riyadh Branch (Saudi Arabia), Kuwait 24.89% 13.21% branch, Muscat Security House (subsidiary in Saudi Arabia) & Singapore RO Long-term credit ratings A- (S&P – Sep’12), A1 (Moody’s – Sep’12), A- (Fitch – Sep’12), A (capital intelligence Sep 2012) Note: Market Capitalization as on 30 Sep 2012. 10 Diverse Income and Asset Base ... Net Profit by Group Assets by Group Wholesale, 28.5% Corporate 38.3% Corporate, 33.4% Wholesale 24.7% Intl, -3.5% Consumer, 41.6% Intl. 8.5% Consumer 28.6% International group include associate operations in India and Bahrain, branch in Kuwait and branch and subsidiary in Saudi Arabia As at 30 Sep 2012 11 Loan and Deposit Portfolio Breakdown Loans and advances by segment Government 0.4% FI's and Others 6.9% Deposits by segment Construction Import & Export trade 2.9% 4.2% Manufacture 5.6% Financial institutions 1% Mining and quarrying 7.6% Private Commercial Sector 28% Real estate 4.3% Personal / Housing Loans 40.4% Services 11.9% Wholesale & retail trade 4.5% Ministries and other government organisations 35% Transport 5.4% Utilities 6.0% As at 30 June 2012. 12 Individuals and others 36% BankMuscat Strategy Consolidate leading position in Oman Capitalise on growth opportunities in Oman – Infrastructure development projects and Government focus on economic diversification and developing tourism – Omanis entering the workforce; over 49% of the population less than 25 years old Leverage large network of branches and other delivery channels to target the growth potential and cross-sell opportunities Focus on fee based income by scaling up businesses such as Credit Cards, Investment banking, asset management, private banking and others Islamic Banking Opportunity - Meethaq (subject to regulatory approval) Full fledged product and service offerings, standard of excellence, customer centric approach and transparency Leverage on investments in new technology and state of the art head office building to further increase efficiency, improve customer service and support growth plan Strengthen regional presence through focused and controlled expansion in GCC countries Presence in Bahrain, UAE, Saudi Arabia, Kuwait and Qatar Leverage the regional presence and scale up business growth 13 Corporate Banking Overview Market leader in corporate banking Extensive and expanding range of products and services Project finance of prime importance; BankMuscat plays a prominent role in the financing of nearly all major Omani projects Technology-led developments Commitment to maintain strong control over asset quality Opportunities Leverage the leading position and expertise to benefit from large infrastructure and industrial projects in Oman Utilize the presence in regional markets Focus on non-fund business and fee income Target all segments in value chain Large number of infrastructure /Industrial projects in the pipeline Privatisation and diversification drive by Government Increasing business flows between Oman and regional countries 3,000 79.5 2,500 62.4 2,000 RO million Strategy 1,500 81.9 80.0 68.0 70.0 60.0 50.7 50.0 40.1 40.0 1,000 30.0 20.0 500 Corporate Banking Financial Performance 1,021 1,417 2,139 2,193 2,325 2,736 2006 2007 2008 2009 2010 2011 - 10.0 0.0 Total assets 14 90.0 Operating income Retail Banking Overview Over 1.1 million customers Customer-focus and serviceoriented approach Largest delivery channel network in Oman Innovative products have been successful Substantial low cost retail deposit base Front-runner in card services segment, Bancassurance, remittance etc. Merchant acquiring market share of over 60% by volume in 2011 Opportunities Leveraging the large customer base and achieving cross sell Technology-led product development and service offerings Enhance process efficiency Focus on development and utilization of e-delivery channels Total retail credit in 2010 amounts to approx. 18% of GDP of 2011. Favourable demographics; over 49% population less than 25 years old Housing finance 2,500 160.0 140.0 2,000 RO million Strategy 137.4 116.6 1,500 115.5 114.7 120.0 100.0 84.8 80.0 66.9 1,000 60.0 40.0 500 20.0 Retail Banking Financial Performance 930 1,187 1,872 1,907 1,997 2,347 2006 2007 2008 2009 2010 2011 - - Total assets 15 Operating income Wholesale Banking Group Treasury: Manage funding and asset and liability management requirements and offer structured solutions (e.g. derivatives, commodity) to corporate clients Brokerage: Leadership position on Muscat Securities. Strong client base. Corporate Finance: Leader in corporate advisory with a series of successful transactions. Able to build track record outside Oman. Asset Management: Largest Omani mutual fund manager with potential for growth. Expanding fund management outside Oman. Private Banking: Banking and investment solutions for high net worth individuals Strategy Opportunities Strengthen the leading position in specialised areas Utilize the presence in regional markets to expand business Leverage specialised product expertise in other markets Focus on fee income Inorganic growth Significant cross-sell opportunities 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 65.9 2,000 1,800 66.3 1,400 50 42.6 36.4 1,200 70 60 52.7 1,600 RO million Overview 40 1,000 800 30 23.6 600 20 400 200 Wholesale Banking Financial Performance 10 971 1,457 1,616 1,453 1,281 1,783 2006 2007 2008 2009 2010 2011 - 0 Total assets 16 Operating income Islamic Banking – Meethaq (subject to regulatory approval) Overview Experience in Islamic Banking through overseas operations Leverage service excellence and infrastructure Assigned a capital of up to RO 150 million Dedicated branches with Meethaq branding Established the Sharia Board Strategy Full fledged product and service offerings Customer Centric approach and transparency Plan to have 7 branches in the first year and expand 17 Opportunities New business opportunity with unexplored market potential Large net worth size to leverage business Potential to target existing customer base of over 1 million Leverage on strong BM brand International Group Overview Footprint in all GCC countries, Southeast Asia and the Indian Subcontinent region. Overseas branches in Riyadh, KSA and Kuwait Representative Offices in UAE (Dubai) and Singapore 49% owned commercial bank in Bahrain (BMI Bank). 97% owned subsidiary in Riyadh, KSA (Muscat Capital LLC) 43% owned securities company in India (Mangal Keshav Securities Ltd) contd... Strategy Focus on existing GCC operations and improve profitability Drive synergies within the group Scale up business volumes to attain desired return Capture trade/business flows between GCC and Asian region through Representative Office in Singapore 18 Opportunities Increasing interdependence and trade between GCC countries Large banking markets in Saudi Arabia and Kuwait Efficiency; rationalization of backoffice costs Leveraging presence in all GCC countries International Group contd... Riyadh Branch, KSA Overview Operational since 2007 Focused on mid-market for corporate and treasury businesses Credit losses in 2009 and 2010, and a marginal loss in 2011. However, posted net profit for the first half of 2012. As on 30 June 2012, Net Loans & Advances of USD 477 mn and Customer Deposits of USD 999 mn; Net profit of USD 269k during the period YTD June. Short-term Strategy Focus on corporate and treasury businesses Prudent credit growth with improvement in credit quality and monitoring Focus on bulk deposits from large corporate and HNI clientele Cost containment and increase shared resources with HO Medium-term Strategy Enhance scale through continued focus on corporate and treasury Kuwait Branch Overview • • • • • Operational since 2010 Focused on corporate, trade and treasury businesses Healthy pipeline built, however credit utilisation is low due to delays in project implementation Operating profit of USD 374k (before provisions) for the first half of 2012; break even at net profit level As of 30 June 2012, Net loans and advances of USD 51 mn and customer deposits of USD 124 mn; Non-funded exposures of USD 141mn. Performance as at 30 June 2012 Short-term Strategy Short term, working capital lending and trade finance to corporates as well as contract financing for Govt./ Oil & Gas sector High net worth clients for liabilities Launch internet banking Leverage off low operating cost base 19 Medium-term Strategy Scale up business volumes with a focus on quality lending International Group contd... Muscat Capital, KSA Overview A subsidiary of BankMuscat with 97% stake Operational since 2009 Focused on brokerage, asset & wealth management and corporate finance/advisory As of 30 June 2012, net loss of USD 1.4 mn for the year to date Short-term Strategy Aim to leverage institutional relationships in brokerage in Oman Leverage expertise built in Oman on Corporate Finance/Advisory Focus on retail and institutional brokerage business Low cost of operations sharing back office activities of Oman Medium-term Strategy Scale up business volumes Leverage BankMuscat presence in other markets Mangal Keshav, India Overview Acquired 43% stake in this securities house in India in 2007 Network of 150 branches/ franchises across India Focused mainly on brokerage business As of 30 June 2012, Net profit of USD 890k (3-m) Performance as at 30 June 2012 Short-term Strategy Diversify from mainly brokerage business to commodities brokerage, insurance and mutual fund distribution Focus on institutional and NRI brokerage business Leverage BankMuscat GCC network for NRI business 20 Medium-term Strategy Scale up business through organic and inorganic growth International Group BMI Bank, Bahrain Overview BankMuscat holds 49% stake in BMI Bank Operational as independent bank since 2005 Full-service bank across corporate, retail, private banking and treasury businesses Network of 10 branches and 30 ATMs, resulting in a strong retail presence in Bahrain Holds strategic stake of 21.3% in Gulf African Bank, a green field first Islamic Bank in Kenya Holds a strategic stake of 50% in an offshore bank in Seychelles and an office in QFC, Qatar As on 30 June 2012, Net Loans & Advances of USD 1,265 mn, Customer deposits of USD 1,273 mn and Shareholders Equity of USD 221mn Net profit of USD 766k for the first half of 2012 Performance as at 30 June 2012 Short-term Strategy Focus on Bahrain business to build scale and market share Strengthen existing presence in international markets Improve operational efficiency and reduce cost to income ratio Leverage on investments in technology and infrastructure to scale up business volumes 21 Medium-term Strategy Establish franchise in Bahrain Inorganic growth in markets where already present and with strategic advantage such as East Africa, Indian Ocean region. Financial Performance and Capital 22 Financial Highlights – 9M-2012 Achieved a Net Profit of US$ 270.6 mn as against US$ 226.3 mn , an increase of US$ 44.3 mn or 20% over 2011 Annualized Basic EPS of US$0.176 for every US$ 0.260 share of Bank Annualized ROAE of 16.3%; Annualized ROAA of 1.9% Capital Adequacy Ratio of 15.77% (as per Basel II) Net Interest Income (NII) at US$ 437 mn, higher by US$ 21.7 or 5.23% over 2011 Cost to Income ratio of 42% Growth of US$ 2,136 mn (18.13%) in Net Loans over Sep 2011 Growth of US$ 563 mn (5%) in customer deposits and CD’s over Sep 2011. (Includes increase of US$ 1,058 mn (25%) from demand deposits, US$ 477 mn (18%) from savings, decrease of US$ 358 mn from term deposit and certificate of deposits (-17%) Revenue mix of 71% : 29% (NII : Other income) 23 Revenue and Cost Control Cost-income ratio Revenue growth 48.0% 900 800 46.0% 764 756 44.0% 690 700 423 42.0% 615 42.0% 28% 600 40.8% 41.1% 40.7% 29% 449 38.8% 30% 32% 38.0% 400 340 300 40.0% 40% 500 36.7% 28% 36.0% 34.6% 24% 34.0% 200 32.0% 100 30.0% 0 2006 2007 2008 2009 2010 2006 2011 Sep-12 Other income Investment Banking income FX income Commission income Net interest income 24 2007 2008 2009 2010 2011 Sep-12 Loan Growth and Asset Quality Gross Loans and advances growth 16,000 Coverage ratios 50% 600 14,442 14,000 45% 12,977 US$ million 10,000 30% 7,261 8,000 6,000 25% 20% 5,073 15% 4,000 2,000 4.8% 2.7% 2.3% 5.0% 10% 4.2% 3.0% 2006 2007 2008 2009 Gross loans and advances 2010 138.8% 522 481 457 458 118.5% 126.8% 387 400 326106.0% 308 US$ million 35% NPL / Gross Loans % 10,009 10,525 10,894 524 484 500 40% 12,000 160% 555 145.9% 105.9% 80% 235 243 60% 193 200 40% 100 5% 3.0% 0% 20% - 0% 2006 2011 Sep-12 2007 Provisions NPL/Loans 25 120% 108.6% 100% 282 300 140% 2008 2009 2010 NPLs 2011 Sept12 Prov/NPLs Strong Capital Growth with Stable Returns Robust capitalisation Capital growth with stable returns 3,000 2675 Tier 2 and 3 ratio 2,500 Tier 1 ratio 2.56% 14.78% 3.63% 2.93% 13.02% 11.97% 12.00% 15.2% 4.56% 3.98% 2.27% 1.93% 1,856 2,000 15.77% US$ mn 15.14% 16.00% 10.00% 15.93 % 24.0 2,068 1,848 1,630 20.0 1,500 14.8 1,000 28.0 2,262 22.0 18.00% 14.00% 25.8 14.6 831 15.4 15.3 16.0 8.00% 12.58% 6.00% 4.00% 10.04% 12.0 500 11.85% 11.37% 11.79% 10.75% 11.57% 10.9 - 2.00% 8.0 2006 2007 2008 2009 2010 2011 2012 0.00% 2006 2007 2008 2009 2010 2011 Sept'12 Shareholders equity CBO requirement of CAR of minimum of 10 % (12% by Dec 2010) is stricter than BIS requirement of minimum 8% 26 Return on equity Thank You 27 Appendix 28 Balance Sheet Balance sheet $ (million) Cash and bank (incl. placements) Loans and Advances Non trading investments Tangible fixed assets Other assets (incl. invt in associates) Total assets 30-Sep-12 3,605 13,920 1,484 179 705 19,893 31-Dec-11 4,403 12,518 891 186 777 18,774 31-Dec-10 3,315 10,410 694 194 584 15,198 31-Dec-09 4,218 9,969 375 68 566 15,197 Bank deposits / FRNs Customer deposits (incl. Bonds & CDs) Other liabilities Subordinated debt Total liabilities 2,316 13,014 1,138 749 17,216 1,914 12,741 989 869 16,513 2,014 9,705 934 477 13,129 3,665 8,474 720 490 13,349 Share capital and premium Convertible bonds Total reserves Cumulative changes in fair value Retained profits Shareholders' equity Total liabilities + shareholders's equity 1,538 42 583 8 507 2,677 19,893 1,185 84 591 3 397 2,261 18,774 1,133 84 493 24 335 2,069 15,198 1,063 84 373 13 315 1,848 15,197 Key ratios Loans and advances / customer deposits Shareholders' equity / total assets Subordinated debt / (debt + equity) BIS total capital ratio 107.0% 13.5% 21.9% 15.10% 98.2% 12.0% 27.8% 15.93% 107.3% 13.6% 18.7% 14.78% 117.6% 12.2% 20.9% 15.20% 29 Profit and Loss Account Profit and loss account $ (million) Net interest income Other operating income Operating income Operating costs Recoveries from impairments Credit loss impairments Other impairments Gain/(loss) from associates Profit before Tax Taxation Net Profit Key ratios Cost/income ratio Return on average assets Return on average equity Basic EPS (US$) Share price (US$) 30-Sep-12 437.1 175.1 612.2 (257.0) 355.3 69.9 (106.2) (1.6) (3.9) 313.5 (42.8) 270.6 30-Jun-12 282.8 118.9 401.7 (172.2) 229.4 41.2 (65.1) (1.2) 0.8 205.2 (27.6) 177.6 31-Dec-11 551.0 213.3 764.3 (314.0) 450.3 67.3 (145.9) (8.8) (9.2) 353.8 (48.5) 305.3 42.0% 1.80% 16.30% 0.197 1.519 42.9% 1.80% 16.30% 0.197 1.519 41.1% 1.80% 15.37% 0.197 1.990 30 31-Dec-10 31-Dec-09 486.2 452.9 203.4 303.1 689.6 756.0 (267.3) (213.3) 422.3 542.6 44.6 28.6 (121.0) (255.2) (7.2) (60.4) (32.8) (27.2) 306.0 228.5 (42.1) (37.0) 263.9 191.5 38.8% 1.74% 14.64% 0.171 2.514 28.2% 1.24% 10.90% 0.178 2.140 Omani Banking Sector Local and specialised banks Foreign banks Branches (in Oman) Est. 133 1982 1. Habib Bank Limited 8 1972 90 1979 2. Bank of Baroda 3 1976 3. Nat. Bank of Oman (NBO) 69 1973 3. Standard Chartered 1 1968 4. Bank Dhofar (BD) 59 1990 4. Bank Saderat Iran 1 1976 5. Oman Arab Bank (OAB) 51 1973 5. National Bank of Abu Dhabi 7 1976 6. Bank Sohar 25 2007 6. Bank Melli Iran 1 1974 7. Ahli Bank 12 1998 7. State Bank of India 1 2004 8. Bank of Beirut 2 2006 9. Qatar National Bank 1 2007 1. BankMuscat (BM) 2. HSBC Oman** 439 1. Oman Development Bank 2. Oman Housing Bank 13 1977 9 1977 Branches Est. (in Oman) 22 **HSBC Bank Middle East Limited (Oman branches) merged with and into Oman International Bank (OIB) and the combined listed entity was renamed as HSBC Bank Oman S.A.O.G 31 25 Relative Loan and Deposit Volumes Total customer deposits & FRNs Net loans 14.0 BM BM NBO HSBC Oman NBO ($ billion) ($ billion) 14.4 14.0 12.5 2.0 8.0 6.5 7.0 6.0 4.0 3.6 2.4 1.8 1.5 2.6 1.6 3.5 3.2 1.6 3.5 3.2 1.6 4.3 3.9 6.0 5.1 4.5 3.4 3.5 4.0 1.8 2.4 2.1 1.8 2.0 2007 2008 2009 2010 2011 Sep-12 43% 40% 40% Source: CBO and Annual report of Banks. 38% 2.5 1.9 4.2 3.9 3.3 2.9 5.04.9 4.2 3.4 3.2 2.6 1.9 2.1 2009 2010 2007 BM market share 8.5 10.4 10.0 9.7 10.0 8.0 9.6 10.0 8.8 12.0 BD 13.0 12.8 BD 12.0 16.0 HSBC Oman 38% 36% 32 2008 36% 33% 2011 34% Sep-12 33% Relative Asset and Equity Bases Shareholders’ equity Total assets BM 25.0 NBO HSBC Oman BD BM NBO HSBC Oman BD ($ billion) ($ billion) 3.00 19.9 18.8 20.0 2.68 2.50 2.26 2.07 15.7 15.2 15.2 1.86 2.00 15.0 1.85 1.63 1.50 11.0 10.0 5.2 5.0 3.8 2.82.5 3.4 2.6 4.7 3.9 2.7 4.7 4.3 3.0 5.8 5.1 3.2 1.00 6.56.0 5.5 0.50 - 0.64 0.49 0.45 0.69 0.65 0.59 0.53 0.44 0.44 2007 2008 2009 0.73 0.60 0.45 0.77 0.76 0.65 2007 BM market share 0.60 0.42 0.29 2008 41% 2009 42% Source: CBO, Annual report of Banks. 2010 41% 2011 39% Sep-12 38% 33 2010 2011 Sep-12 BankMuscat Organisational Structure 34