Fitch Ratings has upgraded Oman-based Bank Muscat's (BM) Individual rating to 'B/C' from 'C' and affirmed its other ratings at Long-term Issuer Default (IDR) 'A-' (A minus) with Stable Outlook, Short-term IDR 'F2' and Support '1'. The Support Rating Floor is affirmed at 'A-' (A minus). Fitch has also affirmed BM's EMTN programme ratings at senior debt 'A-' (A minus)/'F2' and subordinated debt 'BBB+'.
The upgrade of the Individual rating reflects the continued growth in BM's regional franchise and significantly increased capitalisation following the share placement with Dubai Financial Group (DFG) in November 2007. The Individual rating also reflects the bank's dominant franchise in Oman, consistent profitability, sound and improving asset quality and diversified funding structure, but also tight liquidity ratios and some loan and deposit concentrations. The IDRs, Support rating and Support Rating Floor reflect the extremely high probability of support from the Omani authorities, should the need arise. This is based on the strong history of support from the Central Bank of Oman, the bank's dominant franchise with a market share in Oman of around 43% of total assets and its 17% ownership by the Royal Court Affairs (a division of the Oman government).
BM was established in 1982 and listed on the Muscat Securities Market in 1993. It is Oman's largest bank after a number of mergers and acquisitions and is active in retail and commercial banking, investment banking, treasury and asset management. It has a 49% stake in Bank Muscat International in Bahrain, a branch in Riyadh, Saudi Arabia and a representative office in Dubai. It currently holds a 17.3% stake in Centurion Bank of Punjab (India), which recently announced a merger with HDFC Bank, India's second-largest private sector bank. BM intends to retain a stake of around 3% in the combined entity. BM is also acquiring a 35% stake in Saudi Pak Commercial Bank in Pakistan.
The Royal Court Affairs is BM's largest shareholder. In November 2007, DFG acquired a stake in BM, equivalent to 15% of share capital post-placement, for OMR238.3m, which increased the bank's equity by around two-thirds and will support BM's planned asset growth and overseas expansion.