Richard Melson

January 2006

CI Ratings: Bahrain

10 January 2006

To: US CFG Co Richard Melson

Please find attached our latest press release title



Press Release Department

Telephone: ++ 357 2534 2300

Facsimile: ++ 357 2581 7750



Capital Intelligence
Credit Analysis and Rating Service
P.O. Box 53585, Oasis Complex, Block E
Gladstone Street, CY 3303 Limassol




Capital Intelligence, the international emerging markets rating agency, today announced that it has assigned the Bahrain-based BankMuscat International B.S.C. (BMI) long and short-term foreign currency ratings of BBB and A3 respectively, with a support rating of 2, and a financial strength rating of BB+. A stable outlook is assigned to the ratings.

BMI constitutes an integral part of the Omani parent BankMuscat (SAOG) and the ready availability of parental support combined with BMI’s strong ownership (through the investment arms of various GCC sovereigns) underpins the foreign currency ratings. Although BMI in its current form has a relatively short track record and ranks among the smaller sized institutions in the Bahraini banking sector, the Bank continues to make steady progress at building its balance sheet assisted by supportive shareholders. BMI’s largest shareholder, BankMuscat (SAOG) with a 49% shareholding, exercises management control. The Omani parent is the only commercial bank in Oman with a direct government stake (22%).

BMI’s mission is to become a dynamic regional bank, providing innovative and unique financial solutions to corporate and retail customers. Given the small and highly competitive nature of the Bahraini banking sector, BMI faces significant challenges as it builds up the critical mass to consolidate a meaningful position in the local market and region. The Bank currently has a market share of about 6% of lending in Bahrain.

BMI’s financial strength rating of BB+ reflects its sound asset quality as evidenced by the low level of problem loans and strong provisioning levels. The launch of retail lending a few years ago has brought diversification to BMI’s balance sheet and earnings. Profitability is now one of BMI’s major strengths reflecting steady streams of net interest and non-interest income. The liquidity position, which had previously been satisfactory, tightened significantly in 2005 as credit growth outstripped that of customer deposits. Nevertheless, the strong support factor combined with BankMuscat's management control substantially mitigates the concern over liquidity. The gradual expansion of the branch network will broaden customer funding over time and dilute the current funding concentration. BMI’s balance sheet is comfortably capitalised and a policy of full earnings retention has served to grow the capital base. The Bank is in the process of raising USD30mn in Tier 2 capital to support its expansion goals. As at end 2005, BMI had total assets of USD661mn and total capital of USD64mn. Net profit increased by 18.3% to USD10.7mn in 2005 over the preceding year.


Morris Helal Tel: 357 2534 2300

Rory Keelan

CI Latest Press Release: BankMuscat

Teresa Andreou

2006/01/10 Tue