Www.bankmuscat.com September 2012 Investor Presentation

www.bankmuscat.com

September 2012

Investor Presentation

2

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.

3

Introduction

4

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

Focused geographic diversification

Financial Strength

Strong shareholder support

Stable and experienced management team

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

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

5

Omani Economy

6

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.

* Preliminarily 2010 Census

7

GDP Growth

Increasing Oil ProductionGDP growth driven by Oil price

• Provisional

• ** Preliminary

21,756

24,740 30,883

36,756

41,846

60,653

48,205

59,151

72,585

7.2%13.7%

24.8%

19.0%

13.8%

44.9%

(20.5%)

22.7%

22.7%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2003 2004 2005 2006 2007 2008 2009*2010*2011**

S m

illio

n

GDP in current prices (USD mn) GDP - growth nominal

299285.4 282.6 269

259

277 297 316 323

27.834.4

50.361.7

65.2

101.1

56.7

76.6

103.0

0

20

40

60

80

100

120

0

50

100

150

200

250

300

350

$ / bar

rel

mn ba

rrels

Prodcution Oil Price

8

GDP components under “Vision 2020”GDP components at the end of 2011*

Source: Central Bank of Oman’s Annual Report 2010 .

* Preliminary

A New Omani Economy by 2020

Agri. & fishing1%

Financial inst.4%

Transport & communication

5%

Manuf., mining & construction

15%

Trade, tourism and real estate

12%

Petro activities51%

Others12%

Agri. & fishing5%

Financial inst.8%

Transport & communication

8%

Manuf ., mining & construction

17%

Trade, tourism and real estate

26%

Petro activities19%

Others17%

9

BankMuscat Overview and strategy

10

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) 24.89%Dubai Financial Group 13.21%

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

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.

11

Diverse Income and Asset Base ...

International group include associate operations in India and Bahrain, branch in Kuwait and branch and subsidiary in Saudi Arabia

Assets by Group Net Profit by Group

As at 30 Sep 2012

Corporate, 33.4%

Consumer, 41.6%

Intl, -3.5%

Wholesale, 28.5%

Wholesale24.7%

Corporate38.3%

Consumer28.6%Intl.

8.5%

12

Loan and Deposit Portfolio Breakdown

Loans and advances by segment Deposits by segment

As at 30 June 2012.

Construction2.9%

Government0.4%

Import & Export trade

4.2%Manufacture

5.6%

Mining and quarrying

7.6%

Real estate4.3%

Services11.9%

Transport5.4%

Utilities6.0%

Wholesale & retail trade

4.5%

Personal / Housing Loans

40.4%

FI's and Others6.9%

Financial institutions

1%

Individuals and others

36%

Ministries and other

government organisations

35%

Private Commercial

Sector28%

13

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

14

Corporate Banking

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

Large number of infrastructure /Industrial projects in the pipeline

Privatisation and diversification drive by Government

Increasing business flows between Oman and regional countries

1,021 1,417 2,139 2,193 2,325 2,736

40.1

50.7

62.468.0

79.5 81.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

-

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011

RO

mil

lio

n

Total assets Operating income

Overview Strategy Opportunities

Corporate Banking Financial Performance

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

15

Retail Banking

Over 1.1 million customers Customer-focus and service-

oriented 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

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


Retail Banking Financial Performance

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

930 1,187 1,872 1,907 1,997 2,347

66.9

84.8 116.6 115.5 114.7

137.4

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

-

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011

RO

mil

lio

n


16

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

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


Wholesale Banking Financial Performance

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

971 1,457 1,616 1,453 1,281 1,783

23.6

36.4

52.7

42.6

65.9 66.3

0

10

20

30

40

50

60

70

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2006 2007 2008 2009 2010 2011

RO

mill

ion


17

Islamic Banking – Meethaq (subject to regulatory approval)

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

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


Full fledged product and service offerings

Customer Centric approach and transparency

Plan to have 7 branches in the first year and expand

18

International Group contd...

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)

Increasing interdependence and trade between GCC countries

Large banking markets in Saudi Arabia and Kuwait

Efficiency; rationalization of back-office costs

Leveraging presence in all GCC countries


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

19

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.

Enhance scale through continued focus on corporate and treasury

Performance as at 30 June 2012

Overview Short-term Strategy Medium-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

Riyadh Branch, KSA

• 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.

Scale up business volumes with a focus on quality lending


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

Kuwait Branch


20

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

Scale up business volumes

Leverage BankMuscat presence in other markets



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

Muscat Capital, KSA

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)

Scale up business through organic and inorganic growth


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

Mangal Keshav, India


21

International Group

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

Establish franchise in Bahrain

Inorganic growth in markets where already present and with strategic advantage such as East Africa, Indian Ocean region.



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

BMI Bank, Bahrain

22

Financial Performance and Capital

23

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

Revenue mix of 71% : 29% (NII : Other income)

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%)

24

Revenue and Cost Control

Revenue growth Cost-income ratio

40.8% 40.7%

36.7%

34.6%

38.8%

41.1%42.0%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

42.0%

44.0%

46.0%

48.0%

2006 2007 2008 2009 2010 2011 Sep-120

100

200

300

400

500

600

700

800

900

2006 2007 2008 2009 2010 2011 Sep-12Other income Investment Banking income

FX income Commission income

Net interest income

24%

28%

32%

340

449

615

690

40%29%

756764

28%

423

30%

25

Loan Growth and Asset Quality

Gross Loans and advances growth Coverage ratios

5,073

7,261

10,009 10,525 10,894

12,977

14,442

4.8%2.7% 2.3%

5.0% 4.2%

3.0% 3.0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 Sep-12

NP

L / G

ross

Loa

ns %

US

$ m

illio

n

Gross loans and advances NPL/Loans

308 282

326

555

484 458

522

243

193

235

524

457

387

481

126.8%

145.9%

138.8%

106.0% 105.9%

118.5%

108.6%

0%

20%

40%

60%

80%

100%

120%

140%

160%

-

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 Sept-12

US

$ m

illio

n

Provisions NPLs Prov/NPLs

26

Strong Capital Growth with Stable Returns

Robust capitalisation Capital growth with stable returns

CBO requirement of CAR of minimum of 10 % (12% by Dec 2010) is stricter than BIS requirement of minimum 8%

10.04%12.58%

10.75% 11.57% 11.85% 11.37% 11.79%

1.93%

2.56%

2.27%

3.63% 2.93% 4.56% 3.98%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

2006 2007 2008 2009 2010 2011 Sept'12

Tier 2 and 3 ratio

Tier 1 ratio

831

1,630

1,856 1,848 2,068

2,262

2675

22.0

25.8

14.8

10.9

14.6 15.4 15.3

8.0

12.0

16.0

20.0

24.0

28.0

-

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011 2012

US$

mn

Shareholders equity Return on equity

13.02%

15.14%

11.97%

15.2% 14.78%

15.93 % 15.77%

27

Thank You

28

Appendix

29

Balance SheetBalance sheet

$ (million) 30-Sep-12 31-Dec-11 31-Dec-10 31-Dec-09Cash and bank (incl. placements) 3,605 4,403 3,315 4,218 Loans and Advances 13,920 12,518 10,410 9,969 Non trading investments 1,484 891 694 375 Tangible fixed assets 179 186 194 68 Other assets (incl. invt in associates) 705 777 584 566 Total assets 19,893 18,774 15,198 15,197

Bank deposits / FRNs 2,316 1,914 2,014 3,665 Customer deposits (incl. Bonds & CDs) 13,014 12,741 9,705 8,474 Other liabilities 1,138 989 934 720 Subordinated debt 749 869 477 490 Total liabilities 17,216 16,513 13,129 13,349

Share capital and premium 1,538 1,185 1,133 1,063 Convertible bonds 42 84 84 84 Total reserves 583 591 493 373 Cumulative changes in fair value 8 3 24 13 Retained profits 507 397 335 315 Shareholders' equity 2,677 2,261 2,069 1,848 Total liabilities + shareholders's equity 19,893 18,774 15,198 15,197

Key ratiosLoans and advances / customer deposits 107.0% 98.2% 107.3% 117.6%Shareholders' equity / total assets 13.5% 12.0% 13.6% 12.2%Subordinated debt / (debt + equity) 21.9% 27.8% 18.7% 20.9%BIS total capital ratio 15.10% 15.93% 14.78% 15.20%

30

Profit and Loss AccountProfit and loss account$ (million) 30-Sep-12 30-Jun-12 31-Dec-11 31-Dec-10 31-Dec-09

Net interest income 437.1 282.8 551.0 486.2 452.9 Other operating income 175.1 118.9 213.3 203.4 303.1 Operating income 612.2 401.7 764.3 689.6 756.0 Operating costs (257.0) (172.2) (314.0) (267.3) (213.3)

355.3 229.4 450.3 422.3 542.6 Recoveries from impairments 69.9 41.2 67.3 44.6 28.6 Credit loss impairments (106.2) (65.1) (145.9) (121.0) (255.2) Other impairments (1.6) (1.2) (8.8) (7.2) (60.4) Gain/(loss) from associates (3.9) 0.8 (9.2) (32.8) (27.2) Profit before Tax 313.5 205.2 353.8 306.0 228.5 Taxation (42.8) (27.6) (48.5) (42.1) (37.0) Net Profit 270.6 177.6 305.3 263.9 191.5

Key ratiosCost/income ratio 42.0% 42.9% 41.1% 38.8% 28.2%Return on average assets 1.80% 1.80% 1.80% 1.74% 1.24%Return on average equity 16.30% 16.30% 15.37% 14.64% 10.90%Basic EPS (US$) 0.197 0.197 0.197 0.171 0.178Share price (US$) 1.519 1.519 1.990 2.514 2.140

31

Omani Banking Sector

1. BankMuscat (BM) 133 1982

2. HSBC Oman** 90 1979

3. Nat. Bank of Oman (NBO) 69 1973

4. Bank Dhofar (BD) 59 1990

5. Oman Arab Bank (OAB) 51 1973

6. Bank Sohar 25 2007

7. Ahli Bank 12 1998

439

Local and specialised banks Foreign banks

1. Habib Bank Limited 81972

2. Bank of Baroda 31976

3. Standard Chartered 11968

4. Bank Saderat Iran 11976

5. National Bank of Abu Dhabi 71976

6. Bank Melli Iran 11974

7. State Bank of India 1 2004

8. Bank of Beirut 22006

9. Qatar National Bank 12007

25

1. Oman Development Bank 13 1977

2. Oman Housing Bank 9 1977

22

Branches(in Oman)

Est.Branches(in Oman)

Est.

**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

32

Relative Loan and Deposit Volumes

Total customer deposits & FRNsNet loans

Source: CBO and Annual report of Banks.

BM market share

43% 40% 36% 36% 33%40% 38% 33%38% 34%

7.0

9.7 10.0 10.4

12.5

14.4

2.4 3.6 3.5 3.5

4.35.1

1.5 1.6 1.6 1.6 1.83.4

1.8 2.6 3.2 3.2 3.9 4.5

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2007 2008 2009 2010 2011 Sep-12

($ billion)

BM NBO HSBC Oman BD

6.5

8.8 8.5

9.6

12.8 13.0

2.4

3.5 3.3 3.44.2

5.0

2.1 1.9 1.9 2.12.6

4.9

1.8

2.5 2.9

3.23.9 4.2

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2007 2008 2009 2010 2011 Sep-12

($ billion)

BM NBO HSBC Oman BD

33

Relative Asset and Equity Bases

Source: CBO, Annual report of Banks.

Total assets Shareholders’ equity

BM market share

41% 42% 41% 38%39%

1.63 1.86 1.85

2.072.26

2.68

0.60 0.64 0.65 0.69 0.73 0.76

0.42 0.45 0.44 0.44 0.45

0.77

0.29 0.49 0.53 0.59 0.60 0.65

-

0.50

1.00

1.50

2.00

2.50

3.00

2007 2008 2009 2010 2011 Sep-12

($ billion)

BM NBO HSBC Oman BD

11.0

15.7 15.2 15.2

18.819.9

3.8 5.2 4.7 4.7

5.8 6.5

2.8 2.6 2.7 3.0 3.2

6.0

2.5 3.4 3.9 4.3

5.1 5.5

-

5.0

10.0

15.0

20.0

25.0

2007 2008 2009 2010 2011 Sep-12

($ billion)

BM NBO HSBC Oman BD

34

BankMuscat Organisational Structure

Documents

Www.bankmuscat.com September 2012 Investor Presentation