Bank Muscat’s outlook stable after Dubai Financial to take 15% stake

Moody’s Investors Service has affirmed the ratings of Oman-based Bank Muscat (BM), following the announcement that Dubai Financial Group (DFG) will take a 15% stake in the bank. The domestic and foreign currency long- and short-term ratings, as well as the senior unsecured rating remain unchanged, while the Bank Financial Strength Rating is  affirmed at C-. All the ratings carry a “stable” outlook.

The deal, which is pending regulatory approval from the competent authorities, involves the private placement of 161 mln bank shares with DFG, at OMR1.475 per share, resulting in a total consideration of OMR 238 mln (USD 616 mln). The transaction is expected to be completed within the next few weeks.

In affirming the ratings, Moody’s notes that — subsequent to the conclusion of the transaction — DFG will become the second-largest shareholder in BM, holding a 15% stake in the bank. The Royal Court Affairs, a Sultanate of Oman’s governmental body, will remain the largest shareholder, holding 17% of the bank’s shares.

In Moody’s opinion, the involvement of a strategic shareholder such as DFG in the bank’s capital is likely to contribute to the development of its franchise in the longer term both domestically and abroad.

DFG is part of Dubai Holding and a large group with a number of investments in other financial institutions in the region, which BM can leverage in growing its business outside the country. The new shareholder will appoint two representatives on the 11-member board of directors.

Bank Muscat is headquartered in Muscat, Oman and had total assets of OMR3.46 bln (USD 8.95 bln) as at end-June 2007.