Equity Analysis /

Bank Muscat: Preliminary FY19 results show slight weakness

    Rahul Shah
    Rahul Shah

    Head of Corporate & Thematic Research

    Tellimer Research
    16 January 2020
    Published byTellimer Research

    Bank Muscat (Buy, TP OMR0.54) reported FY19 profit of OMR185.6mn, up 3% yoy but marginally below our OMR187.0mn forecast (Bloomberg consensus was OMR185mn). Although income statement data were broadly in line, balance sheet dynamics were disappointing.

    The bank trades at 6.2x 2020f PE, 0.6x PB and gives a 7% dividend yield, which we see as good value for the clear industry leader in Oman (c35% market share). Relative to local peers, Bank Muscat benefits from superior distribution capacity and better access to USD funding markets. Key risks are largely at the macro level, including the chronic fiscal deficit and potential pressure on the USD currency peg.

    The full financials will be released later this month.

    Key positives

    • Non-interest income (+5%yoy) was slightly better than our 4% yoy expectation. No details were provided, but after a slow start to the year, recent fee momentum has been strong.

    Key negatives

    • Loans fell 1% yoy against our expectation of a 5% rise. Some large corporate balances rolled off, as per the company.
    • Deposits fell 5% versus our forecast of a 3% increase. According to the company, the comparative figure had been boosted by a large single deposit.
    • Net interest income rose 4% yoy, slightly below our 5% growth expectation, likely due to the lower volumes highlighted above.
    • The impairment charge rose 30% yoy, above our 25% yoy expectation. Credit risk costs were likely c60bps. NPLs likely grew at low-double-digits percent, in our view.