Oman’s banking sector is relatively
under-penetrated; the case for sustained
balance-sheet growth is compelling
Income statements have a defensive
appeal with strong recurring income
 Bank Muscat is our top pick; we initiate
with a target price of OMR1.20 and OW(V)
rating; we rate National Bank of Oman
N(V) with a OMR0.34 target price
A case for sustained growth
Oman’s banks enjoy less penetration than other GCC
banks, but the sector may be close to an inflection point. In our
view, consumer loans should be well-supported by attractive
demographics and corporate loan books should benefit from
financing for government-backed projects.
About 50% of the Omani population is below 19 years of
age; the potential for growing consumer products like credit
cards, personal loans and mortgage loans is high. More retail
banking accounts should increase the proportion of low-cost
consumer deposits in bank balance sheets, enhancing their
margins. With the government focusing on developing new
industrial freezones such as Duqm, where spending on the
township itself is estimated at more than USD20bn, we believe
the corporate loan book story is compelling.
Bank Muscat is our top pick of the Omani banks and one
of our favourites among MENA banks. Its financial and
qualitative parameters are comparable to leading MENA
banks, and we believe the stock is oversold. With expected
sustainable ROAEs of c20% in the medium term, the 2009e
P/NAV of 1.2x looks cheap. We initiate coverage with a target
price of OMR1.20 and a rating of Overweight (V).
National Bank of Oman (NBO) is the second-largest bank
in the country by assets. Loan-loss recoveries have shielded the
income statement so far but probably can’t be sustained. Loanloss
charges in the absence of material recoveries could hinder
profitability growth. We initiate coverage with a target price of
OMR0.34 and a Neutral (V) rating.