bank muscat (SAOG) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 bank muscat (SAOG) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER

2 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER Contents Page No. 1 Chairman'S Report Interim Condensed Consolidated Statement Of Financial Position Interim Condensed Consolidated Statement Of Comprehensive Income Interim Condensed Consolidated Statement Of Changes In Equity Interim Condensed Consolidated Statement Of Cash Flows 4 6 Notes To The Interim Condensed Consolidated Financial Statements 5-23

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7 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT SEPTEMBER Page 1 Notes RO' 000 RO' 000 RO' 000 ASSETS Cash and balances with Central Banks 731, , ,404 Due from banks 631, , ,401 Loans and advances 3 7,767,117 7,358,603 7,258,671 Islamic financing receivables 3 1,085, , ,655 Other assets 222, , ,239 Investments securities 4 1,264,474 1,027,176 1,190,696 Investment in an associate ,428 Property and equipment and software 66,120 72,119 68,795 11,768,600 11,149,222 11,110,289 LIABILITIES AND EQUITY LIABILITIES Deposits from banks 1,128, , ,415 Customers' deposits 6 6,776,687 6,459,410 6,590,708 Islamic customers' deposits 6 953, , ,704 Sukuk 44,608 44,608 44,608 Euro medium term notes 385, , ,509 Mandatory convertible bonds - 32,416 32,416 Other liabilities 438, , ,789 Taxation 34,524 42,914 32,051 Subordinated liabilities 114, , ,905 9,876,550 9,3,889 9,333,105 EQUITY Equity attributable to equity holders of parent: Share capital 7 294, , ,936 Share premium 7 531, , ,377 General reserve 288, , ,808 Legal reserve 90,312 90,312 83,208 Revaluation reserve 5,770 5,770 5,5 Subordinated loan reserve 82,090 82,090 96,690 Cash flow hedge reserve 736 (186) (348) Cumulative changes in fair value (1,438) 16,813 19,590 Foreign currency translation reserve (1,723) (1,323) (1,647) Impairment reserve / Reserve for restructured accounts 19 7,421 5,100 - Retained profit 463, , ,265 Total equity attributable to the equity holders 1,762,050 1,688,333 1,647,184 Perpetual Tier I capital 7 (a) 1,000 1,000 1,000 TOTAL EQUITY 1,892,050 1,818,333 1,777,184 TOTAL LIABILITIES AND EQUITY 11,768,600 11,149,222 11,110,289 Net assets per share (in RO) Contingent liabilities and commitments 8 2,790,185 2,860,070 2,983,037 The interim condensed consolidated financial statements were approved by the Board of Directors on 29 October. The attached notes 1 to 20 form part of these interim condensed consolidated financial statements

8 Page 2 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER Unaudited Unaudited Unaudited Unaudited -for nine months ended- -for three months ended- Notes RO' 000 RO' 000 RO' 000 RO' 000 Interest income 9 8, , ,888 95,773 Interest expense 10 (105,281) (90,334) (36,707) (31,437) Net interest income 203, ,935 72,181 64,336 Income from Islamic financing / investment 9 42,374 33,967 14,770 11,693 Distribution to depositors 10 (21,476) (14,883) (7,717) (5,010) Net income from Islamic financing 20,898 19,084 7,053 6,683 Net interest income and income from Islamic financing 224, ,019 79,234 71,019 Commission and fee income (net) 11 68,259 68,092 21,809 23,896 Other operating income 12 36,981 36,461 11,447 12,091 OPERATING INCOME 329, , , ,006 OPERATING EXPENSES Other operating expenses (131,779) (124,706) (44,954) (41,823) Depreciation (9,936) (9,719) (3,292) (3,245) (141,715) (134,425) (48,246) (45,068) Impairment for due from banks (437) (450) (154) (150) Impairment for credit losses 3 (55,412) (53,013) (19,231) (17,577) Recoveries from impairment for credit losses 3 29,750,954 9,173 10,883 Impairment for investments (1,110) (5,440) (360) (1,760) Share of results from an associate 5-1, (168,924) (160,592) (58,818) (53,051) PROFIT BEFORE TAXATION 160, ,980 53,672 53,955 Tax expense (25,747) (22,723) (8,628) (8,010) PROFIT FOR THE PERIOD 134,744 1,257 45,044 45,945 OTHER COMPREHENSIVE (EXPENSE) INCOME Net other comprehensive income (expense) to be reclassified to profit or loss in subsequent periods, net of tax Translation of net investments in foreign operations (400) 2 (336) 76 Share of other comprehensive income (expense) of an associate Net change in fair value FVOCI - debt instruments 1,192-1,052 - Change in fair value of investments ,811 Change in fair value of cash flow hedge 922 (47) 68 (18) 1, ,932 Other comprehensive income (expense) not to be reclassified to profit or loss in subsequent periods Realised gain or loss on FVOCI equity investments (270) - (270) - Net change in fair value FVOCI - equity instruments (8,256) - (3,686) - (8,526) - (3,956) - OTHER COMPREHENSIVE (EXPENSE) INCOME FOR THE PERIOD (6,812) 628 (3,172) 4,932 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 127,932 1,885 41,872 50,877 Total comprehensive income for the period attributable to Equity holders of Parent Company 127,932 1,885 41,872 50,877 Profit attributable to Equity holders of Parent Company 134,744 1,257 45,044 45,945 Earnings per share (in RO) - Basic and diluted Items in other comprehensive income are disclosed net of tax. The attached notes 1 to 20 form part of these interim condensed consolidated financial statements

9 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER (Unaudited) Cumulative changes in fair Foreign currency translation Impairment/ Restructured Share Share General Legal Revaluation Subordinated Cash flow hedge Retained AET I capital premium reserve reserve reserve loan reserve reserve value reserve loans reserve profit Total Capital Total RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Balance at 1 January 270, , ,898 90,312 5,770 82,090 (186) 16,813 (1,323) 5, ,546 1,688,333 1,000 1,818,333 Impact of adopting IFRS 9 at 1 January (11,187) 106 9,296 (1,785) - (1,785) Restated balance at 1 January 270, , ,898 90,312 5,770 82,090 (186) 5,626 (1,323) 5, ,842 1,686,548 1,000 1,816,548 Profit for the period , , ,744 Transfer from retained profits to restructured accounts reserve ,215 (2,215) Realised gain/(loss) on FVOCI equity investments (270) Other comprehensive (expense) income (7,334) (400) - - (6,812) - (6,812) Total comprehensive income (7,064) (400) 2, , , ,932 Dividends paid (81,281) (81,281) - (81,281) Issue of bonus shares 13, (13,547) Interest paid on perpetual Tier 1 capital (3,565) (3,565) - (3,565) Conversion of mandatory convertible bonds 10,258 22, ,416-32,416 Balance as at 294, , ,898 90,312 5,770 82, (1,438) (1,723) 7, ,708 1,762,050 1,000 1,892,050 Page 3 (Unaudited) Cumulative changes in fair Foreign currency translation Share Share General Legal Revaluation Subordinated Cash flow hedge AET I capital premium reserve reserve reserve loan reserve reserve value reserve Retained profit Total Capital Total RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Balance at 1 January 249, , ,808 83,208 5,5 96,690 (1) 19,234 (1,966) 363,895 1,546,740-1,546,740 Profit for the period ,257 1,257-1,257 Share of other comprehensive expense (income) of an associate Other comprehensive income (expense) (47) Total comprehensive income (expense) (47) ,257 1,885-1,885 Dividends paid (62,405) (62,405) - (62,405) Conversion of mandatory convertible bonds 8,829 23, ,964-31,964 Issue of Perpetual Tier I capital ,000 1,000 Issue of bonus shares 12, (12,482) Balance as at 270, , ,808 83,208 5,5 96,690 (348) 19,590 (1,647) 419,265 1,647,184 1,000 1,777,184 Appropriations to legal reserve and sub-ordinated loan reserve are made on an annual basis. The attached notes 1 to 20 form part of these interim condensed consolidated financial statements

10 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER Page 4 Unaudited Unaudited RO' 000 RO' 000 CASH FLOWS FROM OPERATING ACTIVTIES Profit for the period before taxation 160, ,980 Adjustments for : Share of results from an associate - (1,782) Depreciation 9,936 9,719 Impairment for investments 1,110 5,440 Impairment for credit losses 55,412 53,013 Impairment for due from banks Recoveries from impairment for credit losses (29,750) (,954) Profit on sale of equipment - - Profit on sale of investments (568) (2,812) Dividend income (5,980) (3,382) Operating profit before working capital changes 191, ,672 Due from banks 134,145 (216,925) Loans and advances (401,131) (176,595) Islamic financing receivables (116,365) (89,468) Other assets (28,051) (21,606) Deposits from banks 140, ,902 Customers' deposits 317,075 (103,889) Islamic customer deposits (6,754) 166,785 Sukuk - 44,608 Other liabilities 32,935 26,089 Cash from / (used in) operating activities 263,925 (51,427) Income taxes paid (34,137) (23,702) Net cash from / (used in) operating activities 229,788 (75,129) CASH FLOWS FROM INVESTING ACTIVTIES Dividends from an associate - 1,611 Dividends received 5,980 3,382 Net movement in investments (132,267) (63,506) Net movement in property and equipment (3,937) (4,282) Net cash from / (used in) investing activities (1,224) (62,795) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (81,281) (62,405) Perpetual Tier I capital issued - 1,000 Interest on Perpetual Tier I capital paid (3,565) - Subordinated loan paid (6,545) (37,545) Net cash from / (used in) financing activities (91,391),050 NET CHANGE IN CASH AND CASH EQUIVALENTS 8,173 (107,874) Cash and cash equivalents at 1 January 1,168,560 1,369,008 CASH AND CASH EQUIVALENTS AT SEPTEMBER 1,176,733 1,261,134 Cash and cash equivalent comprises of the following: RO' 000 RO' 000 Cash and balances with Central Banks 731, ,904 Treasury bills 486, ,218 Due from banks 562, ,590 Deposits from banks (604,022) (387,578) 1,176,733 1,261,134 The attached notes 1 to 20 form part of these interim condensed consolidated financial statements

11 Page 5 FOR THE NINE MONTHS ENDED SEPTEMBER 1. LEGAL STATUS AND PRINCIPAL ACTIVITIES bank muscat SAOG (the Bank or the Parent Company) is a joint stock company incorporated in the Sultanate of Oman and is engaged in commercial and investment banking activities through a network of 167 branches ( : 157 branches) within the Sultanate of Oman and one branch each in Riyadh, Kingdom of Saudi Arabia and Kuwait. The Bank has representative offices in Dubai, United Arab Emirates, Singapore and Tehran, Iran. The Bank has a subsidiary in Riyadh, Kingdom of Saudi Arabia. The Bank operates in Oman under a banking license issued by the Central Bank of Oman (CBO) and is covered by its deposit insurance scheme. The Bank has its primary listing on the Muscat Securities Market. The Bank employed 3,757 employees as of ( : 3,715 employees). During 2013, the Parent Company inaugurated "Meethaq Islamic banking window" ( Meethaq ) in the Sultanate of Oman to carry out banking and other financial activities in accordance with Islamic Shari a rules and regulations. Meethaq operates under an Islamic banking license granted by the CBO on 13 January Meethaq s Shari a Supervisory Board is entrusted to ensure Meethaq's adherence to Shari a rules and principles in its transactions and activities. The principal activities of Meethaq include: accepting customer deposits; providing Shari'a compliant financing based on various Shari'a compliant modes; undertaking Shari'a compliant investment activities permitted under the CBO's Regulated Islamic Banking Services as defined in the licensing framework. Meethaq has 19 branches ( - 19 branches) in the Sultanate of Oman. 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES The unaudited interim condensed consolidated financial statements for the period ended of the Bank are prepared in accordance with International Accounting Standard (IAS) 34, 'Interim Financial Reporting', applicable regulations of the Central Bank of Oman (CBO) and the Capital Market Authority (CMA). For the period ended, the Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for periods beginning on 1 January. The adoption of new and revised standards and interpretations has not resulted in any major changes to the Group s accounting policies and has not affected the amounts reported for the prior periods. The unaudited interim condensed consolidated financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards. In addition, results for the period ended are not necessarily indicative of the results that may be expected for the financial year.

12 Page 6 FOR THE NINE MONTHS ENDED SEPTEMBER 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) The unaudited interim condensed financial statements have been prepared on the historical cost basis, modified to include the revaluation of freehold land and buildings and the measurement at fair value of derivative financial instruments, available-for-sale investment securities and investment recorded at fair value through profit or loss. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The Islamic window operation of the Parent Company; "Meethaq" uses Financial Accounting Standards ("FAS"), issued by Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI"), for preparation and reporting of its financial information. Meethaq's financial information is included in the results of the Bank, after adjusting financial reporting differences, if any, between AAOIFI and IFRS. The functional currency of the Bank is the Rial Omani (RO). These unaudited interim condensed consolidated financial statements of the Bank are prepared in Rial Omani, rounded to the nearest thousands, except as indicated.

13 Page 7 FOR THE NINE MONTHS ENDED SEPTEMBER 3. LOANS AND ADVANCES / ISLAMIC FINANCING RECEIVABLES Conventional banking RO' 000 RO' 000 RO' 000 Corporate loans 4,049,413 3,779,355 3,754,423 Overdrafts and credit cards 293, , ,475 Loans against trust receipts / Other advances 575, , ,261 Bills purchased and discounted 48,536 52,926 45,961 Personal and housing loans 3,097,3 3,000,553 2,962,526 8,064,242 7,668,576 7,582,646 Provision for impairment (297,125) (9,973) (323,975) 7,767,117 7,358,603 7,258,671 Islamic financing receivables RO' 000 RO' 000 RO' 000 Housing finance 478, , ,535 Corporate finance 584, , ,610 Consumer finance 43,861 44,959 45,013 1,106, , ,158 Provision for impairment (20,702) (17,811) (16,503) 1,085, , ,655 Movement in provision for impairment is analysed below: RO' 000 RO' 000 RO' January 327, , ,890 Remeasurement on transition to IFRS 9 transferred to non funded impairments (34,912) - - Impairment for credit losses 64,339 75,948 62,340 Recoveries from impairment for credit losses (32,468) (44,618) (32,848) Written off during the period (7,319) (3,986) (3,743) Transfer from / (to) Memorandum portfolio 553 (13,359) 762 Foreign currency translation difference (23) Transfer to collateral pending sale (19) (170) - Other movements (108) - - At / 317, , ,478 Impairment for credit losses during the period ended of RO 64,339 thousands includes contractual interest reserved for RO 6,739 thousands. Recoveries from impairment for credit losses during the period ended of RO 32,468 thousands includes recovery of reserved interest for RO 3,560 thousands. Contractual interest reserved and recovery thereof is shown under net interest income and income from Islamic financing in the statement of comprehensive income.

14 Page 8 FOR THE NINE MONTHS ENDED SEPTEMBER 3. LOANS AND ADVANCES / ISLAMIC FINANCING RECEIVABLES (continued) Recoveries during the period ended of RO 29,750 thousands ( : RO,954 thousands) include RO 836 thousands ( : RO 2,274 thousands) recovered from loans written off earlier. At, carrying value of funded credit-impaired loans and advances amounted to RO million ( : RO million). The maturity profile of loans and advances / Islamic financing receivables was as follows RO' 000 RO' 000 RO' 000 On demand or within 3 months 1,958,200 1,837,927 2,096,265 Four months to 12 months 783, , ,443 1 to 5 years 2,137,623 1,790,677 1,659,817 More than 5 years 3,972,990 3,858,934 3,806,801 8,852,794 8,328,716 8,201, INVESTMENT SECURITIES RO' 000 RO' 000 RO' 000 Equity investments: Designated as at FVTPL 32, Designated as at FVOCI 95, Available-for-sale - 128, ,670 Gross Equity investments 128, , ,670 Less: Impairment losses on investments - (14,143) (14,564) Net equity investments 128, ,824 95,106 Debt investments: Designated as at FVTPL - 50,995 51,004 Measured at FVOCI 69, Measured at amortised cost 1,069, Available-for-sale - 254, ,692 Held-to-maturity - 607, ,894 Gross Debt investments 1,139, ,182 1,095,590 Less: Impairment loss allowance (2,836) (8) - Net debt investments 1,136, ,352 1,095,590 Total investment securities 1,264,474 1,027,176 1,190,696

15 Page 9 FOR THE NINE MONTHS ENDED SEPTEMBER 4. INVESTMENT SECURITIES (continued) As at Amortised (unaudited) FVTPL FVOCI Cost Total RO' 000 RO' 000 RO' 000 RO' 000 Quoted Equities: Foreign securities 9,127 61,901-71,028 Other services sector - 10,958-10,958 Unit funds 10, ,484 Financial services sector 1,275 8,198-9,473 Industrial sector - 2,259-2,259 20,886 83, ,202 Unquoted Equities: Financial services sector Foreign securities 1,890 1,750-3,640 Local securities 8,092 10,286-18,378 Unit funds 1, ,459 11,968 12,036-24,004 Gross Equity investments 32,854 95, ,206 Less: Impairment losses on investments Net equity investments 32,854 95, ,206 Quoted Debt: Government Bonds , ,656 Foreign Bonds - 35,714 2,015 37,729 Local Bonds - 21,389 53,969 75,358-57, , ,743 Unquoted Debt: Treasury Bills , ,810 Local Bonds - 12,028 23,523 35,551-12, , ,361 Gross debt investments - 69,131 1,069,973 1,139,104 Less: Impairment losses on investments - (2,522) (314) (2,836) Net debt investments - 66,609 1,069,659 1,136,268 Net investments 32, ,961 1,069,659 1,264,474 As at Available-for- Held-to- (audited) FVTPL sale maturity Total RO' 000 RO' 000 RO' 000 RO' 000 Quoted Equities: Foreign securities - 65,190-65,190 Other services sector - 17,448-17,448 Unit funds - 10,827-10,827 Financial services sector - 5,817-5,817 Industrial sector - 3,217-3, , ,499 Unquoted Equities: Foreign securities - 6,455-6,455 Local securities - 19,253-19,253 Unit funds ,468-26,468 Gross Equities portfolio - 128, ,967 Less: Impairment losses on investments - (14,143) - (14,143) Net equities portfolio - 114, ,824 Quoted Debt: Government Bonds 49, , , ,886 Foreign Bonds 1,000 32,819 2,008 35,827 Local Bonds - 1,556 45,282 46,838 50, , , ,551 Unquoted Debt: Treasury Bills , ,012 Local Bonds - 13,050 16,569 29,619-13, , ,631 Gross debt portfolio 50, , , ,182 Less: Impairment losses on investments - (8) - (8) Net debt portfolio 50, , , ,352 Net investments 50, , ,955 1,027,176 As at 51, , ,894 1,190,696

16 Page 10 FOR THE NINE MONTHS ENDED SEPTEMBER On adoption of IFRS 9, on 1 January, the Group designated certain investments amounting to RO million as equity securities as at FVOCI. In, these investments were classified as available-for-sale and measured at fair value. During the period ended, the Bank recorded an impairment loss of RO 1,110 thousands ( : RO 5,440 thousands) and disposed investments on which impairment loss of nil ( : RO 4,297 thousands) was earlier recorded. 5. INVESTMENT IN AN ASSOCIATE The carrying value of Bank's investment in Al Salam Bank (ASB) is as set out below: RO' 000 RO' 000 RO' 000 At 1 January - 48,074 48,074 Share of results for the period / year - 2,438 1,782 Share of other comprehensive income Dividend received - (1,611) (1,611) Transfer to available-for-sale investment - (49,103) - At / ,428 The stake of the Parent Company in ASB had a lock in period of three years from March 2014 till March. In, the three year lock in period of the investment expired. Further, on 19 December, one of the two directors representing the Parent Company on the board of ASB resigned from his directorship position, thereby substantially reducing the influence of the Parent Company on ASB from that date. The Parent Company does not have significant influence in ASB through policy making processes, material transactions between the entities or any other means. Given the change in the board composition and the parent company's inability to appoint two directors in ASB, the Parent Company reassessed its previous classification of the investment under IAS 28 as an Equity associate and concluded that the change in the circumstances results in the investment in ASB being reclassified to Available-for-sale investment under IAS 39 and carry the same at its fair market value 6. CUSTOMERS' DEPOSITS Conventional customers' deposits RO' 000 RO' 000 RO' 000 Current accounts 1,831,347 1,800,5 1,792,346 Call accounts 357,966 6, ,597 Savings accounts 2,351,835 2,403,113 2,362,097 Time deposits 2,174,535 1,892,377 1,881,556 Other 61,004 56, ,112 6,776,687 6,459,410 6,590,708 Islamic customers' deposits RO' 000 RO' 000 RO' 000 Current accounts 115, ,829 88,261 Savings accounts 131, , ,159 Time deposits 582, , ,606 Other 123, , , , , ,704 The maturity profile of customer's deposits was as follows: RO' 000 RO' 000 RO' 000 On demand or within 3 months 1,419,202 1,509,462 1,453,335 Four months to 12 months 1,732,815 1,714,829 1,969,164 1 to 5 years 3,187,313 2,870,375 2,782,076 More than 5 years 1,390,505 1,324,646 1,315,837 7,729,835 7,419,312 7,520,412

17 Page 11 FOR THE NINE MONTHS ENDED SEPTEMBER 7. SHARE CAPITAL During March, the Bank converted a portion of its mandatory convertible bonds (MCBs) issued in 2015 into share capital as per the terms of MCBs. The conversion amounting to RO million was credited to the share capital and share premium amounting to RO million and RO million, respectively. In the Bank's annual general meeting held on 18 March the shareholders approved a dividend of 35%, % in the form of cash and 5% in the form of bonus shares. Thus shareholders received cash dividend of RO per ordinary share of RO each aggregating to RO million on Bank s existing share capital. In addition, they received bonus shares in the proportion of one share for every 20 ordinary shares aggregating to 135,468,092 shares of RO each amounting to RO million. Shareholders of the Bank who hold 10% or more of the bank's shares are given below: RO' 000 RO' 000 RO' 000 Number of shares held Royal Court Affairs 696,343, ,144, ,144,235 Dubai Financial Group LLC 346,807, ,147, ,147,759 % of shareholding Royal Court Affairs 23.63% 23.63% 23.63% Dubai Financial Group LLC 11.77% 12.37% 12.37% 7.(a) PERPETUAL TIER I CAPITAL On 3 April, the Bank issued Additional Equity Tier 1 (AET1) capital deposit amounting to OMR 1 million. The AET1 capital constitute direct, unconditional, subordinated and unsecured obligations of the Bank and are classified as equity in accordance with IAS 32: Financial Instruments Classification. The AET 1 capital do not have a fixed or final redemption date. They are first callable by the Bank after a minimum of 5 years from the instrument date and thereafter in accordance with the terms of the agreement and subject to prior approval of Central Bank of Oman. The AET1 capital bear interest on their nominal amount from the issue date to the first call date at a fixed annual rate of 5.5%. Thereafter the interest rate will be reset as per the terms of the agreement. Interest will be payable semi-annually in arrears and treated as deduction from equity. The Instrument meets all the requirements of AET 1 issuance as mandated by Basel and Central Bank of Oman norms. 8. CONTINGENT LIABILITIES RO' 000 RO' 000 RO' 000 Letters of credit 416, , ,874 Guarantees 2,374,102 2,348,000 2,382,163 2,790,185 2,860,070 2,983,037

18 Page 12 FOR THE NINE MONTHS ENDED SEPTEMBER 9. INTEREST INCOME / INCOME ON ISLAMIC FINANCING / INVESTMENT Unaudited Unaudited Unaudited Unaudited -for nine months ended- -for three months ended- RO' 000 RO' 000 RO' 000 RO' 000 Loans and advances 277, ,259 97,310 87,466 Due from banks 14,664 9,025 5,594 3,633 Investments 16,667 12,985 5,984 4,674 8, , ,888 95,773 Islamic financing receivable 39,792 32,085 13,913 10,982 Islamic due from banks Islamic investment 1,947 1, ,374 33,967 14,770 11, , , , , INTEREST EXPENSE / DISTRIBUTION ON ISLAMIC DEPOSITS Unaudited Unaudited Unaudited Unaudited -for nine months ended- -for three months ended- RO' 000 RO' 000 RO' 000 RO' 000 Customer's deposits 69,592 61,778 24,069 21,155 Subordinated liabilities/manadatory convertible bonds 5,333 7,111 1,745 2,232 Bank borrowings 16,247 9,785 6,045 3,697 Euro medium term notes 14,109 11,660 4,848 4, ,281 90,334 36,707 31,437 Islamic customers deposits 17,949 12,044 6,209 4,025 Islamic bank borrowings 1,798 2, Profit paid on Sukuk 1, ,476 14,883 7,717 5, , ,217 44,424 36, COMMISSION AND FEES INCOME (NET) The commission and fees shown in the interim condensed consolidated statement of comprehensive income is net off commission and fees paid of RO 1,056 thousands ( : RO 1,293 thousands). 12. OTHER OPERATING INCOME Unaudited Unaudited Unaudited Unaudited -for nine months ended- -for three months ended- RO' 000 RO' 000 RO' 000 RO' 000 Foreign exchange 26,605 23,929 8,936 8,708 Profit on sale of investment securities 298 2, Dividend income 5,980 3, Other income 4,098 6,338 1,286 2,138 36,981 36,461 11,447 12,091 Dividend income recognised on FVOCI investments during the period ended is RO 5,094 thousands.

19 Page 13 FOR THE NINE MONTHS ENDED SEPTEMBER 13. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders (after adjusting for interest on the convertible bonds, net of tax) for the period by the weighted average number of ordinary shares oustanding during the period as follows: Unaudited Unaudited RO' 000 RO' 000 Profit attributable to ordinary shareholders of parent company for diluted earnings per share (RO 000's) 134,744 1,257 Interest on convertible bonds, net of taxation (RO 000's) , ,243 Weighted average number of shares in issue during the period (000's) 2,917,728 2,922,121 Basic and diluted earnings per share (RO) There are no instruments that are dilutive in nature, hence the basic and diluted earnings per share are same for both the periods. 14. RELATED PARTY TRANSACTIONS In the ordinary course of business, the Group conducts transactions with certain of its directors, shareholders, senior management and companies in which they have a significant interest. The terms of these transactions are approved by the Bank s Board and Management. The balances in respect of related parties included in the interim condensed consolidated statement of financial position as at the reporting date are as follows: RO' 000 RO' 000 RO' 000 a) Directors and senior management Loans and advances (gross) 4,261 4,561 3,914 Provision and reserve interest Loans and advances (net) 4,261 4,561 3,914 Current, deposit and other accounts 1, ,7 Customers' liabilities under documentary credits, guarantees and other commitments b) Major shareholders and others Loans and advances (gross) 54,448 54,586 26,658 Provision and reserve interest - (8,712) (8,679) Loans and advances (net) 54,448 45,874 17,979 Current, deposit and other accounts 81,687 50,055 59,032 Customers' liabilities under documentary credits, guarantees and other commitments 17,992 6,755 11,341 The income and expenses in respect of related parties included in the interim condensed consolidated financial statements are as follows: Unaudited Unaudited RO' 000 RO' 000 a) Directors and senior management Interest income Interest expenditure b) Major shareholders and others Interest income 1, Interest expenditure 1,2 1,294 During, the Group entered into a settlement agreement with its related party Dubai Group LLC ( the borrower ) on their exposure with the bank. As on, the Group carried 100% provision towards this exposure. Under the agreement, the Group received RO million as full and final settlement from the borrower in March against an exposure of RO million. The settlement and the balance write-off is approved by the Board of directors and has necessary regulatory approval. Accordingly, in, the Group has recovered RO million and has written off RO million in the books of account.

20 Page 14 FOR THE NINE MONTHS ENDED SEPTEMBER 15. DERIVATIVES As at Positive Negative Notional Notional amounts by term to maturity (unaudited) fair value fair value total 0-3 months 4-12 months > 12 months RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Fair value hedge , ,737 Cash flow hedge , ,815 Interest rate swaps 10,217 10, ,556-10, ,882 Cross currency swap Currency options - bought 59-6,190 5, Currency options - sold ,190 5, Commodity options - bought Commodity options - sold Commodities purchase contracts 720 2, ,627 74,688 26,548 12,391 Commodities sale contracts 2, ,692 70,823 22,478 12,391 Forward purchase contracts 434 2,177 1,573,031 1,108, ,933 92,547 Forward sales contracts 11, ,567,062 1,102, ,056 91,079 25,774 16,604 4,107,900 2,368, , ,842 As at Positive Negative Notional Notional amounts by term to maturity (audited) fair value fair value total 0-3 months 4-12 months > 12 months RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Fair value hedge - 1, ,9 192, ,809 Cash flow hedge , ,360 Interest rate swaps 9,398 9, ,154 7,700 11, ,920 Cross currency swap ,500 38,500 77,000 - Currency options - bought ,214 35,472 12,742 - Currency options - sold ,214 35,472 12,742 - Commodities purchase contracts 8, ,350 82,373 15,499 8,478 Commodities sale contracts 2 8, ,350 82,373 15,499 8,478 Forward purchase contracts 2,903 1,857 1,7, , , ,646 Forward sales contracts 6,107 4,007 1,1, , , ,049 27,342 26,818 3,856,194 2,074, , ,740 As at Positive Negative Notional Notional amounts by term to maturity (unaudited) fair value fair value total 0-3 months 4-12 months > 12 months RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Fair value hedge - 1, , ,191 Cash flow hedge , ,905 Interest rate swaps 8,788 8, ,642-28, ,441 Cross currency swap Currency options - bought ,501 16,412 26, Currency options - sold ,513 16,424 26, Commodities purchase contracts 6, , ,082 12, Commodities sale contracts 392 4, , ,051 6, Forward purchase contracts 1,901 1,599 1,206, , ,923 69,882 Forward sales contracts 6,067 6,392 1,213, , ,871 68,014 23,384 23,976 3,631,180 1,765, ,446 1,001,509

21 Page 15 FOR THE NINE MONTHS ENDED SEPTEMBER 16. SEGMENTAL INFORMATION Management has determined the operating segments based on the reports reviewed by the executive committee that are used to make strategic decisions. The committee considers the business from both a geographic and product perspective. Geographically, management considers the performance of whole bank in Oman and International markets. The Oman market is further segregated into corporate, consumer, wholesale and Islamic banking as all of these business lines are located in Oman. Segment information in respect of geographical locations is as follows: Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 RO' 000 Total International Oman Oman International Total 280,269 17, ,118 Interest income 294,115 14,443 8,558 (90,334) (9,387) (80,947) Interest expense (97,325) (7,956) (105,281) 33,967-33,967 Income from Islamic financing 42,374-42,374 (14,883) - (14,883) Distribution to depositors (21,476) - (21,476) 68,092 4,410 63,682 Commission and fee income (net) 63,520 4,739 68,259 36, ,832 Other operating income 34,081 2,900 36, ,572 12,803 0, ,289 14, ,415 Segment costs (124,706) (6,596) (118,110) Other operating expenses (125,696) (6,083) (131,779) (9,719) (198) (9,521) Depreciation (9,745) (191) (9,936) (134,425) (6,794) (127,631) (135,441) (6,274) (141,715) (450) - (450) Impairment for due from banks (437) - (437) (53,013) (9,091) (43,922) Impairment for credit losses (42,482) (12,9) (55,412) Recoveries from provision for credit,954 5,997 24,957 losses 28,272 1,478 29,750 (5,440) - (5,440) Impairment for investments available-for-sale (1,110) - (1,110) 1,782 1,782 - Share of results from an associate (22,723) (235) (22,488) Tax expense (25,707) (40) (25,747) (183,315) (8,341) (174,974) (176,905) (17,766) (194,671) Segment profit (loss) for the 1,257 4, ,795 year 138,384 (3,640) 134,744 Other information 11,110, ,483 10,444,806 Segment assets 11,164, ,132 11,768,600

22 Page 16 FOR THE NINE MONTHS ENDED SEPTEMBER 16. SEGMENTAL INFORMATION (continued) The Group reports the segment information by the following business segments Corporate, Consumer, Wholesale, International and Islamic banking. The following table shows the distribution of the Group's operating income, net profit and total assets by business segments: Corporate Consumer Wholesale International Islamic banking banking banking banking* Subtotal banking Total (unaudited) RO '000 RO '000 RO '000 RO '000 RO '000 RO '000 RO '000 Segment revenue Net interest income 85,642 92,585 18,480 6, , ,277 Net income from Islamic financing ,898 20,898 Commission, fees and other income 16,934 49,002 29,354 7, ,968 2, ,240 Operating income 102, ,587 47,834 14,248 6,245 23, ,415 Segment costs Operating expenses (22,707) (88,313) (12,668) (7,772) (131,460) (10,255) (141,715) Impairment (net) (5,264) (5,6) (2,004) (11,452) (24,026) (3,183) (27,209) Tax expense (11,570) (7,460) (4,980) (176) (24,186) (1,561) (25,747) (39,541) (101,079) (19,652) (19,400) (179,672) (14,999) (194,671) Segment profit for the year 63,035 40,508 28,182 (5,152) 126,573 8, ,744 Segment assets 4,431,094 3,278,152 2,075, ,190 10,423,149 1,345,451 11,768,600 Corporate Consumer Wholesale International Islamic banking banking banking banking* Subtotal banking Total (unaudited) RO '000 RO '000 RO '000 RO '000 RO '000 RO '000 RO '000 Segment revenue Net interest income 79,229 91,153 11,671 7, , ,935 Net income from Islamic financing ,084 19,084 Commission, fees and other income 18,951 46,771 31,753 5, ,706 1, ,553 Operating income 98, ,924 43,424 13, ,641 20, ,572 Segment costs Operating expenses (20,784) (83,709) (11,939) (8,460) (124,892) (9,533) (134,425) Impairment (net) (10,850) (5,834) (5,129) (3,094) (24,907) (3,042) (27,949) Share of results of an associate ,782 1,782-1,782 Tax expense (9,827) (7,231) (4,114) (298) (21,470) (1,253) (22,723) (41,461) (96,774) (21,182) (10,070) (169,487) (13,828) (183,315) Segment profit for the year 56,719 41,150 22,242 3, ,154 7,103 1,257 Segment assets 4,087,953 3,079,141 2,125, ,398 9,958,505 1,151,784 11,110,289 Note: * International banking includes overseas operations and cost allocations from Oman operations

23 Page 17 FOR THE NINE MONTHS ENDED SEPTEMBER 17. ASSET LIABILITY MATURITY The asset and liability maturity profile was as follows RO' 000 RO' 000 RO' 000 ASSETS On demand or within 3 months 3,550,132 3,565,258 3,815,986 Four months to 12 months 1,169,546 1,166,192 1,037,403 1 to 5 years 2,623,737 2,146,333 2,0,586 More than 5 years 4,425,185 4,271,439 4,226,314 11,768,600 11,149,222 11,110,289 LIABILITIES AND EQUITY On demand or within 3 months 2,570,528 2,491,200 2,072,864 Four months to 12 months 2,005,829 2,039,103 2,468,837 1 to 5 years 3,908,810 3,475,142 3,474,960 More than 5 years 3,283,433 3,143,777 3,093,628 11,768,600 11,149,222 11,110,289 MISMATCH On demand or within 3 months 979,604 1,074,058 1,743,122 Four months to 12 months (836,283) (872,911) (1,431,434) 1 to 5 years (1,285,073) (1,328,809) (1,444,374) More than 5 years 1,141,752 1,127,662 1,132, Mismatch represents difference between assets and liabilities for each maturity band. 18. CAPITAL ADEQUACY The following table sets out the capital adequacy position of the Group as per Basel III regulatory requirements RO' 000 RO' 000 RO' 000 Common Equity Tier I capital 1,574,346 1,534,226 1,440,714 AET I capital deposit 1,000 1,000 1,000 Tier I capital 1,704,346 1,664,226 1,570,714 Tier II capital 58, , ,713 Total regulatory capital 1,762,552 1,820,396 1,744,427 Total risk weighted assets 9,838,463 9,867,181 9,962,034 Of which: Credit risk weighted assets 8,897,518 8,927,995 9,058,583 Of which: Market risk weighted assets 175, , ,266 Of which: Operational risk weighted assets 765, , ,185 Capital ratios : Common Equity Tier % 15.55% 14.46% Tier % 16.87% 15.77% Total capital 17.91% 18.45% 17.51%

24 Page 18 FOR THE NINE MONTHS ENDED SEPTEMBER 19. CLASSIFICATION, MEASUREMENT AND IMPAIRMENT OF FINANCIAL INSTRUMENTS 1. IFRS 9 Financial Instruments The Group has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of 1 January, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements. The Group did not early adopt IFRS 9 in any previous periods. As permitted by the transitional provisions of IFRS 9, the Group elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and other reserves of the current period. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have been applied only to the current period. The comparative period notes disclosures repeat those disclosures made in the prior year. The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures. 2. Classification and measurement of financial assets and financial liabilities 2.1 Classification of financial assets and financial liabilities The Group classifies its financial assets in the following measurement categories: at fair value through other comprehensive income (FVOCI) or at fair value through profit or loss (FVTPL); at amortised cost. The classification depends on the Group's business model for managing financial assets and the contractual terms of the financial assets' cash flows. The Group classifies its financial liabilities at amortised cost unless it has designated liabilities at fair value through profit or loss or is required to measure liabilities at fair value through profit or loss such as derivative liabilities. 2.2 Measurement of financial assets and financial liabilities Financial assets measured at amortised cost Debt instruments Investments in debt instruments are measured at amortised cost where they have: contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and are held within a business model whose objective is achieved by holding to collect contractual cash flows. These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost less impairment. The measurement of credit impairment is included in note 3 Impairment of financial assets.

25 Page 19 FOR THE NINE MONTHS ENDED SEPTEMBER 19. CREDIT QUALITY ANALYSIS (continued) Financial assets measured at fair value through other comprehensive income a) Debt instruments Investments in debt instruments are measured at fair value through other comprehensive income where they have: contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at fair value. Gains and losses arising from changes in fair value are included in other comprehensive income within a separate component of equity. Impairment losses or reversals, interest revenue and foreign exchange gains and losses are recognised in profit and loss. Upon disposal, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to the income statement. The measurement of credit impairment is included in note 3 Impairment of financial assets. b) Equity instruments Investment in equity instruments that are not held for trading are measured at fair value through other comprehensive income, where an irrevocable election has been made by management. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment Items at fair value through profit or loss Items at fair value through profit or loss comprise: items held for trading; items specifically designated as fair value through profit or loss on initial recognition; and debt instruments with contractual terms that do not represent solely payments of principal and interest. Financial instruments held at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in the income statement as incurred. Subsequently, they are measured at fair value and any gains or losses are recognised in the income statement as they arise. 3. Impairment of financial assets 3.1 IFRS 9 introduces a new impairment model that requires the recognition of expected credit losses on all financial assets at amortised cost or at fair value through other comprehensive income (other than equity instruments), lease receivables and certain loan commitments and financial guarantee contracts. The expected credit loss must also consider forward looking information to recognise impairment allowances earlier in the lifecycle of a product. IFRS 9 consequently is likely to increase the volatility of impairment allowances as the economic outlook changes, although cash flows and cash losses are expected to remain unchanged. 3.2 IFRS 9 introduces a three-stage approach to impairment as follows: Stage 1 - the recognition of 12 month expected credit losses (ECL), that is the portion of lifetime expected credit losses from default events that are expected within 12 months of the reporting date, if credit risk has not increased significantly since initial recognition; Stage 2 - lifetime expected credit losses for financial instruments for which credit risk has increased significantly since initial recognition; and Stage 3 - lifetime expected credit losses for financial instruments which are credit impaired.

26 Page 20 FOR THE NINE MONTHS ENDED SEPTEMBER 19. CREDIT QUALITY ANALYSIS (continued) 3.3 Assessment of significant increase in credit risk (SICR) When determining whether the risk of default has increased significantly since initial recognition, the Group considers both quantitative and qualitative information and analysis based on the Group s historical experience and expert credit risk assessment, including forward-looking information. Retail facilities use the number of days past due (DPD) to determine significant increase in credit risk. For non-retail facilities, internally derived credit ratings as described above have been identified as representing the best available determinant of credit risk. The Group assigns each facility a credit rating at initial recognition based on available information about the borrower. Credit risk is deemed to have increased significantly if the credit rating has significantly deteriorated at the reporting date relative to the credit rating at the date of initial recognition. In addition, as a backstop, the Group considers that significant increase in credit risk occurs when an asset is more than DPD. 3.4 Criteria used for determining SICR (i.e. movement from Stage 1 to Stage 2) Stage 2 consists of facilities that have undergone significant increase in credit risk (SICR) since initial recognition (unless they are classified under low credit risk at the reporting date). For these exposures Lifetime ECL is recognized which might have a significant impact on the overall ECL A facility would be assigned to Stage 2 based on Quantitative, Qualitative and Backstop Criteria Quantitative Criteria a) For non-retail exposure: based on rating degradation and days past due. i) Rating Degradation Table The credit risk of a particular exposure is deemed to have increased significantly since initial recognition based on its credit risk grade downgrade provided below: Classification Grades Aaa oto Baa3 Grades Baa1 to Caa2 Minimum credit risk grade downgrade 4 to 6 notch 1 to 4 notch ii) Days past due (DPD) based Any facility which has been more than days delinquent would be assigned to Stage 2 b) For retail exposure: based on Days past due. Any facility which has been more than days delinquent would be assigned to Stage Qualitative criteria In addition to the extant requirements laid down under IFRS 9, the group also follows the qualitative criteria prescribed by CBO vide its circular BM 1149 for SICR assessment.

27 Page 21 FOR THE NINE MONTHS ENDED SEPTEMBER 19. CREDIT QUALITY ANALYSIS (continued) 3.5. Calculation of expected credit losses (ECL) ECLs are calculated using three main components, i.e. a probability of default (PD), a loss given default (LGD) and an exposure at default (EAD). These parameters are generally derived from internally developed statistical models combined with historical, current and forward-looking customer and macro-economic data. For accounting purposes, the 12-months and lifetime PD represent the expected point-in-time probability of a default over the next 12 months and remaining lifetime of the financial instrument, respectively, based on conditions existing at the balance sheet date and future economic conditions that affect credit risk. The LGD represents expected loss conditional on default, taking into account the mitigating effect of collateral, its expected value when realised and the time value of money. The EAD represents the expected exposure at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdown of a facility. The 12-months ECL is equal to the discounted sum over the next 12-months of monthly PD multiplied by LGD and EAD. Lifetime ECL is calculated using the discounted sum of monthly PD over the full remaining life multiplied by LGD and EAD Incorporation of forward-looking information The Group incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and its measurement of ECL. Based on advice from the Group Risk Committee and economic experts and consideration of a variety of external actual and forecast information, the Group formulates a base case view of the future direction of relevant economic variables as well as a representative range of other possible forecast scenarios. This process involves developing additional economic scenarios and considering the relative probabilities of each outcome. External information includes economic data and forecasts published by governmental bodies, monetary authorities in the countries where the Group operates, supranational organisations, and selected private-sector and academic forecasters. 4. Regulatory reserves 4.1 Impairment reserve CBO circular BM 1149 sets out guidelines on implementation of IFRS 9 while replacing existing prudential impairment norms of the Central Bank. As per the circular, in the year of adoption, if IFRS 9 based provision for impairment is lower than the provision for impairment as per regulatory guidelines, the excess, net of tax, shall be transferred as an appropriation from net profit after taxes to a regulatory reserve Impairment reserve under Parent Company s equity. In subsequent years, if IFRS 9 based provision for impairment (i.e. charge to the profit and loss) is lower than provision for impairment as per regulatory guidelines, the excess, net of tax, shall be transferred as an appropriation from net profit after taxes to aforementioned Impairment reserve. The regulatory impairment reserve cannot be used by the bank for capital adequacy calculation and for declaration of any dividends. Utilization of the Impairment reserve created above would require prior approval of the Central Bank of Oman. 4.2 Reserve for restructured accounts The Parent Company has created a reserve for restructured accounts in accordance with the regulations of the Central Bank of Oman (CBO). This reserve represents provisions on performing but restructured accounts at the rate prescribed by CBO. This reserve is not available for regulatory capital or distribution of dividends. The reserve will be released to retained earnings on satisfactory performance of these accounts as per regulatory guidelines.