Bank Muscat profit rises 9.3% as deposits and non-interest income grow

Bank Muscat's key first-half figures

Metric H1 2026 H1 2025 Change Net interest and Islamic financing income RO 210.49 million RO 206.44 million 2.0% Other operating income RO 92.23 million RO 81.83 million 12.7% Operating expenses RO 114.38 million RO 108.08 million 5.8% Operating profit RO 188.34 million RO 180.19 million 4.5% Net profit RO 137.49 million RO 125.82 million 9.3% Net impairment losses RO 24.30 million RO 30.16 million Not disclosed The headline result is the 9.3% increase in net profit. That was comfortably ahead of the 4.5% growth in operating profit, with lower impairment losses providing an additional benefit further down the income statement.

Impairment losses are charges taken to reflect expected losses on financial assets, including loans that may not be fully repaid. Bank Muscat's net impairment losses fell to RO 24.30 million from RO 30.16 million. That is a positive development, although the preliminary announcement does not disclose the bank's non-performing loan ratio, cost of risk or detailed asset-quality trends.

Non-interest income does more of the work

Net interest income from conventional banking and net income from Islamic financing rose by 2.0% to RO 210.49 million.

This is the bank's main income stream from lending and financing activities, after accounting for the associated funding costs. Growth was positive, but not especially rapid. The stronger contribution came from non-interest income, which increased by 12.7% to RO 92.23 million. Bank Muscat attributed this to growth in business volumes and higher investment income.

This helped broaden the earnings contribution beyond traditional lending. However, investors should note that the announcement does not split out how much of the increase came from business volumes and how much came from investment income. That distinction could matter because income linked to recurring customer activity may be more dependable than investment gains. Further detail may arrive with the complete unaudited financial statements later in July 2026.

Costs rise faster than core banking income

Operating expenses increased by 5.8% to RO 114.38 million, compared with RO 108.08 million a year earlier.

This cost growth was faster than the 2.0% increase in net interest and Islamic financing income. It was also above the 4.5% rise in operating profit, although strong non-interest income helped offset the pressure. The announcement does not explain which cost categories drove the increase. Staff costs, technology spending and other administrative expenses are not separately disclosed at this preliminary stage.

Investors will want to see whether the higher spending is supporting future growth or represents more persistent cost inflation. No cost-to-income ratio was provided.

Deposits outpace loan growth

Bank Muscat's balance sheet expanded considerably over the year to 30 June 2026.

Balance-sheet metric 30 June 2026 30 June 2025 Change Total assets RO 16,290 million RO 14,174 million 14.9% Net loans and Islamic financing RO 11,392 million RO 10,724 million 6.2% Customer and Islamic deposits RO 11,182 million RO 9,879 million 13.2% Total equity RO 2,618 million RO 2,452 million 6.8% Net loans and Islamic financing increased by 6.2% to RO 11,392 million. Conventional loans and advances rose by 6.7% to RO 9,687 million, while Islamic financing receivables increased by 3.4% to RO 1,705 million.

Customer deposits grew more quickly, rising by 13.2% to RO 11,182 million. Conventional customer deposits increased by 14.2% to RO 9,506 million, while Islamic customer deposits rose by 7.6% to RO 1,676 million. Faster deposit growth can be encouraging because deposits are an important source of funding for a bank's lending activities. However, the announcement does not disclose deposit pricing, funding margins or the composition of those deposits, so it is not possible to judge the full impact on profitability. Total assets rose by 14.9% to RO 16,290 million, significantly ahead of the 6.2% increase in net loans and Islamic financing. The reasons for the wider asset growth are not explained in the preliminary release.

Equity strengthens, but capital detail is limited

Total equity increased by 6.8% to RO 2,618 million. This figure includes RO 505 million of perpetual Tier I capital, unchanged from 2025.

Perpetual Tier I capital is a form of loss-absorbing funding that has no fixed maturity and is treated as part of a bank's regulatory capital structure. The equity increase provides some evidence of a strengthening financial base. Even so, important regulatory measures such as the common equity Tier 1 ratio, total capital adequacy ratio and liquidity ratios were not disclosed.

No dividend information was included either.

What are the positives for investors?

The clearest positive is that net profit grew by 9.3%, supported by several different factors rather than loan growth alone.

Non-interest income rose by 12.7%, customer deposits increased by 13.2%, and net impairment losses fell. The bank also delivered growth in both conventional lending and Islamic financing, while total equity increased. This combination suggests that Bank Muscat expanded its balance sheet while improving reported profitability during the period.

What are the risks and unanswered questions?

Core net interest and Islamic financing income increased by only 2.0%, despite net loans and Islamic financing growing by 6.2%. The announcement does not provide enough information to explain this difference or assess changes in lending margins.

Operating expenses also rose by 5.8%, creating a potential efficiency concern if costs continue to grow faster than core income. Meanwhile, the reduction in impairment losses was helpful to profit, but detailed credit-quality figures were not disclosed. Investors do not yet have the full picture on problem loans, capital ratios, liquidity or the sustainability of investment income.

The investor takeaway

Bank Muscat's preliminary first-half results show healthy profit growth, strong deposit gathering and lower impairment losses. The 12.7% rise in non-interest income was particularly important, given that core interest-related income grew by a more modest 2.0%.

The main points to monitor are rising operating expenses, the relatively slow increase in core banking income and the lack of detailed asset-quality and capital data at this stage. These figures are preliminary and unaudited. Bank Muscat expects to release its complete unaudited financial statements after approval by the board of directors at a meeting scheduled for later in July 2026.