Oman's second-biggest bank is counting the cost of a lawsuit filed by one of its main rivals.
BankDhofar yesterday said its nine-month profit had dropped 77 per cent after it was ordered to pay 26.1 million rials as part of a lawsuit filed by rival Oman International Bank (OIB). BankDhofar has put funding aside to comply with the court decision.
The suit relates to a complex dispute between OIB and Ali Redha Trading Group.
In late 2001, Ali Redha, a commodity trading company based in Oman, announced a default on a debt of 70m rials owed to local and international banks. Majan International Bank was one of the affected lenders and was forced to merge with BankDhofar. Majan's chairman was among the shareholders of Ali Redha.
Oman International said in its lawsuit it was owed the equivalent of 1.93 million BankDhofar shares as a result of losses incurred in the transaction.
The legal case is continuing.
"Although we have booked this loss in compliance with the relevant accounting standards, the bank challenges the premise of this legal case and is exercising all legal actions to reclaim the amount," the bank said in a statement to the Muscat bourse.
Net income dropped to 5.74m rials in the nine months ended September, down from 25.4m rials in the same period last year.
"It's a one-off transaction," said Kanaga Sundar, the head of research at Gulf Baader Capital Markets in Muscat.
Shares of the lender have declined by more than 20 per cent this year, closing yesterday at 0.521 rials. Oman's economy, meanwhile, is expected to grow at 5 per cent, with the inflation rate at 4 per cent over the current five-year plan, said Darwish Al Balushi, the minister of financial affairs.
The country expects investments in infrastructure, energy and tourism to be about 30 billion rials over the same period.