Its strong market position and current low valuation would seem to make BankMuscat a bargain stock.
The bank reported a profit of 294 million Omani rials last year, up 10.8 per cent from 2010. Bank Dhofar analysts expect BankMuscat's profit performance to remain strong.
They forecast a 12.6 per cent increase for this year, and a 10.3 per cent rise next year.
As the leading domestic financial institution by assets, size of loan book and profitability, BankMuscat will benefit from a government spending programme - part of the nation's Vision 2020 development plan - in which banks are expected to play a key role.
Given its importance in the domestic banking system, its strong branch network, excellent track record and solid reputation, BankMuscat is in a secure position as market leader, according to analysts at Bank Dhofar.
Non-performing loans (NPLs) at BankMuscat have been declining after peaking in 2009, and analysts expect this trend to continue. The bank has a coverage ratio in excess of 100 per cent for NPLs and is likely to continue to maintain a healthy coverage ratio, analysts said.
BankMuscat has raised subordinated debt to boost its Tier II capital base and is also expected to undertake a rights issue soon. This should enhance the lender's capital base, providing the necessary buffer to fund higher business growth.
Bank Dhofar analysts have initiated coverage of BankMuscat with a "buy" recommendation.
At the current market price of 0.633 rials, BankMuscat's stock trades at a price-to-book ratio of about 1.3, which is lower than for some of the other listed banks as well as the sector average. Analysts see potential for an 18 per cent rise in the share price.