Net profit at Bank Muscat, Oman's largest bank by market value, nearly halved in the first quarter, as provisions against bad loans remained high and the year-ago comparison figure was boosted by a stake sale.

The Oman bank posted a 49 per cent drop in first-quarter net profit to RO24.5 million ($63.6 million) from 48.4 million in the same period in 2009, a statement on the bourse website said on Wednesday.

The result falls below the expectations of analysts polled by Reuters, who estimated an average net profit for the first quarter of RO30.2 million.

Bank Muscat's first-quarter result in 2009 included a 35.3 million gain on the sale of the bank's stake in India's HDFC Bank.

The bank said impairments for credit losses for the quarter rose to RO11.8 million.

Banks in Oman, as elsewhere in the Gulf region, have in the past year booked more provisions against bad debt, dampening profits and curtailing credit growth.

However, lenders in Oman are regarded as well-capitalised and are expected to benefit from the sultanate's economic growth in 2010.

The non-Opec member still relies heavily on oil revenue, which accounts for a large chunk of the sultanate's gross domestic product.

Omani officials in March said the country expects to post a budget surplus in 2010 on the back of high oil prices, while economic growth is forecast to be around 6 per cent. – Reuters