MUSCAT: Bank Muscat said yesterday it had sold 40 percent of its stake in India’s HDFC Bank and would offload the rest over time as it seeks cash to cover losses from equity investments.
Shares in Oman’s largest lender fell more than 7 percent after it said it expected to report between 4 and 7 million rials ($10.39-$18.19 million) of losses from its “available for sale” equities portfolio in the first quarter.
Banks across the Gulf have booked provisions for bad loans and written down investments as a global financial crisis and slump in oil prices brought to an end a regional economic boom late last year. An almost $100 a barrel slump in oil prices since last July has drastically dimmed the region’s growth prospects and forced many banks to rethink expansion plans as they focus on carrying their own countries through the crisis.
“We decided to sell our stake in HDFC Bank, India, over a period of time,” Bank Muscat said in a statement on the bourse website, without giving a reason.
Bank Muscat said the price and time frame of its stake sale depended on market conditions. “(To) date the bank has disposed 40 percent approximately of its stake,” it said.
Shares of Bank Muscat slumped 7.38 percent after a two-day rally of more than 17 percent, driven mainly by speculation it would sell its almost 3 percent stake in HDFC, giving it cash to cover bad loans.
“It’s the old ‘buy on rumor, sell on fact’,” said Sunil Dhall, a vice-president at Muscat-based Gulf Baader Capital Markets.
“The loss is lower than the market was expecting, so it is positive news and Bank Muscat shares could rise to 0.55 rial in the coming three days.” The stock last traded at 0.501 rial.
Dhall added that the bank might need to speed up its sale of HDFC shares now that its intention was public. In India, HDFC shares fell 2.27 percent.
Reuters calculated on Monday that Bank Muscat would make about $185 million by selling a 2.67 percent stake in HDFC at Friday’s closing price.
Bank Muscat’s profit tumbled 83 percent in the fourth quarter as the bank booked impairment losses related to an investment in Pakistan’s Saudi Pak Commercial Bank.