National Bank of Oman (NBO), the Sultanate's third-largest bank by market value, said a decline in customer deposits and higher operating costs pulled down its first-quarter net profit.

The bank said on Thursday profit slipped 10.3 per cent to RO6.58 million from 7.33 million a year ago, missing analysts' forecasts of RO 7.99 million.

NBO, which in January named Salam Al Shaksy of Dubai Bank as its new chief executive, said customer deposits shrank 3.5 per cent during the quarter, while lending slowed 2.4 per cent.

Operating expenses at the bank, which is about 35 per cent owned by Commercial Bank of Qatar, climbed 9.3 per cent during the quarter.

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

Omani banks, however, are expected to benefit from the sultanate's economic growth in 2010. Omani officials in March said the country expected to post a budget surplus in 2010 on the back of high oil prices, while economic growth is forecast at around 6 per cent. – Reuters