Two of Oman's biggest banks, Bank Muscat and Bank Dhofar, posted a rise in third-quarter earnings raising hopes for a positive year-end close for the country's banking sector.

Bank Muscat, Oman's largest bank by market value, said its third-quarter net profits rose by 26 per cent, beating analysts expectations. Bank Dhofar, the second-largest bank, recorded a 5 per cent rise in profits.

'With stability in local asset quality, we expect provisioning cost to come down for Omani Banking sector,' said Ajeev Gopinath, associate vice president for asset management at Gulf Baader Capital Markets in Muscat.

'This, along with expectation of improvement in credit addition moving forward, we are positive on Omani banking sector,' said Gopinath adding that Q3 earnings from Bank Muscat is seen to be healthy.

'Barring losses from its associate in Bahrain, the performance is commendable,' said Gopinath.

BMI Bank in Bahrain, the associate of Bank Muscat, had reported a loss of about 5.2 million rials during the third quarter of FY10 on incremental credit losses.

Bank Muscat posted third-quarter net profit of 25.2 million rials ($65.5 million) compared with 20.01 million rials ($52 million) in the same period in 2009, according to Reuters calculations.

The result was at the top end of analysts expectations polled by Reuters, who estimated an average net profit for the third quarter of 23.18 million rials.

Impairment for credit losses for the nine-month period ended September 30 was 30 million rials compared with 68.7 million rials for the same period last year, the bank said in the statement.

'The bank says it is not longer taking any more provisions. So it has reached a healthy balance sheet,' said Adel Nasr, brokerage manager for United Securities.

Bank Muscat is one of the managers for telecom firm Nawras' initial public offering.

Meanwhile, Bank Dhofar, the Sultanate's second-largest bank by market value, fell short of forecasts as its third-quarter net profit rose to 7.7 million rials ($20 million) from 7.32 million in the third quarter of 2009, according to Reuters calculations, below the average analyst estimate of 8.71 million.

Dhofar International Development and Investment Holding said in September it sold 2.5 percent of its capital in Bank Dhofar to reduce borrowing and invest in other sectors.

Fitch affirmed its rating on the bank at BBB+ with a stable outlook in August, saying that the individual rating reflected the bank's strong franchise, good profitability and adequate capitalisation as well as its rapid loan growth and relatively low non-performing loans.

'Following these earnings, more investments will be seen in Oman's banking sector in in coming weeks,' said Nasr. 'For now, investors will wait for the remaining earnings to be announced.'-Reuters