NBO's existing shareholders are to vote on the capital increase at an extraordinary general meeting, due to be held by the end of October. 'The objective of the deal was to restore our balance sheet in order to go forward,' says John Finigan, NBO chief executive officer. 'We now expect to restore both profitability and dividend in 2004.'

NBO is recovering from a series of major financial setbacks. In 2001, the bank reported a net loss of RO 6.4 million ($16.7 million) following a 175 per cent increase in provisions to cover a high level of non-performing loans and investment losses from corporate defaults and its Egyptian banking operations. Its share price was dealt a further blow in August 2002 by the sudden departure of its chief executive Aubyn Hill. Since the appointment of Finigan, previously chief executive of Qatar National Bank, NBO share value has doubled (MEED 16:8:02; 8:2:02).

However, the markets are yet to be convinced at the strength of the bank's recovery. International rating agency Moody's Investors Serviceplaced NBO in late September on review for a possible downgrade of its D financial strength rating. The review will not affect NBO's Baa3/ Prime-3 foreign currency deposits grading. Moody's said in its statement that it remains concerned that NBO continues to lose market share to its domestic competitors.

It also stated that the bank still faces a significant potential loss stemming from a dispute with the Central Bank of Egypt. Moody's statement was issued prior to the announcement of the Bahwan deal.