Bank Dhofar - Q1 FY2026 Earnings Analysis

Performance Highlights

Bank Dhofar delivered operating income of OMR 46.23 million in Q1 2026, a 12.4% year-on-year increase versus OMR 41.13 million in Q1 2025, comfortably ahead of trend and driven by broad-based revenue strength. Net profit rose 8.78% to OMR 13.22 million, though reported EPS fell to OMR 0.0031 from OMR 0.0040 due to a larger share base following the prior-year stock dividend, registering as a miss on a per-share basis.

The most significant operating driver was a 32.52% surge in net fee and other income, which climbed to OMR 15.94 million from OMR 12.03 million, complemented by net interest income growth to OMR 24.56 million and Islamic financing income rising to OMR 5.72 million. The cost-to-income ratio improved markedly to 46.20% from 49.66%, even as total expenses edged up 4.57% to OMR 21.36 million, demonstrating meaningful operating leverage across both conventional and Islamic banking segments.

Management Outlook and Forward Catalysts

Management signalled continued investment in digital transformation, highlighted by the pilot launch of a next-generation mobile banking application and a new merchant portal, alongside a full debit and credit card portfolio migration to Mastercard — initiatives that collectively signal a business in active capability-building phase aimed at deepening customer engagement and fee income diversification. Net loans and advances grew 5.22% year-on-year to OMR 4.29 billion, while customer deposits expanded 4.47% to OMR 4.35 billion, reflecting healthy balance sheet momentum supportive of sustained earnings growth.

The central investor debate heading into Q2 2026 centres on credit quality deterioration, with expected credit losses rising 49.13% year-on-year to OMR 9.55 million and the gross NPL ratio increasing to 5.71% from 4.82% a year earlier; bulls will focus on the improving cost-to-income ratio and fee income trajectory, while bears will monitor whether provisioning pressure accelerates and whether EPS can recover on an absolute basis as the capital base normalises.