S&P cut its long- and short-term counterparty credit ratings on Bank Muscat to BBB-/A-3 from BBB+/A-2. The outlook is stable. 'We have downgraded Bank Muscat to BBB-/A-3 because we have lowered our ratings on Oman to the same level. Our equalisation of the ratings on the sovereign and the bank reflects our belief that the bank is unlikely to withstand a sovereign default' S&P said.

The ratings agency also revised down its assessment of the Bank Muscat's capital and earnings to 'adequate' from 'strong'.

S&P said it assesses Bank Muscat's business position as strong reflecting its dominant market position in Oman and well-balanced business model. 'While we expect a slight deterioration in Bank Muscat's asset quality indicators we continue to view the bank's risk position as adequate based on its good asset quality metrics and adequate loan-loss reserve coverage.'

The stable outlook on Bank Muscat S&P said mirrors its outlook on the long-term sovereign rating. 'It also incorporates our view that the bank's business and financial profile should remain relatively stable over the next two years.'

S&P added it would further downgrade Bank Muscat if it were to lower ratings on Oman and it would raise the ratings on Bank Muscat if it were to raise its sovereign ratings.