Bank Muscat, Oman's largest lender, will sell its entire stake in HDFC Bank as it seeks cash for provisioning for losses relating to both operations and investment, the bank said in a regulatory filing.

Bank Muscat's profit plummeted 83 per cent in the fourth quarter, mainly due to impairment of stocks related to an investment in Pakistan's Saudi Pak Commercial Bank. The bank said it expected 4 to 7 million rials ($10.39 – 18.18 million) in losses in the first quarter related to its equity portfolio.

"During the course of the year the bank will have to repeat the impairment test exercise it carried out last year for testing any potential impairment in value on its Saudi Pak Bank investment," it added.

Bank Muscat held a 2.67-per cent stake in HDFC, worth about Rs948 crore ($185.3 million) at Friday's closing price of Rs834.5 a share.

"We decided to sell our stake in HDFC Bank, India, over a period of time," the company said in a web filing with Omani stock exchange. Pricing and timeframe of the stake sale would depend on the prevailing market conditions, the statement added.

The bank has so far disposed of 40 per cent of its holding in HDFC Bank, the release noted.

In February 2008, Bank Muscat said it had no plans to sell any stake in HDFC after the bank agreed to buy Centurion Bank of Punjab. Bank Muscat acquired the HDFC Bank stake when HDFC Bank acquired Centurion Bank of Punjab.

Bank Muscat owned about 14.02 per cent of Centurion Bank at that time, which it converted to a less than 3-per cent stake in HDFC after the agreed takeover.

Banks across oil-rich Gulf have booked losses in bad loans and writedown of investments amidst the global financial crisis and a slump in oil prices.

Shares in Bank Muscat, suspended ahead of the news, surged almost 20 per cent in the last two days following news of the stake sale.

With assets worth over $15 billion, BankMuscat is the largest financial services provider in Oman, with a strong presence in corporate banking, retail banking, investment banking, treasury, private banking and asset management.

The bank has a network of 119 branches and about 320 ATMs and 91 CDMs in Oman, a branch in Riyadh, Saudi Arabia, and a representative office in Dubai (UAE).

Bank Muscat currently owns 49 per cent of BMI Bank BSC, an independent bank in the Kingdom of Bahrain. It also has a 43 per cent stake in the Mangal Keshav Group, one of the oldest securities houses in India.

Earlier this year, the Bank acquired a 35 per cent stake in Saudi Pak Commercial Bank to enter the high-growth Pakistan market.

Bank Muscat has been voted the 'Best Bank in Oman' five times in a row by The Banker, FT London, six times in a row by Euromoney and seven times by Global Finance Inc. The bank was awarded the People Development Award at Oman Awards for Excellence, in 2003, 2004 and 2005. The Bank also won the prestigious Gulf Excellence Award 2005 for Oman. Bank Muscat was named as the Number One Bank in the Sultanate of Oman for 2006 by BusinessToday, for the fourth time. In 2004, the Bank achieved the rare distinction of becoming the first bank in the Middle East to be completely ISO 9000:2000 certified.