Muscat: Omani lender Bank Dhofar said a $68 million (Dh249.7 million) lawsuit filed by rival Oman International Bank will not hit profit performance in the second half because it has already set aside funds to cover any penalty.

Mohammad Redha Jawad, acting chief executive of Oman's third-largest bank by assets, said the lender had seen the brunt of the impact in the first half when it slumped to a net loss.

Bank Dhofar was ordered to pay 26.1 million riyals ($68 million) into an enforcement court's account as part of the dispute. The case is continuing.

Bank Dhofar fell to a loss of 4.6 million riyals in the first half, from a profit of 17.7 million the year before.

"That is as a result of the legal case," Jawad told Reuters in an interview. "There won't be any impact on the second half [profit] because we have already made the adjustment."

Optimistic

Jawad forecast second-half net profit of 21 million riyals, compared with 15.6 million in the same period in 2010.

In the lawsuit, OIB says trading group Ali Redha was holding 1.93 million Bank Dhofar shares that were pledged to it. Bank Dhofar disputes this.

Jawad said he was still hoping to win the legal dispute. "We are very optimistic that this 26 million riyals will come back to us," he said.

Small non-Opec oil producer Oman, which has seen protesters take to the streets this year demanding more jobs and an end to corruption, posted growth of 11.8 per cent in nominal terms year on year in the last quarter of 2010.

"The unrest as far as Oman is concerned has calmed down... The impact on the banking sector was minimal," Jawad said.

"I expect a positive impact with the creation of jobs by the government. It will stimulate the economy and create a good retail consumer market from which the bank can benefit."

Protests prompted Sultan Qaboos Bin Saeed, a US ally who has ruled Oman for 40 years, to promise $2.6 billion in spending and plans to create 50,000 jobs, among other measures.

Jawad said lending conditions in Oman were good.

"We see some good growth in the private sector on the lending side... Our loan book is going to be quite stable."

Total credit in Oman jumped 12.6 per cent year on year in June, from 5.5 per cent compared to the same period last year, central bank data showed.

"We don't have plans to issue bonds at the moment... But we will look at the deployment of funds [and] whether we have opportunities in the coming year," he said.

In April, the bank's former chief executive resigned and Jawad was appointed acting CEO. The board has approved a new CEO but cannot disclose the name yet, Jawad said.