The proposed merger between BankDhofar and Bank Sohar will bring long-term benefits with an overall positive impact on BankDhofar's credit profile, but will generate short-term implementation challenges exacerbated by the weak operating environment, Moody's Investors Service said. Following three years of negotiations, the agreement of a share swap ratio on 8 June between the two banks suggests that the two could conclude the merger before year-end, Moody's said in a report published on Tuesday. Merger implementation costs as well as Bank Sohar's weakening profitability will negatively affect the combined entity's profitability metrics over the medium term, according to Moody's. Moody's said the merged bank will have an unseasoned loan book and relatively low capital buffers given BankDhofar and Bank Sohar's rapid credit growth in recent years. It added that the new entity will remain exposed to weakened operating conditions for Omani banks, although both banks' low problem loans and high coverage as of June 2016 provide a substantial cushion to absorb the expected increase in loan losses. (Muscat Daily) Bank Dhofar: OMR0.25 as of 9 August 2016, Rating: Sell, FV: OMR0.22 per share, MCap: USD1,096 million, BKDB OM / BDOF.OM Bank Sohar: OMR0.18 as of 9 August 2016, Rating: Neutral, FV: OMR0.14 per share, MCap: USD759 million, BKSB OM / BKSB.OM