World Economy

Saudi Bank to Raise $6b in IPO

Saudi Bank to Raise $6b in IPOSaudi Bank to Raise $6b in IPO

Saudi Arabia’s National Commercial Bank (NCB) plans to raise SR22.5 billion ($6b) in a flotation this month, it said in a statement, the biggest ever share sale in the Middle East.

The sale by the country’s biggest lender by assets will see 300 million shares offered to Saudi individual investors and 200 million shares to the state-run Public Pension Agency at a price of 45 riyals per share, the bourse filing said.

Subscription for the initial public offering, the first by a bank in the kingdom since 2008, will be open between Oct. 19 and Nov. 2.

“It comes at an historic moment as the Saudi market will be opened next year and this IPO (initial public offering) signifies the size and depth of the Saudi market will be positively encouraged,” said John Sfakianakis, regional director for the Persian Gulf at Ashmore Group.

“This is significant for the banking sector, the economy and the country and will benefit local and international investors.”

Currently majority-owned by the state Public Investment Fund, NCB is the only unlisted lender among Saudi Arabia’s 12 banks. It held assets worth about $101b at the end of 2013 and made net profits of $2.1b last year.

 Market Value

At the offer price, NCB is considered to be the third largest stock on the Saudi exchange, and the second-biggest bank, by market value. Al Rajhi is the current largest listed bank, with a market capitalization of $30.8b.

However, the 45 riyals per share value is considered cheap by analysts, who note that shares in state-run companies are often sold to the public at reduced rates as a way of spreading the country’s vast oil wealth.

“It will be two times the book value,” said Chiradeep Ghosh, senior analyst at Securities & Investment Company in Bahrain. “It is quite cheap compared to other Saudi Arabian banks. They’re issuing at a discount to appeal to the retail investor base.”

Foreign investors will be able to buy NCB’s shares once the IPO is completed.