The Clap
Riyad Bank, Saudi Arabia’s third-largest bank by assets, is contemplating an initial public offering (IPO) of its investment arm, Riyad Capital, aiming for a listing on the local stock exchange, Tadawul.
Details
The bank’s board has approved the exploration of this initiative, with details regarding the potential offering’s size, structure, and other aspects to be determined in the upcoming period.
It’s noteworthy that the Public Investment Fund is the largest shareholder, owning a 21.7% stake, with the government holding approximately 10.4%.
So What
Gulf markets have witnessed an IPO boom over the past two years, driven by rising oil prices and increasing interest from foreign investment institutions. This comes amid a global downturn in deal-making, partially affected by rising interest rates.
Some Context
Saudi banks are experiencing liquidity pressures as loan growth rates surpass deposit growth rates due to funding for massive projects in the country. Rising interest rates have also intensified competition for financing.
On the other hand, Riyad Bank could become the first Saudi bank to list shares of its investment banking unit.
Shabbir Malik, an analyst at investment bank EFG Hermes, believes the local bank aims to monetize an activity whose value “is not currently clearly visible.”
The bank reported a net profit of approximately SAR 8 billion at the end of 2023, a 15% increase YoY, with total assets reaching SAR 387 billion, up about 8% YoY.
Riyad Bank’s shares have risen 3.68% since the start of the year until April 4, but have fallen 5.4% over the past 12 months.
Now What
Trading on Tadawul will resume on April 14, following the Eid al-Fitr holiday break. The Saudi market’s main index, TASI, closed the last session before the holiday up by about 0.7%, ending at 12,705 points with total trades reaching SAR 8 billion.
