Floating of NCB shares to raise US $3B

Saudi Arabia’s largest bank, the National Commercial Bank will go public in 2004, according to the bank’s general manager Abdul Hadi Shayif.

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By  Massoud Derhally Published  May 7, 2003

Saudi Arabia’s largest bank, the National Commercial Bank will go public in 2004, according to the bank’s general manager Abdul Hadi Shayif.

“I believe that the shares will be floated for public subscription next year but it’s up to the owners to make the decision,” Shayif told the daily Asharq Al-Awsat (April 6).

“The bank’s financial and administrative position is now more suitable than at any time before to conversion to an open joint stock company,” Shayif added.

Shayif who has been outspoken about consolidation in the Saudi banking sector told the paper, “If all the Arab banks merge with one another they would still not reach the status of the world’s second or third bank. If we want to play a bigger role other than a merely national and regional one, the local banks should merge. This will be necessary if they want to face the competition when the Kingdom joins the World Trade Organization.”

According to Johnny AbedRabbo, a senior economist at the National Commercial Bank, the listing of NCB shares will broaden and deepen the Saudi equities market and would contribute to improved market activity through higher turnover and volume of trading.

“The time seems right for both NCB and the market for the listing of these shares based on the strong results and fundamentals of NCB as well as the market’s appetite for fresh IPO’s,” said AbedRabbo. “This is also supported by ample liquidity in the market which would more than cover the initial offering.”

For the first quarter of 2003, NCB posted a 2.7% increase in net profits reported at SR 742.6 million (US $198 million) from 722.8 million riyals in the same period in 2002. The bank has a total of SR 110.7 billion in assets for the first quarter of 2003 up 10.7% from the previous year.

Should NCB float 30% of its 120 million outstanding shares (or 36 million shares) at a price of SR300 per share, the bank could generate up to SR10.8 billion (US $2.95 billion), according to AbedRabbo. Foreign investors will not be able to purchase shares on the Saudi stock market.

AbedRabbo dismissed that NCB’s decision was linked to the protracted negotiations between Saudi Arabia and the World Trade organisation, which are in their eighth year.

“The listing of NCB shares is more likely to be related to the government’s privatisation plan as well as the development of the Saudi capital market in order to attract more Saudi wealth back into the Kingdom,” said AbedRabbo.

The most recent initial public offering of Saudi Telecommunications Company (STC) shares in December 2002, raised close to US $4 billion when the government sold its 30% stake in the company.

Saudi investors are estimated to have some $1 trillion invested in the US alone.

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