The largest Saudi lender by assets, National Commercial Bank (NCB), plans to issue Islamic bonds worth about four billion riyals ($1.1 billion), the bank's chairman said on Thursday, part of a wave of bank capital raising in the kingdom.
Lending has soared in Saudi Arabia on the back of robust economic growth, high oil prices and record government spending, leading to a need for banks to bolster their reserves.
"One of our goals is to boost the bank's capital and the capital adequacy so we have a plan to issue sukuk by the end of 2013 or the start of 2014 worth around four billion riyals to meet the requirements of Basel III and the Saudi Arabian Monetary Agency (Saudi central bank)," Mansour al-Maiman told Dubai-based Al Arabiya TV in an interview.
He spoke as NCB, majority-owned by sovereign fund the Public Investment Fund, reported a 17.1 percent increase in third-quarter net profit to 1.73 billion riyal.
"The capital adequacy ratio is around 16 percent but after distributing dividends this ratio could drop and Basel III requires us to have a ratio of around 15 percent and this is what we are aiming to achieve early next year."
While at a nine-month low in August, bank lending to private companies still grew at a rate of 15 percent year-on-year, according to central bank data.
The push by Saudi banks to increase capital to compensate for lending growth is in stark contrast to lenders in the West, who are trying to build up their balance sheets after losses from the global financial crisis.
Given high liquidity in the local market, both Saudi Hollandi Bank and Saudi British Bank, an affiliate of HSBC, are expected to issue sukuk in coming months. Hollandi and Banque Saudi Fransi, part-owned by Credit Agricole, issued in the last year.
In the first seven months of 2013, Saudi Arabia sold $8.2 billion of sukuk in 13 deals, according to Zawya, a Thomson Reuters unit.
NCB said in a statement its growth was helped by a 8.7 percent rise in income from special commissions, while assets rose 14.4 percent in the year to 367 billion riyals by Sep. 30.
Maiman said the bank had made many reforms in the corporate governance and transparency areas and was ready to carry out a plan to go public, pending a decision by the owners.
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