Saudis explore more bank mergers post $5 billion deal

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The Public Investment Fund (PIF), which owns stakes in some of the biggest lenders is weighing which banks could be merged to increase scale and competition.

Monday 24, December 2018

(Bloomberg)--Saudi Arabia is exploring potential mergers to boost its financial services industry after the combination of Saudi British Bank and Alawwal Bank, according to people with knowledge of the matter.

Authorities are also likely to look favourably upon potential mergers among banks outside the state’s control.

Some of the lenders weighing possible mergers include National Commercial Bank, the Kingdom’s largest by assets, Banque Saudi Fransi, whose largest shareholder is Prince Alwaleed bin Talal’s Kingdom Holding, Al Rajhi Bank and Samba Financial, the people said. The deliberations for consolidation are preliminary and may not result in a transaction, the people said.

Slower economic growth, driven mainly by the drop in oil prices, and a decline in asset quality are prompting policy makers and some banks in the world’s biggest crude exporter to explore merger opportunities. More than 10 banks elsewhere in other Gulf Cooperation Council countries are also considering tie-ups.

HSBC Holdings unit is buying a local rival part-owned by Royal Bank of Scotland Group in a $5 billion deal -- the Kingdom’s first bank merger for almost 20 years. Any future deal would have to wait until this transaction is completed in the first half of 2019, the people said.

There are fewer than 30 local and international lenders in Saudi Arabia, serving more than 30 million people. The Saudi Arabian Monetary Authority, responding to Bloomberg questions, said it hasn’t received any formal merger request.

PIF, the sovereign fund chaired by the Kingdom’s powerful Crown Prince, is focused on potential deals among its portfolio banks, the people said.

In a statement, the wealth fund said that while “any strategic decision would be taken by a portfolio company, as an active investor and impactful shareholder, PIF is committed to advising and helping portfolio companies drive performance by identifying opportunities for long-term value creation.”

“This is in line with our stated mission to actively invest over the long-term, maximise sustainable returns and enable the economic development and diversification of the Saudi economy,” it said.

The PIF owns a 44 per cent stake in National Commercial Bank and a 23 per cent stake in Samba, according to data compiled by Bloomberg. The fund also holds a 22 per cent stake in Riyad Bank and a 10 per cent holding in Alinma Bank.

National Commercial Bank and Al Rajhi Bank could not be reached for comment. No one was available to comment at Saudi Fransi, while Samba did not respond to requests for comment.

TAGS : National Commercial Bank, PIF, Banque Saudi Fransi, Al Rajhi Bank, Kingdom Holding, Crown Prince, MbS, SABB, Al Rajhi Bank , Samba Financial, SAMA

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