Our round-up of Middle East financial news includes notes on the Saudi-isation of insurance selling in the Kingdom, Algeria's financial difficulties, Morocco's plans to float its local currency, Egyptian inflation, and the DIFC's efforts to attract Trust and Foundation business.
Credit Agricole to Reduce Stake in Saudi Fransi Bank
The current structure of foreign bank investments in Saudi Arabia dates to the late 1970s, when a limit of 40% was put on foreign investment in local banks. Most of the foreign banks operating in the Kingdom at the time reduced their stakes to 40% and took management contracts in the new 'joint venture' banks. In the late 1980s and early 1990s, mergers and acquisitions diluted some foreign shareholders. In 2004, Citibank controversially sold its remaining stake in Saudi American Bank.
There are currently three banks in which foreign shareholders hold 40% – Saudi British Bank (HSBC), Arab National Bank (Arab Bank) and AlAwwal Bank (ABN AMRO). AlAwwal Bank (which was formerly known as Saudi Hollandi Bank) is in the process of merging with Saudi British Bank. Royal Bank of Scotland acquired ABN AMRO in 2007 and is keen to sell its stake in AlAwwal as part of wider moves to reduce risk weighted assets.
Credit Agricole has a 31% stake in Saudi French Bank. It will sell a 16% stake in the bank to Prince al-Walid Bin Talal's Kingdom Holding company.
JP Morgan has a 7.49% stake in Saudi Investment Bank and National Bank of Pakistan has a 5.83% stake in Bank al-Jazira, but in neither case is the bank exercising significant management control, unlike the foreign shareholders in the four banks mentioned above.
The table attached below shows shareholders owning more than 5% of any of the banks, as reported on the Tadawul (Saudi Stock Exchange) website.
The most striking feature of the table is the extent to which three government-owned bodies hold shares in local banks. The Public Investment Fund, the General Organisation for Social Security and the Public Pension Authority are all long-term investors.
Also interesting are the shareholdings that Rashed Abdul Rahman al-Rashed and sons have in both Saudi French Bank and Arab National Bank; and the shareholdings that the al-Rajhi family have in Bank Al Bilad, in addition to the bank that holds their name.
Earlier this year, Bahrain-based Gulf International Bank, which is majority owned by the Public Investment Fund, was awarded a domestic banking license, the first such license to be issued since that granted to AlInma in 2008.
As part of the Kingdom's efforts to attract foreign investment, the ceiling for foreign ownership of companies quoted on the Saudi stock market has been raised to 49%. All 12 locally incorporated Saudi banks are quoted on the exchange, raising the possiblity that foreign shareholders could build stakes through open market purchases.
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