Here is a selection of Arab banking news stories that we have been following recently. Bank M&A in the Gulf, Blom's successful capital increase and the British government's second sovereign sukuk.
News updates from Saudi Arabia (updated with new Saudi Aramco news)
- 11th, November, 2019
Aramco IPO moves forward
The long-awaited IPO of Saudi Aramco will entail selling a 1.5% stake in the company and listing the shares on the local Tadawul stock markets. The listing is expected to raise about $25 bn, implying a valuation of about $1,667 bn for the who company.
The final share price will be set on 5 December, the day after subscriptions will close.
The 658-page prospectus stated that up to 0.5% of the company will be sold to individual investors.
It has been widely reported that Crown Prince Mohammed bin Salman wants the IPO to imply a valuation of $ 2 tn for Aramco as a whole. A sale of 2% of the company would lead to $ 40 bn of Saudi Aramco shares being traded on the Tadawul, with the valuation of the company as a whole dwarfing those of all other companies on the exchange. The market capitalisation of the Tadawul was $484 bn on 7 November, according to SICO, the Bahrain-based investment bank and asset manager.
On a valuation of $ 1,667 tn, an allocation of 0.5% to individuals would raise $8.3 bn. That is an amount which can easily be digested by the Saudi private sector – private sector deposits in Saudi banks totalled $445 bn in May 2019, and of course Saudi individuals have substantial investments and bank deposits abroad.
Aramco has announced plans to distribute annual cash dividends of $75 bn for the first five years after the flotation and has mentioned the possibility of special dividends in addition to this $75 bn. The company reported net profits of $47bn for the first half of 2019.
Something to watch out for will be the dividend yield implied by the sale price and the promise of $75bn in annual cash dividends. Investors want to compare Aramco’s dividend yield against those of other large oil companies.
Saudi Ministry of Finance issues pre-budget statement
The Saudi Ministry of Finance issued a pre-budget statement on 31 October.
Expenditure during the first nine months of the year was up 5.5% compared to the comparable period in 2018. This is in line with the full-year projections, announced in the full-year 2019 budget statement at the beginning of this year. Revenues during the first nine months are up 7.6%, again, broadly in line with the full-year 2019 budget statement.
The pre-budget statement emphasises improvements in non-oil revenues as a result of the introduction of Value Added Tax, the levy on expatriate employment, and the excise tax on sugary drinks and tobacco. The statement says that non-oil revenues have doubled to around $77bn since 2016. This is about one third of budgeted revenues.
The pre-budget statement highlights expenditure during 2019 on affordable housing, on the Hajj and Umrah programme, and on infrastructure projects such as desalination and sanitation.
The pre-budget statement estimates real GDP growth of 0.9% in 2019, and predicts growth of 2.3%, 2.2% and 2.3% in 2020, 2021 and 2022. Nominal GDP is estimated at $744.5 bn in 2019.
No explicit mention is made of the Government’s plan to eliminate the budget deficit in 2023, but its projections for the years to 2022 show a gradually reducing deficit, gliding down to $$24.5 bn in 2022.
Government debt is estimated at $181 bn in 2019 (this appears to be a projection for the end of the year) and is forecast to reach $246 bn at the end of 2022.
The Saudi Ministry of Finance usually issues its full budget statement at the end of December or at the start of January. This year, items to watch out for will be whether the target of fiscal balance by 2023 is retained; hard numbers behind the increase in non-oil revenues; and whether actual expenditure figures are in line with the budget announced at the beginning of the year.
The Pre-Budget Statement can be seen here.
New CEO for al-Rajhi bank
Al-Rajhi has appointed Walid bin Abdullah al-Moqbel to be its new CEO with effect from the beginning of 2020. He will replace Steve Bertamimi, whose contract will expire on 31 December. Mr. Bertamimi has been al-Rajhi’s CEO since May 2015.
Mr. Moqbel has most recently served as al-Rajhi’s Deputy CEO and previously held the positions of Chief Operating Officer and Chief Financial Officer. He holds Masters and Phd degrees in Finance and Accounting from UK institutions and is a Certified Public Accountant. Al-Rajhi’s stock exchange announcement on 5 November noted that it had received approval for the appointment from the Saudi Arabian Monetary Agency.
Al-Rajhi is the second largest bank in Saudi Arabi, when ranked by end-2018 equity and the biggest Shari’ah-compliant bank in the Middle East. It had shareholders’ equity of $12,959 mn at the end of 2018 and assets of $97,419 mn.
New Vice Governor for the Saudi central bank
Ayman Mohammed al-Sayari has been appointed Vice Governor of the Saudi Arabian Monetary Agency (SAMA – the Saudi central bank and banking authority). He was previously Deputy Governor for Investments – one of the five Deputy Governor positions. (The other four are Financial Sector Development, Supervision, Research and International Affairs, and Administrative Affairs.) No announcement has been made about a replacement for Mr. Sayari in the Investment portfolio.
Mr. Sayari is acting head of the Saudi Debt Management Office and is also a Board member of the Saudi Development Fund.
The Governor of SAMA is Dr. Ahmed al-Kholeify, who was appointed in May 2016.
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