Riyad Bank considering IPO of investment banking unit

Saudi Arabia’s Riyad Bank, the kingdom’s third biggest lender by assets, said on Thursday its board was considering an initial public offering of its investment banking arm, Riyad Capital.

The lender, which is backed by the kingdom’s sovereign wealth fund and the government, said its board issued a resolution to assess the unit’s readiness, which includes determining the size and structure of any potential IPO.

Should there be a decision to proceed, the deal would be subject to regulatory approvals, the filing said.

Riyad Bank is 21.75 per cent owned by the Public Investment Fund and 10.39 per cent owned by the government of Saudi Arabia.

IPO boom

Gulf markets have been riding an IPO boom over the last two years on high oil prices and foreign institutional investor interest, bucking a global dealmaking slump caused in part by high interest rates.

Saudi Arabia’s banks’ liquidity has come under pressure as loan growth has outpaced deposit growth to support the kingdom’s mega projects, while higher interest rates have also intensified competition for funding.

Riyad Bank could be the first Saudi lender to spin off its investment banking unit.

Banking analyst Shabbir Malik at EFG Hermes said he thinks the bank is trying to monetise a business whose value is “not (clearly) reflected at the moment”.

Riyad Bank’s shares are up 3.68 per cent year to date but down 5.4 per cent over the last 12 months.