Government increases NCB shareholding

10 January 2003
The government has increased its stake in National Commercial Bank (NCB) to 80 per cent from 50 per cent and the last major link between the bank and the Bin Mahfouz family has been severed (MEED 3:5:02, Cover Story).

The 30 per cent stake is understood to have been acquired by the Public Investment Fund (PIF) from Bin Mahfouz family members including Naila Abdulaziz Kaaki, the wife of Khalid Bin Mahfouz, the bank's chairman and general manager in the mid 1990s, and Khalid's sons Abdulrahman and Sultan.

It is understood that PIF has paid SR 6,700 million-6,800 million ($1,787 million-1,813 million) for the 30 per cent stake. NCB officials were not available for comment as MEED went to press. If the reported price paid is accurate, it is equivalent to about 2.3 times the book value of the shares at the end of September, representing a healthy premium.

Such a valuation marker could be of significance if the share sale heralds an acceleration of plans for the flotation of NCB. It has long been the intention of the government to divest part of its stake in NCB through an initial public offering (IPO).

The main barrier to this plan being pursued in the past has been the statutory stipulation that an IPO cannot be staged in Saudi Arabia until two years of full financial figures have been published. NCB has failed to publish full financials since 1998. Banking sources in Saudi Arabia say that fully-audited figures have been prepared but disagreements over dividend payments between the government and the Bin Mahfouz shareholders prevented their publication. With the government acquiring their shares, the likelihood is that full financials will be published in the coming months and the government will move forward with its privatisation plans.

The government entered NCB's shareholder structure in 1999 when the PIF bought a 50 per cent stake from Khalid bin Mahfouz. In the months that followed it offloaded 10 per cent of the bank's stock to the General Organisation for Social Security (GOSI), which is expected to be a long-haul investor.

With the PIF now holding 70 per cent of NCB's stock, the chances of a flotation in 2003 have increased considerably. The route to market has been cleared by the recent IPO of a 20 per cent stake in Saudi Telecom, the first privatisation since the offering of shares in Saudi Basic Industries Corporation (Sabic)in 1983 (see Telecoms & IT). NCB remains the largest bank in Saudi Arabia, in terms of assets and equity, and the only unlisted bank in the kingdom.

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