National Commercial Bank IPO to boost Tadawul

09 October 2014

Predicted increase in offerings in coming year

The planned initial public offering (IPO) of Saudi Arabia’s National Commercial Bank (NCB) is expected to bolster the kingdom’s stock exchange and encourage other companies to list.

NCB is the largest Saudi bank by assets and the last remaining unlisted bank in the kingdom. It is aiming to raise SR22.5bn ($6bn) via its IPO, which is due to launch on 19 October.

“Indications are that the IPO will be the largest on the market, capturing broad investor participation,” Asim Bukhtiar, head of research at the local Riyad Capital, tells MEED. “Interest level is high both from retail and institutional investors.”

The lender plans to sell 300 million shares to individual Saudi investors, which is equivalent to 15 per cent of the bank’s capital, according to a note on the Saudi Stock Exchange (Tadawul).

A further 200 million shares, the equivalent of 10 per cent of the bank’s capital, will be allocated for subscription by the state-owned Public Pension Agency. The shares are priced at SR45 each.

The pricing of the shares is lower than expectations, with many predicting they would be priced closer to SR55-SR65.

The cheaper shares are expected to bolster investor appetite on the Tadawul.

“That is going to give the market a little push,” says Mohammed al-Suwayed, a Riyadh-based major partner at US-headquartered SPT Investors.

“We are probably going to see a good rebound in the market for the next week or two.”

The Tadawul All-Share Index (Tasi) has already been moving in an upward direction for the past few months, and is currently up 27.3 per cent year-to-date.

Depending on the success of the NCB offering, other non-bank companies could consider listing on the exchange.

The kingdom’s Capital Market Authority (CMA) is currently promoting the option of listing on the Tadawul to Saudi family-owned companies.

“We are expecting to see many more firms [list] next year,” says Al-Suwayed.

In July, it was announced the Tadawul will open up to foreign investors by the first half of 2015.

Up until now, the exchange was only open to domestic and GCC investors. Foreigners had limited options to buy Saudi stocks, either doing so via swaps with international banks, or through a select number of exchange-traded funds.

Following this, the Tadawul could be upgraded to emerging market status on the MSCI index by 2017.

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