SAMA examines local lenders ahead of Saudi Aramco IPO

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Saudi Aramco has approached wealthy Saudi families in recent weeks as part of wider efforts to build a large investor base to achieve the $2 trillion valuation targeted by Crown Prince Mohammed bin Salman.

Thursday 10, October 2019 BY KUDAKWASHE MUZORIWA

The Saudi Arabia Monetary Authority (SAMA) is examining local banks' exposure to Saudi Aramco ahead of an initial public offering (IPO) of the state-oil giant that will likely see large numbers of Saudi investors seek loans to buy its stock.

The central bank is said to be checking whether local banks have the capacity to handle demand for loans linked to the listing—between six and seven million local investors are expected to participate in the IPO, but it is not yet clear how many of them will use credit to finance their share purchases.

Ahmed al-Kholifey, the Governor of SAMA, said that he did not expect the IPO to affect liquidity in the banking sector, but that SAMA may revise its lending regulations to facilitate availability of liquidity to investors before the IPO. 

The regulator contacted Saudi banks last week, asking them a series of questions about their lending exposure to the state-oil firm.

Additionally, Fitch Ratings said that Saudi banks have been under pressure in the past few years from a slowdown in the construction and retail sectors, but funding and liquidity remained sound, with deposit and loan growth roughly in line, and capital ratios solid.

Saudi Arabia is pressing ahead with plans to sell between one and two per cent of the state-owned energy company, through a local listing, which might be followed by additional share sales locally and internationally, reported Reuters.

TAGS : Saudi Arabia Monetary Authority, Saudi Aramco, IPO

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