Why can’t these Saudi banks find buyers?
Women shop at Al Hayatt mall in Riyadh. Retail may see more growth after the announcement of state bonuses.
Saudi Arabia is about to cast off its oil-dependence, build brand-new industries and open its economy to foreign investment, according to the government. That might make it a good time to buy into a Saudi bank. And substantial stakes in two of them are up for sale.
But in both cases, it’s international lenders who are seeking to get out — and there are no big-name global banks eager to buy, according to analysts and people familiar with the transactions; what interest there is comes from local or regional groups. That reflects concerns about prospects under Saudi Arabia’s ambitious reform programme, as Deputy Crown Prince Mohammad Bin Salman cuts back the government spending that’s traditionally buoyed the economy.
One result of austerity is the worst growth since the world recession of 2009, and it’s forecast to slow further this year. New construction projects are scarce, and payments to builders got held up last year. That’s hurting banks that lend to them, including the two on the market. Royal Bank of Scotland Group Plc has reportedly been seeking for years to sell its 40 per cent stake in Alawwal Bank, while Credit Agricole SA is considering a sale of its 31 per cent stake in Banque Saudi Fransi, according to people familiar with the matter.
Control of the banks isn’t on offer, and that’s one issue for buyers. But another is that banking is “basically the final stopping point you find of all the risks in the Saudi economy,” said Crispin Hawes, London-based managing director At Teneo Intelligence. “They all crystallise in the loan books of domestic banks.”
So, even if there’s a “very good case” for investment in some industries, that’s less true in banking, Hawes said.
Among the world’s major finance companies, from Goldman Sachs Group Inc. to Citigroup Inc., there’s plenty of interest in Saudi Arabia — it’s just not directed toward banking.