Aramco sees enough orders to pull off IPO

Dubai, UAE - Saudi Aramco’s bankers are voicing confidence there’s enough investor interest to pull off the reduced initial public offering (IPO) that the state oil giant launched this week, people with knowledge of the matter said.

The IPO arrangers are indicating in private discussions that they already have nearly enough orders from the first three days of marketing to cover the institutional portion of the deal, according to the people. The precise amount of real demand will only become clear later once underwriters compare the orders they’ve received, the people said.

Saudi central bank doubled leverage limits for retail investors looking to buy shares in Aramco, according to people familiar with the matter, part of an effort to boost local demand for what could be the world’s largest IPO.

Banks will be permitted to give leverage to retail customers at a ratio of two to one for every riyal they put toward buying Aramco shares, up from the normal limit of one to one, the people said. Lenders will be allowed to give corporate and institutional customers higher leverage ratios based on each customers creditworthiness, the people said.

Samba Financial Group will offer retail investors two to one leverage to invest in Aramco shares, CEO Rania Nashar said on Monday. The Saudi Arabian Monetary Authority, as the kingdom’s central bank is known, didn’t respond to requests to comment.

Saudi banks are seeking to cash in on the IPO after years of falling loan growth and a decline in the pace of economic expansion. Lenders will gain from revenue generated from margin loans and brokerage. Saudi Arabia on Sunday set a valuation target for the IPO well below Crown Prince Mohammed bin Salman’s US$2tn target and pared back the size of the offering - easing pressure on the country’s banking sector.