Saudi banks in a ‘sweet spot’ says fund manager

Saudi banks well positioned with low cost of funding and deposits

  
An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. Image used for illustrative purpose

An investor monitors a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia January 18, 2016. Image used for illustrative purpose

REUTERS/Faisal Al Nasser
 
DUBAI: Saudi banks are in a “sweet spot” to tap rising corporate and mortgage lending according to a top regional fund manager.


It comes after a rampant rise in the stock price of the Kingdom’s big lenders.

“I think Saudi banks in general are in a sweet spot,” Hedi Ben Mlouka, CEO and founder of FIM partners, told Bloomberg TV on Thursday. “You are seeing growth no longer coming from a low base, we are talking big numbers here that move the balance sheet and the profitability of these banks. The ‘Shareek’ program is going to spur the first growth we have seen in corporate borrowing to support all this capex,” he said.

The $2.7 trillion Shareek program was announced by the Saudi government last month and aims to provide incentives for publicly quoted companies to channel dividend payments into long-term investment in the Kingdom.

“The Saudi banks are in the best position to take advantage of that because their cost of funding and cost of deposits is low,” said Mlouka. “The Islamic banks are the best positioned from that perspective because they have the lowest cost of funding.”

Saudi banks have been among the best performers among regional publicly traded stocks in the first quarter, with the shares of Tadawul-listed lenders up by an average of 26 percent since the start of the year, according to Bloomberg data.

Saudi Arabia’s debt capital market is expected to grow as the Kingdom doubles down on its Vision 2030 goals, S&P Global Ratings said this week.

The Kingdom is banking on the increasing role of its debt and equities market in financing Vision 2030, the report said, as it seeks to attract more foreign direct investments.

“We think banks will continue to play an important role in financing Vision 2030, but foresee an increased role for the local capital market,” said S&P Global Ratings credit analyst Timucin Engin in the report published Tuesday.

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