PIF-backed Riyad Bank considers IPO of its investment banking unit

The move comes amid strong listing activity in Saudi Arabia

Tadawul stock exchange has a strong initial public offering pipeline with more companies seeking to list on the Arab world’s biggest bourse by market capitalisation. AFP

Saudi Arabia’s Riyad Bank is considering an initial public offering of its investment banking unit on the main market of the Saudi stock exchange, amid a surge in listings across the GCC on strong investor demand.

On Wednesday, the bank’s board issued a resolution to start the assessment and preparation of a possible IPO of Riyad Capital, the lender said in a bourse filing to the Saudi stock exchange Tadawul, where its shares are traded.

Riyad Bank and Riyad Capital will work together on the IPO including “determining the size, structure and the other relevant details”, it said.

If a decision is made to proceed with the IPO, the deal will be subject to the relevant regulatory approvals, it added.

Riyad Bank is backed by the Public Investment Fund with a stake of 21.75 per cent, while the Saudi government has a 10.39 per cent ownership in the lender.

The lender reported 8 billion riyals ($2.1 billion) in profit for 2023, up about 15 per cent annually, as net income from the special commission of financing and investment grew during the period.

The Arab world’s largest economy has seen strong IPO momentum, with companies listing their shares to raise more money to meet their funding requirements and expand their operations on the back of growing investor interest.

Companies raised $3.5 billion on the Saudi exchange through 35 offerings last year, recording the highest number of IPOs in the GCC during 2023 and 35 per cent of the total proceeds, according to data from Kamco.

SAL Saudi Logistics Services Company’s began trading on the Tadawul on November 1 after raising $678 million from its IPO.

In December, the MBC Group raised 831 million riyals through the sale of a 10 per cent stake in a public offering on the Tadawul.

Meanwhile, Riyadh-based Avalon Pharma raised 492 million Saudi riyals from its IPO in February.

More companies are expected to list their shares on the Saudi bourse this year, according to the head of the kingdom’s Capital Markets Authority.

There were 56 big and small companies considering listings on Tadawul’s Main Market and its Nomu-Parallel trading platform, a 30 per cent increase from the same period last year, CMA chairman Mohammed El Kuwaiz said at the Saudi Capital Market Forum in Riyadh in February.

The IPO momentum carried over into 2024 from the past three years indicates “Saudi Arabia is encountering the proposition of transforming from a net exporter of capital to a net importer of capital”, he said.