Shares of Saudi Arabia’s Al Rajhi Bank rise after $4bn capital plan rollout

The lender’s board has proposed to boost capital through the issuance of bonus shares to shareholders

Al Rajhi Bank's board of directors recommended to increase the lender's capital by granting three bonus shares for every five held by shareholders. Ahmed Yosri / The National

Shares of Al Rajhi Bank, Saudi Arabia’s second-largest lender by assets, surged after it announced a $4 billion capital increase plan to grow its business.

The Riyadh-based lender’s board of directors recommended increasing the bank’s capital through issuance of bonus shares to shareholders. It plans to offer three bonus shares for every five held, Al Rajhi said in a statement on Sunday to the Tadawul Stock Exchange, where its shares are traded.

The bank will boost its capital through capitalisation of 15bn Saudi riyals ($4bn) from retained earnings, the lender said.

Granting bonus shares to shareholders will raise Al Rajhi Bank’s capital to 40bn riyals from 25bn riyals and will “support the bank’s resources, which will contribute to good growth ratios in the upcoming years”, it said.

The shares climbed 6.4 per cent to 168.8 riyals at 1.15pm UAE time on Sunday.

The proposed bonus grant is subject to approvals from authorities and the extraordinary general assembly on the capital increase and number of granted shares, Al Rajhi said.

The eligibility of bonus shares will be for shareholders owning stock by the end of trading day of the bank’s extraordinary general assembly meeting date, which will be announced later, the lender said.

Shareholders must also be registered with the Securities Depository Centre Company by the end of the second trading day following the extraordinary general assembly meeting, it added.

Al Rajhi's rivals include Saudi National Bank, which took the top spot as the kingdom’s biggest lender by assets after a combination with Samba Financial Group.

Al Rajhi has a market capitalisation of about $110bn, higher than that of Saudi National Bank. But it trails the latter with assets of $155bn compared with $243bn of its rival, according to Bloomberg.

Al Rajhi Bank reported a 39 per cent rise in its 2021 net profit as operating income rose sharply on the back of the kingdom’s economic recovery.

Net profit for the 12-month period to the end of December reached 14.74bn riyals, the lender said.

Operating expenses during the period rose by 4.1 per cent because of a rise in salaries and employee benefits, depreciation expenses and other administrative expenses. There was also an 8.3 per cent increase in impairment charges for financing, it said.