Saudi National Bank to increase its capital by $4.1bn to strengthen financial position

The move will help the lender, which holds a 9.9% stake in Credit Suisse, to achieve its 'strategic objectives'

Tadawul-listed Saudi National Bank is the biggest lender in the kingdom by assets. Reuters

Saudi National Bank is raising its paid-up capital by 15.22 billion Saudi riyals ($4.1 billion) as the kingdom’s biggest lender by assets looks to boost its financial position.

SNB's board recommended to shareholders to approve the increase in capital by about 34 per cent, from 44.78 billion riyals to 60 billion riyals, through issuance of bonus shares, the lender said in a filing to the Tadawul stock exchange, where its shares are traded.

“The recommendation is aimed to strengthen the bank's financial position, which contributes to achieving its strategic objectives,” the bank said in the bourse filing.

The increase in capitalisation will come from the bank’s retained earnings — the portion of net income of a company which is retained after paying dividends.

The bank will issue about one bonus share for every three owned by shareholders, it said.

SNB shares surged after the announcement, closing 2.68 per cent higher on Thursday at 49.80 riyals.

The proposed issuance of bonus shares is subject to regulatory approval and shareholders’ nod, SNB said.

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

Because the bonus shares will be transferred from the bank’s retained earnings “there is no impact on capital ratio”, senior Bloomberg Intelligence analyst Edmond Christou said.

“However, this means the new paid-up capital now stands at 60 billion riyals compared, with 31 billion riyals for statutory reserves. As per regulation, this implies an acceleration of statutory reserve build-up from future earnings to bring it up to the new paid-up capital,” he said.

The bank, which is 37 per cent owned by the kingdom’s sovereign wealth fund, the Public Investment Fund, said on Thursday that it would pay a cash dividend of 2.67 billion riyals, or 0.60 a share, to shareholders for the second half of 2022.

In October, SNB announced it was investing up to $1.5 billion in the troubled Swiss investment bank Credit Suisse, for a stake of up to 9.9 per cent.

In an October interview with Bloomberg, SNB chairman Ammar Al Khudairy said he liked Credit Suisse’s new leadership and their resolve to execute on its turnaround plan, although any additional equity was “out of the question”.

SNB, which was created through the merger of National Commercial Bank and smaller rival Samba Financial Group in 2021, reported a 19 per cent jump in its third-quarter net profit as operating income climbed and impairment charges for bad loans declined.

Net income for the three months to the end of September rose to 4.7 billion riyals, from 3.9 billion riyals in the same quarter last year, SNB said in October.