Tadawul has contingency plans to handle full Saudi Aramco IPO

Khalid Al-Hussan, CEO of the Saudi Stock Exchange (Tadawul), is ready for the Saudi Aramco IPO in whatever shape it comes. (Reuters)
Updated 02 May 2018
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Tadawul has contingency plans to handle full Saudi Aramco IPO

  • Tadawul has capacity to handle entire listing
  • Stock exchange has central counter-party clearing house

RIYADH: The Riyadh stock exchange has a range of options for a possible listing of shares in Saudi Aramco later this year, the chief executive of Tadawul told Arab News.

Khalid Al-Hussan said that the exchange was ready to list all the shares in a potential initial public offering of 5 percent of Aramco shares, which could be worth $100 billion at current official estimates.

Speaking on the sidelines of the Euromoney conference in Riyadh, he said: “The Saudi economy has the capacity to take care of the whole IPO. There is untapped capacity outside the exchange if we need that, from corporates, individuals and foreign investors.”

Some experts have cast doubt on the Tadawul’s ability to digest such a big share offering as Aramco, which would account for nearly 20 percent of its market capitalization of around $530 billion.

They have argued that other stock markets, like New York or London, would have to be involved in the IPO, or that some shares could be sold to private investors.

Al-Hussan’s comments will add to increasing speculation that the government is leaning toward a Saudi listing before the end of this year.

He insisted that the exchange was ready and able to undertake the full listing, if asked, though he allowed that the final decision was up to the government, which would issue the shares.

“It has been determined clearly that the Tadawul is the home exchange, but the issuer will make the decision on whether it is the only exchange. What we have done is to prepare a case for each scenario, so that whenever we get the full detail on the IPO, we will have done our preparation. We have looked at all the contingencies for each scenario.”

However, he made clear that his preference was to undertake the IPO exclusively on Tadawul. “I aspire to have the whole IPO on Tadawul. But of course I’m looking at it from an exchange point of view, whereas the owner is looking at it from a national point of view,” he said.

Al-Hussan said that all the necessary regulatory, technological, operational and human preparation had been done to allow a full Aramco IPO. “We are all ready to welcome such a unique national IPO as Aramco onto the Tadawul,” he said.

“If the world comes to Aramco (via an exclusive listing on Tadawul), we are open to that and our market is accessible. If Aramco goes to the world (by listing on another market in addition to Aramco) we welcome that too, and we are ready to compete with the global exchanges,” he said.

Tadawul — the biggest and most liquid exchange in the Gulf — has been talking to other regional exchanges about the possibility of dual listings ahead of what is expected to be a rush of IPOs as the Saudi privatization program gets underway. Al-Hussan said this process was ongoing.

“We have to focus on bringing more IPOs to market, we have to persuade corporates of the benefits of going public. We are telling them to start the process of due diligence now in preparation. When you pull the trigger to go public, that is your decision, but you have to be ready,” he said.

Tadawul also announced that it has set up a central counter-party clearing house in order to diversify investment opportunities and bring in new asset classes such as derivatives.

“This will enable Saudi companies to hedge against risks, which will enhance the attractiveness of the Saudi capital market to all investors. It will improve risk management of the market buy introducing new mechanisms to ensure that the settlement is compete and that all parties meet their obligations when settling trades in the market.

The new clearing house has been set up in the from of a closed joint stock company with SR600 million ($159.9 million) of capital. Equity settlement is expected to start in the second half of next year, with derivative settlement a year later.

FASTFACTS

Factoid

A 5 percent listing of Saudi Aramco stock could be worth as much as $100 billion


Dubai’s Emirates NBD acquires Turkish lender Denizbank for $3.2 billion

Updated 5 min 38 sec ago
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Dubai’s Emirates NBD acquires Turkish lender Denizbank for $3.2 billion

MOSCOW/DUBAI: Dubai’s biggest lender Emirates NBD has agreed to buy Turkey’s Denizbank from Russia’s state-owned Sberbank for $3.2 billion to help establish itself as a leading bank in the Middle East, North Africa and Turkey.
Denizbank is the fifth-largest private bank in Turkey and the biggest asset held by Sberbank outside Russia. The sale is part of a strategy by Russia’s top lender to divest overseas businesses to focus on its domestic market.
The deal is the biggest ever acquisition by Emirates NBD, which had said in January it was in talks to buy the Russian lender’s stake in Denizbank.
The transaction comes against a backdrop of Turkey’s strained relations with Gulf states since Ankara stood by Qatar after the UAE, Saudi Arabia and others accused Doha of supporting terrorism, a charge it denies.
The deal will help Emirates NBD diversify its business and establish itself as a leading bank in the region, the company’s vice chairman, Hesham Abdulla Al Qassim, said in a statement.
Denizbank has assets of 169.4 billion lira ($37.25 billion) and operates 751 branches, including 43 outside Turkey, while Emirates NBD has banks in the UAE, Egypt, Saudi Arabia, India, Singapore, the United Kingdom, and offices in China and Indonesia.
“By acquiring Deniz, Emirates NDB can diversify its credit risk as it has concentrated exposure to Dubai government,” said Shabbir Malik, a banking analyst at EFG Hermes in Dubai.
“Turkey is an important trading partner for the UAE, and Emirates NBD can serve UAE customers which have trade ties with Turkey. That said, the banking system is crowded and there is strong market share concentration in the top seven banks.”
Reuters reported in March that Denizbank’s chief executive Hakan Ates met with President Tayyip Erdogan and other senior officials in Ankara to try to convince them the deal would be positive for Turkey.
One source said at the time there was an acknowledgement in Ankara that Turkey’s tensions were with Abu Dhabi, not Dubai — meaning the UAE’s policy makers, not the region’s main commercial and financial hub.
The transaction is expected to be accretive to shareholders in the first year, said Emirates NBD Chief Executive Officer Shayne Nelson.
“Earlier there was mass media speculation that the deal would be concluded at a price of over $5 billion,” Russia’s Aton brokerage said in a research note.
“The deal may limit Sberbank’s ability to materially increase dividends for 2018, but will still improve its capital ratios and ROE (Return on Equity). Nonetheless, we expect the stock to be under pressure today.”
Denizbank currently holds subordinated loans issued to it by Sberbank with a value of $1.2 billion, the Russian bank said in a reply to Reuters questions.
Besides its Turkish business, Sberbank has a network of eight subsidiary banks in central and eastern Europe. It has signaled it is interested in finding a buyer for some of those assets if it can get the right deal.
The closing of the deal is subject to regulatory approvals in Turkey, Russia, the UAE and other relevant jurisdictions, where Denizbank operates.