JEDDAH, 30 December 2004 — Saudi Arabia’s largest listed bank, Al-Rajhi Banking and Investment Corp., said it plans to increase capital from SR2.25 billion to SR4.5 billion ($1.20 billion) by making a one-for-one scrip issue.
This will take place through the granting of one free share for every owned share at a nominal values of SR50. The market value of the share is now around SR2,000.
The move will double the number of the company shares from 45 million to 90 million if the granting of the new shares is approved by the general assembly expected to convene during the first quarter of next year.
The bank said the issue would be financed by a transfer of funds from reserves. It will also distribute an SR35 dividend per share, it said in a statement posted on the Saudi stock market’s website on Sunday.
Meanwhile, according to the Kuwait-based Global Investment House report, the assets of Al-Rajhi Bank grew from SR51.74 billion in 2001 to SR73.0 billion as of September 2004 and ranks 4th amongst Saudi commercial banks in terms of asset size with a 12.3 percent market share of the sector’s aggregate total assets. The bank’s capitalization ratios reported a marginal decline from 25.9 percent in 2002 to 24.4 percent in 2003. Shareholders’ equity accounted for 11.2 percent of total assets in 2003 compared to 13 percent in 2001 and to a sector’s average of 10.2 percent.
Al-Rajhi Bank’s net income increased at a CAGR of 15 percent during the period 2001-2003. For the year 2003, Al-Rajhi Bank reported a net income of SR2.03 billion compared to SR1.41 billion for 2002 representing a large increase of 44.2 percent.
The bank’s ROAA has increased to 3.3 percent in 2003 as compared to 2.5 percent in 2002. The bank’s ROAA is above the sector’s average ROAA for year 2003, which was 2.3 percent.
The ROAE of Al-Rajhi also increased to 28.9 percent in 2003 from 20.8 percent in 2002. In 2003, the average ROAE for Saudi banks was 22.3 percent.
Al-Rajhi reported a net income of SR2.14 billion for the first nine months of this year, a strong increase of 46.9 percent as compared to the SR1.45 billion net income reported for the corresponding period in 2003.
The bank’s shareholders equity increased from SR7.24 billion in 2003 to SR9.38 billion at the end of September. Assets amounted to SR73.0 billion representing a 12.9 percent increase over the 2003 year-end figure of SR64.67 billion.
Al-Rajhi is a full-fledged Islamic bank providing wholesale, retail and commercial banking products and services in addition to investment banking.
The bank plans to build on the strong brand image and customer loyalty to build on the depositors’ base keeping in mind the marked tendency of the Saudi investors to go in for Islamic banking and finance products and services.
The bank has one of the largest branch networks in the Kingdom.
Al-Rajhi plans to consolidate its position in the retail banking sector by increasing its branches and ATM location in order to increase its coverage area. It has one of the largest branch networks which gives it a competitive edge to garner the maximum share of the lucrative retail banking segment. The bank has also enhanced and added more features in its retail products and services in order to be more competitive and cost effective.
The bank has been trying to take up a major slice of the burgeoning Saudi infrastructure related projects. It has been participating aggressively in the financing and arranging for the big infrastructure projects. Al-Rajhi Bank has traditionally been very strong in the currency remittances market, having evolved from the major currency exchange and remittances centers. It has launched a new remittance service called “Cash Online,” through its Al-Rajhi Express Remittance Centers across the Kingdom for faster remittances.
Al-Rajhi is also concentrating on improving its non-investment based activities. The bank plans to be an active player in the funds management business. Also, the increase in the private banking business in the region augurs well for the bank as it has the critical mass of branches to cater for the private banking operations. Al-Rajhi has also been looking at other markets for expansion. It was awarded Islamic banking license by Malaysia under its plan to open its rapidly growing market for Islamic finance to foreign lenders.
