RIYADH, 8 March 2005 — Saudi Arabia’s new Islamic bank, Bank Albilad, will open branches nationwide in the second half of the year and hopes to launch the Kingdom’s first Islamic bond in 2006, Chief Executive Officer Azzam Abaalkhail said.
Abaalkhail said Albilad will initially focus on commercial, retail and private banking. The bank also sees opportunities to fund power, water and real estate projects planned in the Gulf state, which is booming on the back of high crude prices. “In the first year we will target customers and businesses. However if there is an opportunity to participate in any of these transactions we will consider that. We are ready for it,” Abaalkhail told Reuters in an interview on Sunday.
Albilad, established from the merger of eight local money exchange companies, is Saudi Arabia’s 11th bank and the second Islamic bank after Al-Rajhi Banking and Investment Corp. “Saudi Arabia is a big country so there is potential here for us,” Abaalkhail said, adding the bank aims to have 31 branches across the country by the end of the year and 120 to 130 within five years.
Abaalkhail said there were plenty of options for banks trying to raise short, medium or long-term funds through Shariah-compliant instruments. “Islamic banking is very flexible. Yes, it’s done differently, and the requirement is for risk mitigation ... (But) these things are very, very straightforward”.” European countries have issued sukuk (Islamic bonds) for example,” he said. “Sukuk is just another kind of funding and it can be applied for large mega-projects — possibly long term.” “We’re looking at it. Not for 2005 but we’re looking at it very seriously (in 2006) ... We would like to be the first of course.”
Albilad’s initial public share offering, which opened two weeks ago, was oversubscribed within a day and a half. Over six million people — more than a third of the Saudi population — have so far applied for shares. Only Saudi nationals are eligible to apply for new share issues.
Abaalkhail said by Friday 6.65 million people had sought shares worth a total of SR6.29 billion ($1.68 billion). “It’s a record-breaking IPO. We’ve never had that many subscribers,” he said.
Investors were attracted by several factors. “Historically banks have excelled in Saudi Arabia so it’s a good investment,” he said. Albilad’s Shariah compliance also makes it attractive, and smaller investors have been looking for a chance to join the Saudi share market which has soared 257 percent in two years.
