RIYADH, 6 April 2008 — In what is being called Saudi Arabia’s largest initial public offering, Alinma Bank will float tomorrow 70 percent of its shares with an estimated value of SR10.5 billion.
Unlike previous IPOs that placed a limit on the number of shares that could be purchased, Alinma’s IPO places only a minimum of 50 shares at SR10 apiece. The IPO is open only to Saudi nationals.
“We have been preparing for the launch for over a year now,” Abdulmuhsin Al-Faris, CEO of Alinma Bank, told Arab News yesterday. “All preparations for the IPO are ready. We are keen that all banks in Saudi Arabia and their branches all over the country take part in the IPO.”
The CEO of the bank advised locals to take advantage of electronic transactions to purchase as many shares as possible in the 10-day offering.
“Electronic transactions would be easier and better. However, that does not mean one cannot go to a branch of any bank and purchase shares,” he said.
Experienced Underwriter
Samba Capital has been chosen as the underwriter based on its experience in managing several IPOs in the Saudi stock market.
Alinma will be 100 percent Shariah-compliant. Al-Faris said that Islamic banking was growing at steady and phenomenal rates worldwide, not just in Saudi Arabia or other Islamic countries.
“Non-Islamic countries have now shifted to (offering) Islamic banking after realizing its profits and benefits,” he said.
Financial analyst Nabeel Al-Mubarak said the Saudi market could accommodate another bank, especially for non-corporate banking services.
“Many banks in Saudi Arabia offer a wide range of services for corporate customers, such as large companies, but medium and small enterprises do not find banking services at that level,” he told Arab News. “It is not just a matter of offering customer service at branches. There are banks worldwide, which care for their customers’ needs and savings throughout their careers.”
Shariah-Compliant Bank
Muhammad Al-Umran, a member of the Saudi Economics Society, said that Alinma Bank would be a leading Islamic bank not just in the Kingdom, but also in the world since its capital was equal to that of Al-Rajhi Bank — SR15 billion. Al-Rajhi is currently the Kingdom’s largest fully Shariah-compliant bank.
“I think Alinma will use most of its surplus to invest in Islamic-oriented or Shariah-compliant assets,” he said.
Al-Umran added that opening doors for more competition in Islamic banking would help the market nurture and further develop just as it does in any other financial system.
“I think the demand is very clear here,” he said.
He believes the bank will concentrate in its earlier stages on commercial banking and phase in retail banking at a later date. “A retail unit should be cost-effective, which is better than opening branches left and right,” he said. “I think they will learn from the experience of Bank Albilad, which opened a huge network of branches and has not yet justified these expenses in its three years of operation,” he added.
