⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

Saudi Arabia Considers Increase in Lending for Aramco IPO

Published 10/31/2019, 09:06 AM
Updated 10/31/2019, 10:21 AM
© Reuters.  Saudi Arabia Considers Increase in Lending for Aramco IPO

(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

Saudi Arabia is considering increasing how much the kingdom’s banks can lend to local investors who want to buy shares in Aramco’s initial public offering, people with knowledge of the matter said.

The Saudi Arabian Monetary Authority met banks this week to discuss how much they can lend to domestic stock buyers who want to invest in the oil giant’s IPO, the people said, asking not to be identified because the information is private. Some lenders are seeking permission to offer greater leverage than what the central bank normally allows, they said.

The regulator wants to ensure that they are able to maintain enough liquidity in the local financial system, while still ensuring enough loans are available to support investors in the IPO, the people said. The final amount lenders are willing to provide will depend on the valuation Aramco seeks, with banks likely to be more conservative at higher valuations, they said.

Loyal Investors

Saudi banks are gearing up for what’s set to be the world’s biggest share sale after years of falling loan growth and a decline in the pace of economic expansion. Many Saudis are expected to buy into the offering -- only the kingdom’s sixth in two years -- as a demonstration of loyalty to the country, allowing institutions to cash in on revenue generated from margin loans and brokerage.

SAMA’s meeting with banks Tuesday was part of the periodic meetings the central bank holds with lenders, a representative for SAMA said in an emailed statement. Aramco, officially known as Saudi Arabian Oil Co., declined to comment.

The sale could add as much as $12 billion in bank deposits as foreign funds buy up as much as 30% of stock being offered, according to Arqaam Capital Ltd. It’s also set to provide a much-welcome boost to lenders as Saudi citizens borrow to sign up to the sale. But any jump in lending could be brief -- as investors receive only a portion of the shares they bid for -- and borrowers are at risk of defaulting if the deal turns sour.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.