Shares In Biggest Saudi Bank Jump 10% On Listing

Shares in Saudi Arabia’s biggest lender, National Commercial Bank, jumped their daily 10 per cent limit upon listing on Wednesday after a $6 billion IPO, the largest ever in the Arab world and the second-biggest globally this year.

Completing the initial public offer last week, state-owned NCB said the $3.6 billion portion for retail investors was 23 times subscribed, with a total of 1.25 million subscribers – roughly one in every 16 Saudi citizens – taking part.

Demand for the IPO, at a fixed price of SAR45 per share, was huge partly because Saudi authorities tend to price initial offers of equity cheaply, using them to spread corporate wealth among citizens.

Institutional investors were not allowed to take part in the offer and will have to buy the stock, which looks certain to become a staple in most Saudi Arabia-focused portfolios, on the secondary market.

The stock opened on Wednesday at SAR49.5, with a massive amount of unfilled buy orders that came close to equalling the bourse’s total trading volume on a normal day.

Bahrain-based Securities & Investment Co rated NCB a “high conviction buy” with a target price of SAR72, citing its outlook for strong balance sheet growth and sustainable margins. Based on listed Saudi banks’ median price to 2013 earnings ratio, NCB would be worth about SAR76.

Most IPO investors are likely to wait until the stock trades at higher levels before selling, which will take three or four days, said Maged Ali Hasan, head of brokerage services at EFG-Hermes in Riyadh.

NCB’s surge underscores a generally positive mood on Saudi Arabia’s stock market, which is preparing for inflows of fresh money early next year, when regulators plan to allow foreigners to buy local stocks directly for the first time.

Twenty-five percent of the bank’s capital was sold in the IPO, with 60 per cent of the offer going to retail investors and the remainder allocated to the Public Pension Agency. At Wednesday’s traded price, NCB added SAR99 billion ($26.4 billion) to Saudi Arabia’s pre-listing stock market capitalisation of $518 billion.