SABB dollar-denominated bond in int’l market mulled

RIYADH —  Saudi British Bank (SABB) plans to issue a dollar-denominated bond in international markets, two sources familiar of the matter said on Tuesday, as the kingdom's sixth-largest lender by assets seeks to refinance an existing debt maturity.

The deal is likely to be arranged solely by HSBC, which holds a 40 percent stake in the Saudi bank known as SABB, the two sources said, speaking on condition of anonymity.  One of the sources, with direct knowledge of the issue, said the deal would happen by the end of the third quarter, subject to market conditions, and would look to refinance an existing $600 million bond which is set to mature in November.

SABB declined to comment.

Bond offerings from Saudi banks denominated in any currency other than Saudi riyals are rare, given the strong liquidity in the local market which makes borrowing cheap, meaning this scarcity value will be attractive to investors.

SABB issued a SR1.5 billion ($400 million) 10-year sukuk in May, which boosted the bank's Tier 2, or supplementary, capital. However, it hasn't issued in dollars since the existing deal was sold in November 2010.

Meanwhile, the only Saudi lenders to have outstanding debt in the currency according to Thomson Reuters data are Banque Saudi Fransi, which issued in 2012, and Arab National Bank, which sold its bond in 2006.

When Saudi banks do issue in dollars, it is often to raise dollar funding to back infrastructure projects in the country — which often need to pay for equipment that is priced in the currency. It was not known if this is the rationale behind SABB's dollar fundraising strategy.

Despite the impact of lower oil prices sending the Saudi government to issue sovereign debt for the first time since 2007, growth in the kingdom's banking sector has remained solid and Saudi lenders carry much higher capital reserves than their Western counterparts.

SABB, which had a total capital adequacy ratio of 17.58 percent at the end of June, beat forecasts despite reporting a 1.7 percent year-on-year drop in net profit in the second quarter, earning SR1.14 billion. — Reuters