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Saudi banking: Saudi Hollandi brings RBS some cheer

It is not all bad news at Royal Bank of Scotland. At least its Saudi franchise is improving, which might ultimately fetch the troubled UK bank a higher price if it decides to sell the stake it inherited from ABN Amro.

Saudi Hollandi Bank boasted strong net profit growth in the fourth quarter even as bigger local rivals reported increased provisions and falling profits. The bank made a net profit of a riyal equivalent of $82 million in the fourth quarter, against a loss of $28 million in the same quarter in 2007 because of provisions unrelated to the sub-prime crisis. Al Rajhi and Saudi British Bank, on the other hand, reported net profits in the fourth quarter of 2008 down by almost 10% and almost 7% respectively. Net profits at Arab National Bank and Banque Saudi Fransi were down by 11% in the fourth quarter.

In January, Saudi Hollandi became the first bank in the Kingdom to issue a sukuk to boost its capital adequacy ratio. In a self-led deal, the bank sold SR775 million ($207 million) of 10-year put five mudaraba sukuk through a private transaction. The deal is the first tranche of a SR1.5 billion tier 2 sukuk issuance programme. It was priced at 200 basis points over the Saudi inter-bank rate.

The issue follows the bank’s first tier 2 capital bond for a riyal equivalent of $187 million, raised in 2004. Bernd van Linder, general manager of treasury at Saudi Hollandi, says another tranche might follow later this year if market conditions permit.

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