Riyad Bank set for $3.5bn expansion

Riyad Bank's The rights issue is one of the largest in the kingdom in years.

Saudi Arabia's Riyad Bank wants to raise 13.13 billion riyals ($3.5 billion) through a rights issue which would increase its capital by 140% and beef up reserves, the bank's chairman said on Wednesday.

Saudi Arabia's fourth-largest lender by market value, has applied to the authorities for approval to sell 875 million new shares at 10 riyals and a 5 riyal premium.

"This rights issue will be in the interest of the bank in developing and expanding the scope of its operations. It will create value for shareholders," chairman Rashed Abdulaziz Al-Rashed told Reuters by telephone.

The rights issue is one of the largest in the kingdom in years.

The bank is active in project financing in the kingdom which is riding a wave of economic growth fuelled by record oil receipts.

"The economic growth needs to be accompanied by banks. We have large financing needs and the capital increase is meant to serve these needs," he said.

Of the total 13.13 billion riyals, the bank will use 4.38 billion riyals to boost its reserves and the remainder will be used to raise the paid-up capital from 6.25 billion riyals to 15 billion riyals, the bank said in a statement on the bourse website.

The announcement by the government last year of a plan to launch Inmaa Bank (Development Bank) - a new lender which will have a capital of 15 billion riyals - has triggered moves by other banks to increase their capital.

State-owned National Commercial Bank, the largest Saudi bank by assets, announced plans in March to raise its capital from 9 billion to 15 billion riyals through a bonus share issue.

Inmaa Bank would look to raise 70% of its capital through a public offering open to Saudi investors only, but the subscription has been delayed several times this year.

Riyad bank outperformed listed Saudi banks in earnings growth in the second quarter of this year after declines in net profit over the previous three quarters, due to the impact of a crash in the local stock market.

The bank's earnings reached 848 million riyals in the second quarter of 2007, a rise of 24.3% from the year-earlier period.

Rashed declined to give a forecast for net profit for 2007. "The rise in profits depends on economic and credit opportunities... We remain confident," he said.

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