Samba Financial to issue 1-for-2 bonus share offer

BANKING FRENZY: Saidu banks rush to raise capital after gov't new super bank, Inmaa Bank. (Getty Images)

Samba Financial Group, Saudi Arabia's second largest lender by market value, said on Tuesday it plans a 1-for-2 bonus share issue, raising its capital by 50% to 9 billion riyals ($2.4 billion).

The issue will take place after a general shareholders assembly, Samba said in a statement without elaborating.

The bank will also give shareholders a cash dividend of 1 riyal for the second half of 2007, it added. This raises to 2.7 riyals the overall dividend for 2007, which is 21% below 2006's dividend, according to the bourse's data.

Samba made a net profit of 4.8 billion riyals in 2007, down 7.7% from 2006. The bank also missed fourth-quarter profit forecasts.

Hamad Saud al-Sayyari, governor of the Saudi central bank, said in May that local lenders have to adopt the Basel II risk-based capital framework at the start of this year to strengthen the country's financial system.

Basel II, adopted by the Basel Committee on Banking Supervision, aims to align global bank capital standards and introduce new formulae to more closely tie capital requirements to asset risk, replacing a less differentiated standard in force since 1988.

Saudi Arabia's Riyad Bank last year said it would raise 13.13 billion riyals ($3.5 billion) by selling stock to existing shareholders to increase its capital by 140% and beef up reserves.

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

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 also spurred moves by other banks to increase their capital.

Inmaa Bank would look to raise 70% of its capital through a public offering open to Saudi investors next month. (Reuters)

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