Banque Saudi Fransi scales back capital raising

BANQUE SAUDI FRANSI: Capital raising ambitions are being scaled back. (Getty Images)

Banque Saudi Fransi said on Sunday it has trimmed by more than half an earlier plan to increase its capital by nearly 60 percent, citing a slowdown in the banking industry and inadequate conditions for rights issues.

The bank, in which France's Credit Agricole is a main shareholder, now plans to raise its capital by 28.5 percent to 7.23 billion riyals, shelving an earlier plan to raise 9 billion riyals through rights and bonus issues.

A board meeting on Sunday proposed to offer shareholders a one riyal dividend for 2008 and a two-for-seven bonus share issue, it said in a statement posted on the Saudi bourse website.

"Banque Saudi Fransi has found other means of creating value for its shareholders," Chief Financial Officer Philippe Touchard told Reuters.

"Shareholders decided to wait until market conditions become more adequate. The bank has the means to achieve organic growth and get to a capital of 9 billion riyals without resorting to shareholders," Touchard said.

Touchard said declining interbank lending rates have forced a change of perspective.

The central bank, Saudi Arabian Monetary Agency (SAMA), has reduced its benchmark repurchase rate five times since October to 2 percent from 5.5 percent to push down the interbank lending rate.

"The 30-plus percent profit growth performances of 2005 and 2006 are behind us. We have to be cautious on risks since assets' growth will decline," Touchard said.

"The situation on the rate market dictates this situation but we have to remunerate capital," he added.

Like all Saudi banks, Banque Saudi Fransi was hit in the fourth-quarter by provisions for a drop in the market-to-market value of investments.

Fransi's net profit fell by an annual 11 percent in the fourth quarter although it rose 3.5 percent for all of 2008.

The bank booked 410 million riyals in provisions for 2008, 265 million riyals of it in the fourth-quarter alone, due to the drop in investment values, Touchard said.

"These provisions were mainly to cover market-to-market losses on fixed income and ome unfortunate equities in Saudi Arabia. We did a thorough cleaning," he said.

France's Credit Agricole indirectly holds a 31 percent stake in Fransi through its investment banking unit Calyon. (Reuters)

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