Saudi banks exposure to Saad, Algosaibi up to $7bn

Saudi banks may have between $4bn and $7bn in lending exposure to troubled conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros, according to an HSBC analyst report.

A recent sell-off in Saudi banks suggests the domestic bad debt exposure to Saad and Algosaibi was around $15 billion, but those assumptions were "too pessimistic", HSBC analyst Aybek Islamov said in the note on Tuesday.

"Market concerns on Saudi banks' exposures to Saad and Algosaibi potential debt default (are) overblown," Islamov said.

Privately held Saad Group ran into difficulties earlier in June, prompting the Saudi central bank to freeze the accounts of its billionaire chairman, Maan Al Sanea. Algosaibi is also restructuring its debt.

At least five banks in the UAE, including Mashreqbank, National Bank of Abu Dhabi and Abu Dhabi Commercial Bank, have exposure to the Saudi firms, according to banking sources or the banks themselves.

HSBC continues to see headwinds for the Saudi banks' second-quarter earnings due to weak lending.

HSBC expects Riyad Bank to outperform its peers Arab National Bank, Al Rajhi Bank and Samba Financial Group in the second quarter. (Reuters)

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