Saudi banks' exposure to Saad, Algosaibi 'at $5bn'

Saudi banks have around $5bn of exposure to troubled family conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros (AHAB), Standard Chartered said on Wednesday.

“We estimate that Saudi banks have approximately $5bn (SAR 18.75bn) of combined gross exposure to the Saad and Al-Gosaibi groups,” credit analyst Victor Lohle said in a research note.

He added that although there is potential for a one-off shock to the banking system, the situation is manageable, with most banks’ financial profiles expected to remain sound.

“Although significant, the exposure must be put into the context of a system with equity of about $50bn,” he said.

In its initiation of coverage of the Saudi Banking system, Standard Chartered also noted that Saudi banks have a history of support.

No Saudi bank has ever failed, and when institutions have faced difficulties, they have either been rescued, or a market solution has been found.

In addition, a number of government agencies, including the Saudi Arabian Monetary Authority, have hold stakes in several banks.

AHAB and Saad Group are restructuring combined debt that could be worth up to $22bn in the biggest corporate scandal to hit the GCC since the beginning of the international financial crisis.

Saad Group’s owner, Maan Al Sanea, is being sued for fraud in a New York court by AHAB, which claims the billionaire siphoned off $10bn from the group’s workers remittance business.

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