RIYADH (AFP) – Saudi Arabia’s National Commercial Bank is going ahead with an initial public offering worth $6 billion despite opposition from Muslim clerics.
The IPO from Sunday, making NCB the last Saudi bank to go public, is expected to be one of the largest in the world this year.
“It will be very, very highly watched”, said Beshr Bakheet of the privately-held Osool and Bakheet Investment Company.
Abdullah al-Mutlaq, a member of the kingdom’s official Council of Senior Ulemas, said on television that the IPO is haram, or forbidden under Islamic tenets which ban usury.
“What is clear to me now is that it is not permissible,” he said, adding that many of the bank’s investments were already haram.
After a lively public debate over the moral legitimacy of the share offer, the amount of subscriber interest in the IPO will be key, Bakheet said.
Will investors buy or will they back off because of what some religious authorities are saying, he asked.
Only three of Saudi Arabia’s 12 banks are fully compliant with Islamic syariah laws, while the others offer syariah-compliant products along with conventional banking services.
NCB’s syariah advisory council on Thursday declared the share offer to be acceptable under Islamic law.
“After much thought and deliberations regarding the issue, the bank considers the IPO in the bank’s stock to be permissible according to syariah,” it said in a statement obtained by AFP.
More than two-thirds of NCB’s business is already syariah compliant, and it plans to become a completely Islamic bank “within a reasonable time”, the statement said.
Saudi Arabia is OPEC’s biggest oil exporter and its economy has been one of the best performing in the Group of 20 leading nations, according to the International Monetary Fund.
An NCB prospectus says the bank will offer 300 million shares to the public at 45 riyals ($12) each, for a value of $3.6 billion, while another 200 million shares will be allocated to the state pension agency bringing the total to $6 billion.
The ultra-conservative Wahhabi Islamic tradition applies to both religious and political life in the oil-rich Gulf kingdom.
However, foreign investment restrictions in the country’s Tadawul All-Shares Index, the largest Arab bourse, are expected to ease next year.
“There is a general trend in Saudi Arabia for large companies to open themselves to greater competitive pressure from the outside, and I think this would be an example of that,” a diplomatic source said of NCB’s public offering.
Government policy is to sell shares in all major state-owned firms, Bakheet said.