NBP to sell stakes in Saudi bank

The National of Bank of Pakistan (NBP) hopes to divest its stake in Saudi-based Al Jazira Bank within three months and at a discounted price, a top official said on Tuesday. The sale would cash in on a 10-fold rise in Al Jazira Bank's share price since 2004, and would complete NBP's exit from a stock it acquired 35 percent of in 1975, analysts said.
The bank said the sale would remove a legal obstacle from its plan to open an NBP branch in Riyadh next year, and that some of the proceeds may be returned to shareholders.
NBP holds around 6.5625 million shares in the Saudi bank, which at Tuesday's price would cost around 548 million dollar.
Analysts said NBP held the stock at a cost of 8.8 Saudi riyals per share, after accounting for share splits and a bonus issue, compared with Tuesday's price of 313.25 riyals.
"Because it is not going to be an open market sale, the likelihood of getting a premium is out of question," said Syed Ali Raza, president of the NBP.
"It would probably be at a discount, and that has been the experience of other foreign banks as well," Raza told Reuters in an interview.
NBP plans to open up a branch in the Saudi capital city of Riyadh in the first quarter of next year, and according to Saudi laws, no institutions can have two kinds of presence in the kingdom, said Raza.
The law also prohibits an open market sale, and thus the NBP can only sell its share to designated institutional investors, mainly pension funds.
"I anticipate that we should be able to divest these shares within three months from now, roughly," Raza said.
Raza said the Saudi Arabian Monetary Agency had not set a deadline for the completion of the transaction, but it has to be completed before NBP opens a branch in the oil-rich kingdom.
State-owned NBP is Pakistan's largest bank and has a market capitalisation of around 2.8 billion dollar. In the year to December 2005, NBP earned a net profit of Rs 12.709 billion, with earning per share of Rs 17.87.
Raza expected that taxes of around 15-20 percent would be applicable on the deal.
Analysts say the sale would result in a one-off increase in earnings per share of NBP of around Rs 30 even if the stake was sold at a discount of 20 percent, and if 20 percent tax is also paid.