Saudi banks to see positive impact from bond sale: Albilad Cap

The Saudi government’s planned sale of US dollar dominated international bonds is expected to have a positive impact on the kingdom's banking sector as it's expected to reduce pressure on local liquidity, Albilad Capital said in a new report.

Liquidity conditions in the sector tightened in the first half of 2016 amid lower oil prices and 8.1 percent credit growth.

Total deposits decreased by 2.5 percent year-over-year (YoY) over the same period, led by a decline in state oil revenue.

The drop in oil prices trimmed liquidity levels as result of several Riyal dominated bond issues over the last year, which aimed to help finance public spending, the brokerage firm said.

“This increased the bank liabilities from the public sector by 117 percent from the same period last year to reach SAR 204.4 billion (54.5 billion), of which government bonds amounted to SAR 156.6 billion ($41.8 billion) at the end of Q2 2016”, Albilad explained.

The upcoming bond sale, planned for October, will be Saudi Arabia's first bond issue on the international market. Bloomberg reported last week that a roadshow for foreign investors and institutions would be held in September.