Zakat claims for Saudi banks set to rise from 2019: Riyad Capital

The revised annual Zakat charge for Saudi banks is estimated to be higher from next year than what has historically been, Riyad Capital said in a new report on Monday.

Earlier this month, 12 banks listed on Tadawul agreed with the General Authority of Zakat and Tax (GAZT) to settle Zakat claims for the previous financial years and until the end of the fiscal year 2017.

The total Zakat payable amounted to SAR 16.8 billion while the reduction in shareholders’ equity would be SAR 11.2 billion.

According to the consultancy, the charge on shareholders’ equity would be immediate with banks getting five years to pay the Zakat will cause minimal disruption to dividend payments.

Alawwal Bank chairman Mubarak Al Khafrah told Argaam last week that Saudi Arabia’s banks have agreed with the GAZT to settle the Zakat claims in instalments over five years.

Meanwhile, Riyad Capital said that the price-to-book (P/B) ratio for the Saudi banks at the post zakat book value per share is likely to increase for majority of the banks, but will not be a “big concern for investors given that the return on equity would be higher going forward”.

"In addition, these announcements finally eliminated the uncertainty concerning Zakat charge, which will be taken positively by investors," it added.