Lower policy rates in Saudi Arabia to have ‘limited impact’ on banks, says Alinma Bank CEO

The interest rate cuts by Saudi Arabia will likely have a limited impact on the growth of the Kingdom’s banking sector’s profitability, Abdulmohsen Abdulaziz Al-Fares, Chief Executive Officer, Alinma Bank told Argaam in an exclusive.

Saudi banks reported significant earnings growth in the first nine months of 2019, unaffected by the slump in the cost of finance, Al-Fares said on the sidelines of the third Future Investment Initiative (FII) in Riyadh.

“Lower cost of finance may boost investments of financial entities. However, financing portfolios of variable rates are affected by the decline in the cost of financing,” Al-Fares noted.

As for Saudi Aramco’s initial public offering (IPO), Al-Fares indicated that the Saudi oil giant’s IPO will likely attract retail as well as institutional investors.

“Alinma Bank is well-positioned for Saudi Aramco’s IPO, as the bank will provide loans for the retail and corporate investors willing to subscribe to Aramco’s shares, depending on applicants’ credit capability.

The offering size should first be considered, and then banks will assess clients’ credit capability.

When asked about Alinma’s participation in the share offering, Al-Fares indicated that any decision will be taken only after the IPO prospectus is issued.

The Kingdom’s energy minister said yesterday that the state-owned oil company, Saudi Aramco’s IPO will come soon, and will be a decision taken by Saudi Crown Prince Mohammed bin Salman, Argaam reported.