KSA banks distressed as stocks cheaper than assets

RiyadH / Bloomberg

Saudi banking stocks have fallen to the lowest levels in at least a decade relative to their net assets, showing the slump in oil is stoking concern that bad loans will increase. Following a 10 percent slide this year, an index of 12 lenders on the Tadawul All Share Index is trading at an average 1.3 times book value, near the weakest since 2006.
Four of those have fallen below their net assets, compared with two in December, while three others are trading at multiples of just above 1. They include Samba Financial Group and Riyad Bank, the nation’s third- and fourth- biggest banks.
“Investors are punishing financial stocks because there is an expectation of non-performing loans going up and for deposit outflows to continue. This suggests banks will have to pay more to get their funding back. A weak economic environment would also impact the banks´ brokerages and investment banking businesses,” said Chiradeep Ghosh, research manager at Manama-based securities and investment company.