Reuters
Two Saudi banks soared on Wednesday after saying they were in initial stages of a merger, helping lift the mood in other lenders while first quarter financial results buoyed the shares of two blue chips in other Gulf countries.
On Wednesday Saudi’s Alawwal Bank agreed to start talks with Saudi British Bank (SABB) about a tie-up that could create the kingdom’s third biggest bank with assets of nearly $80 billion. Shares in Alawwal soared by 8.6 percent in their heaviest daily traded volume since May 2012 while SABB jumped 6.8 percent in the largest single day volume since November last year.
“While the merger, if it goes through, is good news for both lenders, Alawwal will benefit more from the tie up from reduced operating cost,†said Mohammad al Shammasi, chief executive of Riyadh based Derayah Financials.
Other analysts said that currently the price-to-book ratio of both lenders, a common measure used to determine the relative value of banks, is low and that a merger will help drive up the value of the combined entity. The positive mood spilled into other banking shares, with mid-sized Saudi Investment Bank gaining 2.0%. Improving petrochemical prices, strong balance sheet and an attractive dividend yield of around 5% are the key strengths of the stocks, NCB Capital added that rates the stock an “overweight†with a target price of 50.40 riayals.
The Saudi index closed flat. Elsewhere, shares of the largest listed company, telecommunications operator Etisalat, added 1.1 percent after it reported a 4.5 percent rise in first-quarter net income from the prior year period to 2.09 billion dirhams, broadly in line with analysts’ forecast.
The Abu Dhabi index, however, lost 0.5 percent with main drag from profit taking on shares of the largest lender First Abu Dhabi Bank which dropped 2.2 percent.
Shares of energy company Abu Dhabi National Energy , which had dropped as much as 6.7 percent earlier in the day on news that rating agency S&P had downgraded TAQA’s credit rating to ‘A-’ from ‘A’ and gave it a ‘negative’ outlook from ‘stable’, closed flat. In Dubai, 26 shares rose, nine declined and the index added 0.2 percent. Financially troubled builders Arbatec and Drake & Scull were some of the top gainers with the former adding 4.2 percent and the latter jumping 2.1 percent.
Shares of Qatar’s largest petrochemicals maker Industries Qatar rose 1.2 percent after reporting a first quarter net profit of 928 million Qatar riyals, up 33 percent from the prior year period and above the 866.25 million riyals three analysts had on average forecast the industrial company to make in the period.
Doha’s index rose 0.5 percent, coming slightly off the previous session’s four-month low.