Saudi banks rally on SAMA action

27/09/2016 04:05 AST

Saudi banking shares rallied on Monday after the central bank said it would deposit about SR20 billion at commercial lenders and introduce two new money market instruments.

Riyadh’s main index was up 0.6 percent after 15 minutes of trade as four-fifth of the banking shares rose. Samba Financial Group was the top gainer in the industry, up 2.3 percent to SR18.20.

The petrochemical sector was also positive, with its largest producer Saudi Basic Industries up 0.9 percent as Brent futures climbed back over $46 a barrel.

Saudi Arabia’s central bank — the Saudi Arabian Monetary Agency (SAMA) — announced on Sunday it would deposit about SR20 billion ($5.3 billion) at commercial banks and introduce two new money market instruments as part of its “supportive monetary policy.”

It will inject the funds in the form of time deposits on behalf of government entities, SAMA said.

It will also introduce seven- and 28-day repurchase agreements to lend money to banks when needed. Previously, the central bank has typically only used repo agreements with one-day maturities. The latest step “will show investors that the government is committed to support the banking system,” Apostolos Bantis, a Dubai-based credit analyst at Commerzbank AG, told Bloomberg. “SAMA is being proactive to ensure liquidity meets economic and financial requirements,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told Bloomberg.

“This will provide a breather to the banks and the planned sovereign bond issue will also help.” In its statement on Sunday, the central bank reiterated that the Saudi banking system was healthy, with non-performing loans totaling no more than 1.3 percent of all loans and provisions set aside for bad loans at high levels.

Saudi Gazette