Bahrain-based Gulf International Bank, which is owned by six Gulf Arab states, will likely use the proceeds from its debut Saudi bond issue to shore up future liquidity requirements. "The timing of the bond issue is important...we believe that the planned new regulations will require banks to fund medium and longer term assets with longer tenor liabilities," said chief executive Yahya Alyahya, in a statement on GIBs website.

New rules on managing liquidity in the banking sector are expected to be introduced by the central bank in the fourth quarter, including a loan-to-deposit ratio requirement of 75 percent. All banks will be expected to comply with the new rules. GIBs initial offering is expected to price early next week, with the guidance set at between 130-140 bps over the 3-month Saudi interbank offered rate, which stands at 0.764 percent.

The three-year conventional bond will be priced early next week in a private placement open only to Saudi investors, a banker based in Saudi Arabia said. It is expected to be a benchmark issue, in the region of around $500 million, but is being priced in Saudi riyals. "Given the demand, it is likely the price guidance will be tightened in the next few days," a banker said. "Theyve cleaned up their balance sheet, and now theyre gearing up for growth.

Chief executive Yahya Alyahya told Reuters earlier this year that GIB plans to deleverage its balance sheet, targeting a loan-to-equity ratio of around 5 by the end of the year, from 6.7 at year-end. This would bring GIBs loan portfolio down to about $10.5 billion. The Saudi government and the Saudi Arabian Monetary Agency (SAMA) comprise the majority shareholders of the bank, with a combined ownership of 54.1 percent. Bahrain, Oman and the United Arab Emirates (UAE) each own a 7.2 percent stake, while Kuwait and Qatar each hold 12.1 percent.