Banque Saudi Fransi Sets Up $2 Billion Islamic Bond Program

Banque Saudi Fransi, a Saudi Arabian lender part-owned by Credit Agricole SA, set up a $2 billion Islamic bond program as part of the Riyadh-based lender’s plans to diversify its sources of financing.

“We are properly equipped to raise funding when and if needed from the international market,” Chief Financial Officer Philippe Touchard said in a phone interview from Riyadh today. “The $2 billion program might be used during different phases over the next five years.”

Islamic bond sales in Saudi Arabia, the world’s largest oil exporter, rose to a record $6.55 billion so far this year as the government’s spending plan encourages companies to raise funds to invest. The state-run General Authority of Civil Aviation sold 15 billion riyals ($4 billion) of Islamic bonds in January. Saudi Electricity Co. last month raised a combined $1.75 billion from an issue of five- and 10-year sukuk, securities that pay returns on assets to comply Islam’s ban on interest.

Citigroup Inc., Credit Agricole, Deutsche Bank AG were appointed the lead arrangers of the program, Saudi Fransi said in its base prospectus posted on the London Stock Exchange. Saudi Fransi Capital, the investment banking unit of the bank, is the domestic financial adviser and co-arranger for the program in Saudi Arabia, Touchard said.

Banque Saudi Fransi last sold bonds in 2010 when it raised $650 million from selling five-year debt. The yield on the 4.25 percent notes fell to 2.72 percent today from a high of 4.28 percent in March 2010, according to prices compiled by Bloomberg.

Banque Saudi Fransi reported a 10 percent increase in first-quarter profit to 789 million riyals, beating analysts’ estimates. The stock has advanced 15 percent this year compared with a 17 percent gain for the benchmark Tadawul All Share Index and 20 percent increase for the Tadawul All Share Bank Index.

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