Riyad Bank is considering listing its investment banking division

Riyad Bank is considering selling shares in its investment banking arm, Riyad Capital, joining a steady stream of companies calling on the Saudi stock market amid strong demand for IPOs in the Gulf, according to Bloomberg .

The kingdom's third largest lender has begun evaluating and preparing for a possible initial public offering (IPO) of Riyad Capital, the quoted source notes.

The Gulf region has been a booming market for IPOs over the past two years amid high oil prices and increased interest from international investors, even as equity sales have weakened globally amid high interest rates. For example, shares of Modern Mills Co. of Saudi Arabia surged 30% in their recent trading debut on the Riyadh market after an oversubscribed IPO.

Established in 2008, Riyad Capital, which provides asset and wealth management, investment banking and brokerage services, posted a profit of 380.5 million riyals ($101 million) last year, according to the company's website. Its total assets were about 3 billion riyals.

The Public Investment Fund (PIF), the country's sovereign wealth fund, is the largest shareholder in Riyad Bank with a 21.75% stake. A 10.39% stake is controlled by the government of Saudi Arabia.

According to vccircle.com, Riyad Bank's board has issued a resolution to evaluate the possible listing, namely determining the size and structure of a potential IPO. The information submitted by Riyad Bank to the Saudi stock exchange operator Tadawul Group specifies, according to arabnews.com: "Riyad Bank and Riyad Capital will coordinate to complete the evaluation, as well as the relevant measures, including determining the size of the offer, as well as other related details".

The IPO will be subject to regulatory approvals if Riyad Bank decides to proceed with the offer. In February, the bank announced that its net profit for 2023 rose to 8.05 billion riyals ($2.15 billion), marking a 15 percent increase from the previous year. Operating income rose 17% year-on-year to 15.89 billion riyals in 2023, driven by higher fees. However, the bank saw a 3.6 percent drop in its net profit in the fourth quarter of 2023 compared to the same period last year to 1.95 billion riyals, arabnews.com notes.