Banks Boost Saudi Shares to 11-month High.

Summary: RIYADH u Saudi shares rose, led by Al Rajhi Bank and Samba Financial Group, after Saudi bank stocks were upgraded at Credit Suisse Group AG and some banks were said to have agreed to refinance part of the Saad GroupAEs debt.

The Tadawul All Share Index added 3.1 per cent to 6,130.95 at the close of trade, rising to its highest since October 22 last year. The index has gained 27.7 per cent this year after losing more than half its value in 2008 as oil prices dropped.

Al Rajhi, the largest bank in Saudi Arabia by market value, rose 7.9 per cent to SR75.25, its highest finish since October 21, 2008. Samba Financial, the second-largest bank in Saudi Arabia, climbed 9.6 per cent to SR50.75 in the first day of trading since September 16 when the market closed for a week's public holiday.

Credit Suisse said on Friday that historically low valuations and an agreement to refinance debt owed to the banks by Saad Group, which defaulted on payments owed by its Bahraini banking unit earlier this year, will spur investor confidence.

Samba, Saudi British Bank, Al Rajhi and Riyad Bank were raised to "outperform" from "neutral," Credit Suisse London-based analyst Mohamad Hawa wrote in a research note. Banque Saudi Fransi and Arab National Bank were upgraded to "neutral" from "underperform."

Saudi British Bank, the Riyadh-based lender 40 per cent-owned by HSBC Holdings Plc, gained 10 per cent to SR51.25. Riyad Bank rose 9.7 per cent to SR26.5 and Banque Saudi Fransi, the Saudi lender partly owned by Credit Agricole SA, rose 8.5 per cent to SR44.5.

Rallying Market

"The last day prior to the holidays, the market was showing signs of a pick-up," John Sfakianakis, chief economist at Banque Saudi Fransi, said on Saturday. "During the break there was anticipation it would rally once it opened. The report added to the impetus today (Saturday). Banks rallied on the report of the Saad agreement," he added.

A group of Saudi Arabian and foreign banks agreed to refinance part of the Saad Group's debt, two people familiar with the situation said last week. Saad has been given more time to pay about SR10 billion ($2.7 billion) to a group of mainly local creditors, one person familiar with the accord said.

The deal may lure investors back to bank shares trading at a 67 per cent discount to their five-year average price-to-book ratio and a 48 per cent discount to the average price-to-earnings ratio, Credit Suisse's Hawa wrote.

"The market will continue its upward trend" prior to the announcement of companies' financial results, Sfakianakis said. "The market expects banks to fare better and that the economy seems to be recovering." --

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