{"id":95612,"date":"2025-03-25T00:00:00","date_gmt":"2025-03-25T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2025\/03\/25\/banks-may-sell-bad-loans-to-finance-gigaprojects-bloomberg\/"},"modified":"2025-03-25T00:00:00","modified_gmt":"2025-03-25T00:00:00","slug":"banks-may-sell-bad-loans-to-finance-gigaprojects-bloomberg","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2025\/03\/25\/banks-may-sell-bad-loans-to-finance-gigaprojects-bloomberg\/","title":{"rendered":"Banks may sell bad loans to finance gigaprojects -Bloomberg"},"content":{"rendered":"

Lenders could begin to sell bad debt to investors:<\/strong> The Kingdom\u2019s banks, led by the Saudi National Bank, are looking to begin selling non-performing loans (NPLs) through a number of securitization agreements, with the first major sale potentially coming as early as this year, Bloomberg<\/a> reports, citing sources it says are familiar with the matter. The move aims to free up room for financing the Kingdom\u2019s gigaprojects.<\/p>\n

IN CONTEXT- <\/strong>The government continues to double down on diversification plans and gigaprojects while staying clear of \u201coverheating\u201d<\/a> the national economy. Officials have also said that they\u2019re willing to accept modest fiscal deficits<\/a> as the price of pursuing long-term diversification. <\/p>\n

How it would work:<\/strong> Banks can package up NPLs into securitized notes and sell them \u2014 often at a discount \u2014 to investors. This allows banks to cut legal costs and balance their portfolios by offloading underperforming assets.<\/p>\n

REMEMBER- <\/strong>Credit rating agency Moody's revised<\/a> its outlook last month for Saudi Arabia's banking sector from positive to stable due to tightening funding conditions. The agency cited reliance on confidence-sensitive capital market funding as one of the main reasons for the downgrade, which is expected to rise as credit demand outpaces deposit growth, pushing the loan-to-deposit ratio further above 100% in the next 12 to 18 months. <\/p>\n

\u201cBanks in the region are very keen to release capital from exposures that have turned <\/strong>sour<\/strong>, and sophisticated investors are looking to pick up those,\u201d A&O Shearman\u2019s Haris Meyer Hanif told Bloomberg. While the Kingdom has yet to see a major NPL portfolio agreement being traded, Hanif \u2014 whose firm helps structure such transactions \u2014 expects the market to begin to \u201csee it very soon.\u201d<\/p>\n

Easier said than done:<\/strong> NPL sales were not prevalent in the Kingdom due to Saudi banks having low non-performing loan rations, as well as unfavorable debt market regulations, according to Bloomberg. While financing needs might fuel the trend, a number of hurdles could prevent the NPL market from picking up, such as failing to price transactions fairly due to a lack of comparable data. <\/p>\n

The UAE has recently been taking similar measures:<\/strong> First Abu Dhabi Bank (FAB) was set to sell<\/a> soured loans worth USD 800 mn to Deutsche Bank in Januaryas the German lender outbid other international entities including US hedge funds. <\/p>\n

\u201cWe anticipate further NPL sales from banks in the UAE, and we also find the growing <\/strong>opportunity set in [Saudi] exciting,\u201d<\/strong> said Naveen Sabharwal, a managing director at Davidson Kempner which acquired<\/a> some USD 1.1 bn of bad debt from Abu Dhabi Commercial Bank in 2023. \u201cWe would expect to see the first [Saudi] NPL sale in 2025,\u201d Sabharwal added.<\/p>\n","protected":false},"excerpt":{"rendered":"

The first major sale could potentially come as early as this year<\/p>\n","protected":false},"author":1,"featured_media":95613,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2617],"tags":[19,2441,10,1115],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-95612","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-banking","tag-debt","tag-enterpriseam-ksa","tag-saudi-national-bank-snb","wpautop","entry"],"acf":{"mongo_id":"1ddfb0af-1995-40f9-abe2-b144f4a81fc5","order":"8","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/11\/180.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Banks may sell bad loans to finance gigaprojects -Bloomberg","related_issue":[95598],"teaser":"The first major sale could potentially come as early as this year","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2025\/3\/.64be374c-354d-421d-a039-937fbb3deb3f.mp3"},"yoast_head":"\nBanks may sell bad loans to finance gigaprojects -Bloomberg - 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