DUBAI, Feb 12 (Reuters) - Saudi Hollandi Bank has proposed increasing its capital by 20 percent through a bonus share issue for funding business activities and growth, the lender said in a statement.
It plans to increase its capital to 5.72 billion riyals ($1.52 billion) from 4.76 billion riyals by issuing one bonus share for every five held, paid for by capitalising 952 million riyals of retained earnings, a bourse statement said late on Wednesday.
The move will be voted on by shareholders at a meeting on Mar. 17, the statement added.
No money is being raised from shareholders, who are getting the new shares for free, but the move is an accounting device which in effect boosts the bank’s equity and therefore supports future lending.
A number of other Saudi banks have said they will conduct similar bonus share offerings, including Samba Financial Group and Saudi British Bank.
Profitability at banks in the kingdom has been supported in recent years by strong loan growth, although this has contributed to lenders needing to top up their capital reserves -- some through the issuance of capital-boosting sukuk and others by bonus share issues.
Saudi Hollandi in December proposed a cash dividend of 1 riyal per share for 2014 and posted a 33 percent rise in fourth-quarter net profit last month. ($1 = 3.7512 riyals) (Reporting by Nadia Saleem; Editing by David French)