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First Saudi bank merger in years may boost RBS exit from the Kingdom

A combination of Saudi British Bank and Alawwal Bank is likely to help Royal Bank of Scotland Group PLC's sell its stake in Alawwal Bank.

RBS, which has an effective 40% of Alawwal Bank, will have a stake of about 5% in the combined entity, potentially making it easier for the British banking group to find a buyer, sources told Reuters. The deal will allow, RBS, which is still majority owned by the British government, to free up capital it holds against the Alawwal stake and it further paves the way for RBS's privatization.

The deal also highlights the stake in Saudi Arabia held by another large, U.K.-based bank, HSBC Holdings PLC which holds a 40% of Saudi British Bank.

SABB will acquire Alawwal in a stock transaction that values the latter at about 18.6 billion Saudi Arabian riyals and will lead to a combined company with assets of 271.43 billion riyals as of March 31, according to S&P Global Market Intelligence calculations.

It is the first merger of two Saudi banks since the creation of Samba Financial Group, which resulted from the union of Saudi American Bank with United Saudi Bank in 1999. Samba had assets of 227.61 billion riyals as of 2017-end.

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