Saudi Banks Fall as Investors Fret Over Prospect of Higher Tax
(Bloomberg) -- Saudi Arabian banks dropped on concern that the government may double the current rate they pay under an Islamic tax.
The Tadawul Banks Index fell 1.1 percent as of 10:54 a.m. in Riyadh, as all but one of its 12 members declined. The gauge was set to end at the lowest level since Jan. 20. Al Rajhi Bank’s 1.7 percent drop was that biggest drag on the kingdom’s main stock gauge. National Commercial Bank and Riyad Bank lost at least 1.5 percent.
The Saudi tax authority is talking to lenders about raising the religious levy, known as Zakat, potentially bringing it in line with the 20 percent rate paid by foreign banks, people familiar with the matter said, asking not to be identified because the discussions are private. The talks are continuing and the final rate could be lower, they said.
While the drop on Thursday trimmed the banking index’s one-year advance to 35 percent, that’s still more than twice the gain in the Tadawul All Share Index. Saudi lenders have been rising as investors prepare for the stocks’ inclusion in FTSE Russell and MSCI Inc. emerging-market gauges. Saudi stocks will be added to FTSE’s index in stages starting this month.
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