UPDATE 1-Saudi's National Commercial Bank to raise $6 bln in IPO

(Adds analyst comment, context)

DUBAI, Oct 2 (Reuters) - Saudi Arabia's National Commercial Bank IPO-NACO.SE plans to raise 22.5 billion riyals ($6 billion) in a flotation this month, it said in a statement, the biggest ever share sale in the Middle East.

The sale by the kingdom’s biggest lender by assets will see 300 million shares offered to Saudi individual investors and 200 million shares to the state-run Public Pension Agency at a price of 45 riyals per share, the bourse filing said.

Subscription for the initial public offering, the first by a bank in the kingdom since 2008, will be open between Oct. 19 and Nov. 2.

“It comes at an historic moment as the Saudi market will be opened next year and this IPO signifies the size and depth of the Saudi market will be positively encouraged,” said John Sfakianakis, regional director for the Gulf at fund manager Ashmore Group.

“This is significant for the banking sector, the economy and the country and will benefit local and international investors.”

Currently majority-owned by the state Public Investment Fund, NCB is the only unlisted lender among Saudi Arabia’s 12 banks. It held assets worth about $101 billion at the end of 2013 and made net profits of $2.1 billion last year.

At the offer price, NCB to be the third largest stock on the Saudi exchange, and the second-biggest bank, by market value. Al Rajhi is the current largest listed bank, with a market capitalisation of $30.8 billion.

However, the 45 riyals per share value is considered cheap by analysts, who note that shares in state-run companies are often sold to the public at reduced rates as a way of spreading the kingdom’s vast oil wealth.

“It will be two times the book value,” said Chiradeep Ghosh, senior analyst at Securities & Investment Company in Bahrain. “It is quite cheap compared to other Saudi Arabian banks. They’re issuing at a discount to appeal to the retail investor base.”

The launch has been eagerly anticipated by investors since Finance Minister Ibrahim Alassaf announced plans in February to float NCB.

It also takes on added significance because of its timing, ahead of plans by the Capital Market Authority to open the Tadawul to direct investment by foreign financial institutions in the first half of next year. Banks are expected to be among the biggest beneficiaries of the move as higher brokerage volumes lifts fees and earnings.

Despite being more liquid and diverse than markets in neighbouring Gulf states such as Dubai, foreign investors can only buy stocks using swaps or exchange traded funds.

Foreign investors will be able to buy NCB’s shares once the IPO is completed.

MSCI said in July it will consult with investors about adding Saudi Arabia to one of its indexes after reviewing changes to foreign ownership rules.

Analysts say the only uncertainty is whether the 15 percent size of NCB’s free-float would be large enough to warrant inclusion on the MSCI index. (1 US dollar = 3.7513 Saudi riyal) (Reporting by Tom Arnold and Olzhas Auyezov; Editing by Rania El Gamal/Keith Weir)