Alinma Bank will give clients credit cards upon opening an account, Saudi Arabia's newest lender said, firing a warning shot to credit-averse rivals ahead of the launch of its operations this year.

Alinma's announcement, made in an emailed statement, comes at a time when Saudi banks have reached limits on their credit capacity.

The loan-to-deposit ratio of several banks exceeded at the end of last year the 80 per cent limit imposed by the central bank following a surge in lending over the past five years that was fuelled by record oil prices.
 
Concern over the global financial crisis has further slowed down credit growth as lenders became increasingly cautious.

Between 2003 and 2008 the number of issued credit cards rose 104 percent to 12.3 million, Saudi central bank data shows.

Saudi banks usually require new account holders to have some credit history before issuing them with credit cards.

Alinma has appointed Visa, the world's largest payment network, to issue the cards.

The new bank hopes the credit card offer will win it quick market share in a highly-lucrative sector that is witnessing more and more competition, said John Sfakianakis, chief economist at HSBC's Saudi affiliate, the SABB bank.

'Saudi is a very competitive market for retail. There is growth potential since credit card penetration here is at 51 per cent of the population compared to some 60 per cent in the United States,' he said.

Alinma will be competing with 11 Saudi banks and several foreign banks that include National Bank of Kuwait and France's BNP Paribas.

The bank will start operations in the third quarter with 15 branches and plans to add another 20 before 2011, a source at the bank said.

But the bank will not take on more risk than other Saudi lenders. 'We will apply the criteria and abide by regulations,' it said.

The formation of the sharia-compliant lender was ordered by King Abdullah in 2006 at the height of a stock market crash that has destroyed the savings of hundreds of thousands of ordinary Saudis.

Three funds owned by the government of the world's largest oil exporter hold in equal shares 30 per cent of Alinma's 15 billion riyal ($4 billion) capital. The remainder is held by the public. The bank raised 10.5 billion riyals in an IPO last year.-Reuters