Riyad Capital, the investment banking arm of Riyad Bank aims to grow by at least 20 per cent in 2010, boosted by Saudi bourse growth, but more defaults at family-owned firms risk undermining optimism, the unit's chief executive said.

'We still believe if the market achieves its potential, which is for 2010 in the range of 20 per cent above from where it is now, we should benefit a great deal,' Ali Al-Gwaiz said.

'We would not be happy if our growth is below that of the stock market,' Gwaiz told Reuters in an interview on Sunday.

Set up in 2008 and part of Saudi Arabia's second-largest bank by market value, Riyad Capital is one of the main players in the local asset management and brokerage sector.

Saudi's main index advanced about 27 percent in 2009, outperforming other markets in the Gulf and benefitting from rising oil prices and strong economic prospects.

The kingdom, the largest Arab economy and the world's top oil exporter, is expected to grow by 3.8 per cent this year, up from an anaemic 0.2 per cent in 2009 as state spending remains high and private consumption picks up, according to a Reuters survey in January.

The kingdom's business image has been tarnished following debt troubles at two family-owned conglomerates, which raised questions about transparency, possibly deterring foreign investors from investing in Saudi Arabia.

Riyad Capital's chief executive warns that more difficulties at family-owned businesses could surface, possibly leading to fresh writedowns for local banks hitting investor confidence.

'With the decline of the stock markets throughout the world, many business families, especially those who rely on leverage, found themselves in a difficult situation,' Gwaiz said.

'Some of them might have been able to manage their situation or to prolong, but the question is for how long they can do this?  If that happens it will definitely have an impact on the stock markets and maybe our dreams will not come true.'

Banks both in Saudi Arabia and across the Gulf region have seen provisions rise due to an increase in corporate and retail defaults. The debt trouble at state-controlled Dubai World threatens to add to the woes.

Riyad Capital also expects an uptick in initial public offerings (IPOs) in Saudi Arabia and already has several mandates to advise companies which are preparing an IPO.

It recently advised and underwrote National Petrochemicals Company on its IPO. The Saudi bank was the region's most active in equity issuance, according to the Thomson Reuters' investment banking league tables for the Middle East in 2009.

'There are many companies that are in the queue now and being evaluated ... I expect something of not more than 15 (companies seeking an IPO in 2010),' he said.-Reuters