RIYADH: Saudi Arabia's biggest bank has responded to criticism of its operations from Islamic scholars by pledging to convert itself into a full-fledged Islamic bank within about five years.

The decision, made as the bank launches a $6 billion initial public offer of its shares, the largest-ever equity sale in the Arab world, shows how Saudi Arabia's conservative brand of Islam can have a big impact on business decisions in the kingdom.

State-owned National Commercial Bank (NCB), which has about $116 billion of assets, currently has a mixed business — most of it conforms to Islamic principles such as bans on interest payments and pure monetary speculation, but some of it involves conventional banking. Some other banks in Saudi Arabia are also mixed.

Last week some members of Saudi Arabia's highest religious body, the Council of Senior Scholars, said investing in NCB's share offer was not permissible because too much of its business was non-Islamic.

“Religion comes above every thing,” Sheikh Abdullah al-Mutlaq, one of the members, told state television.

Although securities analysts said the scholars' criticism was unlikely to derail the IPO, which promises big profits to Saudi individual investors, NCB held a meeting last Thursday of its own sharia board of Islamic scholars plus its chief executive, chairman and other officials.

The sharia board reviewed a plan by NCB to convert itself into a full-fledged Islamic bank within a period “that is expected not to exceed five years”, the board said in a statement.

It determined that the bank had a “sincere will” to become fully Islamic, adding that some fatwas or religious rulings in the past had found it permissible to buy shares in a conventional bank that would become Islamic.

As of June, two-thirds of the bank's assets were Islamic in nature while the remaining third were conventional; 78 percent of all of NCB's financing deals were sharia-compliant, as were 92 percent of its liabilities and 73 percent of its income, the sharia board said.

Conversions of conventional banks into Islamic ones are rare but not unprecedented; there have been examples among lenders in Bahrain and Pakistan, although NCB would be unique because of its size and complexity. NCB would be expected to convert various subsidiaries such as brokerage and fund management units.

NCB's 435.5 billion riyals of assets as of June exceed the 295.2 billion riyals held by Saudi Arabia's Al Rajhi Banking and Investment Corp, currently the world's biggest full-fledged Islamic bank.

Subscriptions for NCB's IPO, the first by a bank in the kingdom since 2008, opened on Sunday and will run until Nov. 2. Analysts believe the shares are cheaply valued — IPOs in Saudi Arabia are often priced low as a way for the kingdom to share corporate wealth with its citizens — and that the offer will draw heavy demand.

Clerics' opinions in Saudi Arabia have affected a wide range of Saudi business practices, including the growth of health insurance and the use of residential mortgages; women are not permitted to drive, a significant cost for some families and businesses.