Robust Investor Demand for Masraf Al Rayan’s Benchmark US$750m Sukuk Issuance

Masraf Al Rayan, the second largest Islamic bank in Qatar in terms of assets, successfully closed its latest Sukuk issuance in August 2020 – a benchmark fixed rate Regulation S 5-year Senior Unsecured US$750 million Sukuk offering under. The Sukuk was issued under Masraf Al Rayan’s US$2 billion Trust Certificate Issuance Programme.

The Bank, rated A1 by Moody’s with a stable outlook, mandated Al Rayan Investment, Crédit Agricole CIB, HSBC, Mizuho, MUFG, QNB Capital, Société Générale and Standard Chartered Bank as Joint Lead Managers and Bookrunners to arrange a series of fixed income investor meetings by Conference Calls in Hong Kong, Singapore and London, commencing on 24 August 2020.

According to Masraf Al Rayan, the Sukuk was 4.4 times oversubscribed with the order book reaching US$3.3 billion. The overwhelming demand from investors allowed the Bank to increase the issue size from an initial US$500 million to US$750 million. The issuance was priced at a spread of 185 basis points over the 5-year mid swap (MS) carrying a fixed profit rate of 2.21% per annum.

The transaction, stressed Masraf Al Rayan, attracted investors from across the globe with 41% from Europe, 28% from Asia, 24% from MENA and 7% from US offshore accounts. By investor type, 69% were allocated to fund managers, 15% to banks and private banks, 8% to agencies and 8% to insurance and pension funds. The Sukuk will be listed on Euronext Dublin.

Masraf Al Rayan is one of the best performing banks in Qatar. Its return on average assets continues to be one of the highest in the market at 2.01% for FH 2020.  Its capital adequacy ratio, using Basel-III standards, reached 19.70% compared to 19.45% as of 30 June 2019 and its operational efficiency ratio (cost to income ratio) stood at 22.65%, again one of the best in the region. It also has the lowest non-performing financing (NPF) ratio of 0.94% in the banking sector in Qatar “reflecting very strong and prudent credit and risk management policies and procedures.”

According to Ali Bin Ahmad Al Kuwari, Chairman and Managing Director, Masraf Al Rayan, the success of the issuance was based on a comprehensive marketing strategy that aimed to demonstrate the strong fundamentals of Masraf Al Rayan and the strength of the Qatari economy to the international investors.

“The year 2020,” he explained, “is considered an extraordinary year. It has witnessed several crises from early on at the economic and health levels: low oil prices has impacted the global markets, then came the COVID-19 pandemic and the resulting quarantine that placed huge restrains on individuals and economic activities and blocking movement among countries, and low consumer spending, which affected many productive and non-productive economic activities and had negatively impacted the financial and business markets.

“In spite of these extraordinary circumstances, Masraf Al Rayan maintained its steady performance during the first half of this year, achieving notable results, under the prudent decisions made by the government of the State of Qatar to mitigate the damage incurred within the private sector caused by the COVID-19 pandemic, the most important of which is the allocation of QAR75 billion to support those who were affected.”

Masraf Al Rayan commenced talks on a possible merger with Al Khaliji Commercial Bank in June 2020 “to establish a larger and stronger financial institution.” The proposed merger is subject to the approval of the Qatar Central Bank, the Qatar Financial Markets Authority, the Ministry of Commerce and Industry, other relevant bodies and the shareholders of Al Rayan and Al Khaliji, as well as the completion of a detailed legal and financial due diligence.

The potential merger will lead to the creation of one of the largest Sharia’a compliant banks in Qatar and the Middle East with total assets exceeding QR164 billion (US$45 billion) and a shareholders’ equity of more than QR19 billion (US$ 5.2 billion). The merger, said the two banks, is also expected to contribute positively to the economic development of the emirate by supporting corporate businesses and small and medium sized entities, and would also create a strategic partner for the public sector.

Masraf Al Rayan recently announced a net profit of QAR1,084 million for the period ending 30 June 2020, an increase of 0.5% compared to the same period last year. Total assets reached QAR109,339 million compared to QAR102,543 million as of 30 June 2019, an increase of 6.6%.

Similarly, customer deposits increased to QAR67,417 million compared to QAR 64,412 million as of 30 June 2019, an increase of 4.7%; while financing activities reached QAR78,104 million compared to QAR74,800 million, an increase of 4.4%. 

Share this post