Dubai Islamic Bank (DIB), the oldest commercial Islamic bank in the world and a prolific repeat issuer of Sukuk, successfully issued its second Sukuk in the international market in 2019 – a benchmark 5-Year US$750 million Sukuk.
This follows DIB’s benchmark Sukuk in January 2019 – the first issuer to do so in the new year – of a similar size, a US$750 million Additional Tier 1 (AT1) Perpetual Non-Call Sukuk. The bank, which is in merger talks with Noor Bank and is rated A3 by Moody’s and A by Fitch (both stable), successfully priced the latest Sukuk offering at a profit rate of 2.95% per annum, equivalent to 140 bps over the 5-year Mid Swap Rate.
This compared with the pricing of the January 2019 issuance at a profit rate of 6.25% per annum, equivalent to 366.4 bps over the implied 6-year US Treasury yield.
In a statement, DIB stressed that the November Sukuk’s profit rate of 2.95% “is the tightest achieved by an FI Sukuk in 2019.” DIB had earlier mandated Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Maybank, Sharjah Islamic Bank, Standard Chartered Bank and Warba Bank to act as Joint Lead Managers and Bookrunners on the transaction.
The Islamic Corporation for the Development of the Private Sector (ICD), the private sector fund of the Islamic Development Bank Group, acted as a Joint Lead Manager, whilst Kuwait International Bank acted as a Co-manager.
The deal was priced intraday after completing a global roadshow in Hong Kong and London, as well as several investor calls. “The meetings,” said DIB, “were used to demonstrate management’s ability to deliver on its strategy and showcase the strong credit fundamentals of the bank. The roadshow resulted in significant demand from Middle Eastern, Asian and European investors, with an orderbook that closed in excess of US$2 billion, representing an oversubscription rate of 2.7 times.”
According to Dr. Adnan Chilwan, Group Chief Executive Officer of DIB, “the success of DIB’s Sukuk is a testament to the confidence investors place in the bank’s robust fundamentals, as well as their comfort in the broader Dubai and UAE story. We are extremely pleased with the outcome of this transaction and remain committed to our local and global investors who continue to support our diversified funding strategy”.
The Sukuk was issued as a drawdown under DIB’s USD 7.5 billion Trust Certificate Issuance Programme which is listed on Euronext Dublin and NASDAQ Dubai. The certificates of the latest Sukuk are in the process of being listed on Euronext Dublin and NASDAQ Dubai. Nasdaq Dubai is one of the leading exchanges on which Sukuk are listed with the Sukuk value (including this latest US$750 million DIB offering) totalling US$65.05 billion.
The bank recently reported strong financials for the first nine months of 2019, with Group net profit increasing to AED4,015 million, up 8% YoY compared to AED3,701 million for the same period in 2018. Similarly, net financing and Sukuk investments rose to AED185.7 billion, up by 6% YTD; and total assets stood at AED229.9 billion, up by 3% YTD. Customer deposits also increased, to AED162.9 billion, up by 5% YTD.
This on the back of both Moody’s and Fitch re-affirming the bank’s credit ratings with a ‘stable’ outlook in September 2019, which according to Group CEO Dr Chilwan “signifies the strength of the franchise to navigate through the current global economic environment and sustain profitable growth.”
Abdulla Al Hamli, DIB Managing Director, is bullish about the Islamic finance sector in the UAE going forward: “The Islamic banking sector in the UAE continues to remain robust with assets crossing AED560 billion and a healthy 23% domestic market share.”