Dubai Islamic Bank (DIB), the largest Islamic bank in the UAE in terms of assets and a prolific issuer of Sukuk, successfully priced its latest benchmark US$500 million Perpetual Non-Call 5.5yrs Additional Tier 1 Sukuk on 14 April 2021. The Sukuk, which was rated ‘A3’ by Moody’s Investors Service and ‘A’ by Fitch Ratings, was issued by DIB Tier 1 Sukuk (5) Ltd under its US$7.5 billion Trust Certificate Issuance Programme, on behalf of the Obligor, DIB, and priced at a profit rate of 3.375% per annum. Both are listed on Euronext Dublin and NASDAQ Dubai. “This transaction,” stressed DIB, “represents the lowest ever pricing achieved by a GCC bank (both conventional and Islamic) on an Additional Tier 1 instrument and the lowest ever on a US dollar AT1 Sukuk globally. “Despite the volatility witnessed in credit markets during the past month on account of US Treasury rates, achieving this landmark success in the current scenario is testament to the bank’s strong credit profile and standing with international and regional investors.”
DIB had mandated Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Standard Chartered Bank and its own investment banking division to act as Joint Lead Managers and Bookrunners on this transaction and to arrange a series of virtual investor meetings with accounts in the GCC, UK, Asia, Europe and US Offshore Accounts.
The deal was priced intraday after completing investor calls, which were attended by several local, regional and international investors. Despite the record low yield, the Sukuk was 5.6 times oversubscribed with an orderbook that peaked at US$2.8 billion which, says DIB “is a further testament to investors reaffirming their commitment to UAE and DIB in particular.”
Dr. Adnan Chilwan, Group Chief Executive Officer, DIB, stressed that “given that markets had been fairly volatile during the last several weeks on account of underlying US Treasury rates rising rapidly, successfully executing this issuance at the lowest-ever pricing on a US dollar AT1 instrument is an achievement we are all proud of. We are grateful to the investor community for their overwhelming response which is a clear testament to the confidence global markets place in the bank’s robust fundamentals, as well as investor comfort in the broader Dubai and UAE economy.”
The Sukuk certificates were listed on Nasdaq Dubai on 19 April 2021 and on the Euronext Dublin. According to Nasdaq Dubai, DIB is the leading UAE-based Sukuk issuer by value on the Bourse with a total value of US$6.3 billion including this latest US$500 million listing.
This latest listing, says Nasdaq Dubai “reinforces Dubai’s position as one of the largest centres for Sukuk listings globally, attracting both local and international issuers, with a total listed value now standing at US$74.66 billion.”
DIB is a prolific Sukuk issuer. Its previous global issuance was in June 2020 when it raised US$1.3 billion through two transactions – a benchmark 5-year US$1 billion Sukuk priced at a profit rate of 2.95% per annum which is equivalent to 245 bps points over the equivalent tenor Mid Swap (MS) rate, and a subsequent US$300 million tap issuance.
Prior to these two Sukuk, DIB last issued a benchmark 5-Year US$750 million Sukuk in November 2019, and a US$750 million Additional Tier 1 (AT1) Perpetual Non-Call Sukuk in January 2019. The November 2019 Sukuk offering was priced at a profit rate of 2.95% per annum, which is equivalent to 140 basis points (bps) over the 5-year Mid Swap (MS) Rate), while the January 2019 Perpetual issuance at a profit rate of 6.25% per annum, which is equivalent to 366.4 bps over the implied 6-year US Treasury yield.
The proceeds from the Sukuk issuances according to the Bank is earmarked to support its customers and the business community as economies start to overcome challenging market conditions due to the coronavirus pandemic.
DIB, which recently completed its integration with Noor Bank following their merger, reported encouraging Q1/21 results despite the continuing difficult international economic circumstances due to the ongoing impact COVID-19 pandemic and the slow recovery towards pre-pandemic market conditions.
Group CEO, Dr. Adnan Chilwan stressed that “the signature strength of the balance sheet with 6% year on year expansion demonstrates the bank’s resilience in challenging conditions as well as the effective execution of its strategy to capture organic growth opportunities during economic uncertainties.”
Total income reached AED2.8 billion; profit before impairments rose to AED1,614 million compared to AED1,592 million for Q1/20; and DIB Group net profit of AED853 million whilst lower YoY, excludes the one-off gain in Q1/20 of AED 1 billion.
But as Dr Chilwan maintained, “as significant headwinds remain in the current environment, we continue to approach the year with extreme prudence, with focus on low risk sectors and those showing consistent signs of recovery as the market improves. The bank has continued to build provisions during Q1/21 amounting to nearly twice the value for the same period last year on a normalized basis. But, business momentum remains positive with profit before impairments increasing by 1%. As a result, we have achieved a substantial QoQ net profit increase when compared to Q4 2020, and a modest QoQ net profit decrease when compared to same period last year despite the one-off gain in Q1 2020.”