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Emirates Islamic Returns to Market with Benchmark US$500m Sukuk Wakala Issuance

Emirates Islamic Bank (EIB), rated A+ (stable) by Fitch Ratings, successfully closed the issuance of its latest Sukuk offering in September 2020 – a benchmark US$500 million 5-year Sukuk Wakala, which matures on 23 September 2025. EIB is 99.9% owned by the Emirates NBD Group and indirectly owned by the Government of Dubai (via ICD, the Investment Corporation of Dubai).

The Sukuk was issued by its wholly-owned Cayman Islands-incorporated special purpose vehicle, EI Sukuk Company Limited, which is also the trustee, under the Bank’s US$2.5 billion Trust Certificate Issuance Programme established in July 2020, with an option to increase the size of the Programme in accordance with the terms of the Programme Agreement. The Obligor to the transaction is EIB.

EIB had mandated Bank ABC, Citigroup, Dubai Islamic Bank, Emirates NBD Capital, HSBC, Standard Chartered Bank and The Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IsDB) Group, to act as Joint Lead Managers and Bookrunners for the transaction, and to arrange a series of virtual calls with investors in the Middle East, Asia, Europe and Offshore US accounts.

The issuance attracted strong investors appetite which resulted in an order book of US$1.2 billion which was roughly 2.4 times the issuance size. The transaction was priced at a fixed profit rate of 1.827% per annum, which according to the bank is the lowest achieved by a UAE bank in the past ten years.

The investor base was diversified geographically, with 41% placed into the Middle East and North Africa, 28% allocated to Asia, 17% to US offshore investors and 14% into Europe. “The success of this transaction, in an especially busy period of GCC fixed income financing, reiterates the Bank’s strong appeal to investors,” said the bank in a statement.

According to Salah Amin, Chief Executive Officer, EIB, “the robust oversubscription to the Sukuk issuance reaffirms strong investor confidence in Emirates Islamic’s fundamentals and growth story. We are pleased with the overwhelming response from both regional and global investors which is a positive endorsement of the Bank’ credit strength and investor proposition.”

The Sukuk certificates are rated A+ by Fitch Ratings and are listed on NASDAQ Dubai and Euronext Dublin.

EIB is a regular issuer of Sukuk having entered the market in 2012 followed by regular multiple issuances issuances in 2014, 2016 and 2018.

It is the third largest Islamic bank in the UAE in terms of assets after Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB). As at end 2019, its total assets amounted to AED65 billion, compared with DIB’s AEF232 billion and ADIB’s AED126 billion. Similarly, total deposits for the period amounted to AED45 billion compared with AED164 billion and AED101 billion for DIB and ADIB, while total financing reached AED37 billion compared with AED151 billion and AED81 billion for DIB and ADIB respectively.

The bank, like others in the industry globally, in H1 2020 has been affected by the economic and health impact of COVID-19. Net profit for the period for instance dropped from AED673 million at H1 2019 to AED12 million for the same period in 2020. The 98% decline, said the Bank, is largely attributable “to prudent actions taken by the Bank to create higher impairment on its financing and investment book to cater to the future impact of COVID-19.”

Similarly, total income dropped 15% from AED1,335 million in FH2019 to AED1,140 million in FH2020. Nevertheless, EIB’s total assets actually increased by 5% from AED61.1 billion to AED64.2 billion for the same period.

Financing and investing receivables increased by 10.3% from AED36.6 billion in H1 2019 to AED40.4 billion in H1 2020, suggesting that despite the pandemic impact, the Bank has showed resilience in maintaining its soundness and position in the UAE banking sector. Customer deposits, not surprisingly, increased by 2.8% from AED43.8 billion to AED45 billion for the same period respectively, while the NPF ratio actually declined from 8.6% to 8.2%.

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