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First Abu Dhabi Bank Closes its Latest US$500m Sukuk at the Tightest Spread Ever Achieved by the Bank or any Other MENA Bank on a Public Fixed Rate Bond or Sukuk

First Abu Dhabi Bank (FAB), the UAE’s largest bank in terms of assets, issued its first public debt transaction in 2022 with a benchmark US$500 million fixed rate Sukuk issuance on 1 March 2022.

The Sukuk, which has a tenor of 5 years and matures on 2 March 2027, was issued by FAB Sukuk Company Limited, a special purpose vehicle acting as the Trustee on behalf of the Bank/Obligor, First Abu Dhabi Bank. The Sukuk was issued under FAB Sukuk Company Limited’s US$5 billion Trust Certificate Issuance Programme, which was arranged by First Abu Dhabi Bank, Citigroup, Standard Chartered Bank, Dubai Islamic Bank and HSBC in 2021. It is the fifth in the Series of FAB Sukuk issuances.

The Sukuk transaction was arranged by First Abu Dhabi Bank and Standard Chartered Bank, which together with Citigroup Global Markets, Dubai Islamic Bank, and HSBC Bank also acted as dealers to the transaction. The Sukuk certificates have been admitted to the Main Market of the London Stock Exchange for trading.

The underlying asset pool for the transaction comprises 55% tangible assets and 45% intangible assets. The Sukuk was swiftly executed intraday to mitigate market risk. The orderbook opened in the morning and was anchored largely by Islamic bank investors. Additional demand came from conventional fund managers, multilateral agencies and insurance companies. The final orderbook closed at US$1.4 billion, representing an oversubscription rate of approximately 2.8 times.

The Sukuk format of the transaction, says FAB, allowed the bank to capture abundant Islamic investor liquidity, resulting in 93% of the issuance being allocated to Islamic accounts, which is more than the average seen on other similar transactions. The orderbook also comprised high-quality investors from outside the region with 36% of the issuance being allocated internationally.

FAB, rated Aa3 by Moody’s, AA- by Standard & Poor’s and AA- by Fitch (all with stable outlook), eventually priced the transaction at 70 basis points over the U.S. Treasury Rate, which is equivalent to a fixed profit rate of 2.591% per annum payable semi-annually in arrears.

Rula Al Qadi, Head of Group Funding at FAB, emphasised that “the success of the transaction demonstrates FAB’s loyal investor following. Market conditions have been volatile in recent times, with multiple global events impacting credit markets. Despite this backdrop, FAB priced a US$500 million Sukuk at 70bps over the U.S. Treasury Rate, which is the tightest spread ever achieved by FAB or any other MENA bank on a public fixed rate bond or Sukuk issuance.”

Earlier this year, FAB reported a net profit of AED12.5 billion for FY2021, compared to AED10.6 billion in 2020, marking a 19% increase year-on-year. This performance, stressed the bank, reflects positive underlying trends across core businesses in a year of economic rebound and expansion. Total assets exceeded AED1 trillion, up 9% year-on-year; customer deposits reached AED614 billion, up 14% year-on-year; and loans, advances and Islamic financing totalled AED410 billion, up 6% year-on-year.

Operating expenses increased, however, reflecting ongoing investments in digital and strategic initiatives, and the acquisition of Bank Audi Egypt.

Meanwhile in March 2022 FAB became the first UAE and GCC bank to join the Partnership for Carbon Accounting Financials (PCAF), furthering the bank’s strategy to achieve net-zero greenhouse gas emissions by 2050. PCAF helps financial institutions aiming to reduce their GHG emissions, by providing a clear methodology for measuring and disclosing the greenhouse gas emissions generated by financial products such as loans and investments. This includes the emissions of portfolio companies or individual investment assets, covering collateral, real estate loans, power generation project financing, and company equity or debt. By joining PCAF, FAB is committing to measuring and disclosing the greenhouse gas emissions of its portfolio companies within three years, while learning and sharing reliable carbon accounting methods and experience.

Shargiil Bashir, Chief Sustainability Officer at FAB, reiterated that the Bank “has made a clear commitment to achieving net-zero greenhouse gas emissions by 2050, which will require decarbonising not just our own operations but also our portfolio, taking into account the emissions of our customers and clients. The standards provided by PCAF are an important tool for achieving our objectives, giving us clear benchmarks to measure and disclose our emissions. The accountability this provides will support our work with clients to bring about positive change.”

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