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Kuwait’s Warba Bank Returns to the International Financial Market with Third Sukuk Issuance – a US$250m Tier I Capital Offering in November 2021

Kuwaiti Islamic bank, Warba Bank, successfully closed its latest Sukuk offering – a US$250 million Perpetual Tier-1 Capital Mudaraba Sukuk – in November 2021. The certificates were issued by Warba Tier 1 Sukuk (2) Limited incorporated in the Cayman Islands on behalf of the Obligor, Warba Bank. The Certificates are not rated.

The Certificates are perpetual securities and accordingly do not have a fixed or final redemption date. The Certificates may be redeemed in whole but not in part. The Bank, which is 34% owned by the government of Kuwait, had earlier in the month received approval from the Central Bank of Kuwait “for the issuing of additional Tier I Sukuk not exceeding US$250 million or equivalent other currencies.”

According to the transaction prospectus filed with Euronext Dublin (Irish Stock Exchange), the Bank has appointed Standard Chartered Bank to act as the Global Coordinator to the transaction and together with Emirates NBD Capital, HSBC, Abu Dhabi Islamic Bank, Bank ABC, Dubai Islamic Bank, Kamco Invest, Warba 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, as Lead Managers.

They were mandated to arrange fixed income investor meetings in Asia, UAE and London ahead of a potential sale of five-year U.S. dollar denominated Sukuk. The transaction was well received by the market and over-subscribed 4.4 times with the order book exceeding US$1.2 billion. The transaction was eventually priced at a profit rate of 4.0% per annum, to be paid semi-annually.

The proceeds from the issuance will be used by the Bank to support its Tier 1 Capital for the purpose of maintaining its capital adequacy and for its general corporate purposes.

The Sukuk was listed on the Euronext Dublin (Irish Stock Exchange) on 24 November 2021 and also on Nasdaq Dubai on 28 December 2021. According to Shaheen H. Al-Ghanem, CEO of Warba Bank, “our latest Sukuk issuance witnessed significant success in attracting regional and international investors and is a clear testament on their confidence in Warba Bank’s expansion strategy in various business activities such as investment, treasury, corporate and retail banking.”

This is the third Sukuk listing by Warba Bank on Nasdaq Dubai, following the listing of a US$250 million Sukuk and a US$500 million Sukuk in March 2017 and October 2019.

This new listing brings the total outstanding value of Warba Bank’s Sukuk on the Nasdaq Dubai to US$898 million and the total value of Sukuk listed on the bourse to US$79.4 billion.

Hamed Ali, CEO of Nasdaq Dubai and Dubai Financial Market (DFM), stressed that the listing of the Warba Bank Sukuk is “part of its active role to support leading issuers from the UAE and beyond. The constant listings from leading regional and international financial institutions, such as Warba Bank, underscore their confidence in Nasdaq Dubai’s regulatory framework and its support infrastructure. We are committed to further expanding our services in line with the requirements of issuers and investors as well as to drive Dubai’s leading status as one of the largest global Sukuk listing centres to new heights.”

The Bank reported net profits of KD9.2 million as at 30 September 2021 compared with a loss of KD11.431 million in the same period in 2020. Its total assets for the same period similarly increased to KD3.6 billion from KD3.48 billion; customer deposits increased to KD2.43 billion from KD2.35 billion; and customer financing receivables marginally decreasing to KD2.46 billion from KD2.49 billion.

The Bank’s non-performing financing amounted to KD28.5 million as at 30 September 2021 compared to KD27.1 million as at 31 December 2020. The Bank also increased its general provisions by KD8.6 million in the year ended 31 December 2020 to reflect the continuing uncertainty surrounding COVID-19, and during the nine-month period ended 30 September 2021 the Bank increased its general provisions by KD14.8 million.

Warba Bank has been assigned long term ratings of “A+” with a Negative outlook by Fitch Ratings and “Baa2” with a stable outlook by Moody’s Investor Services.

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