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QIIB Second Sukuk in 2019 Nine Times Oversubscribed at Lowest Pricing for an AT1 Issuance from the GCC on the Back of Strong Qatari Economic and Banking Sector Fundamentals

Qatar International Islamic Bank (QIIB), one of the oldest Islamic banks in the emirate, successfully closed the issuance of its second Sukuk offering in the international market in 2019 – a US$300 million Additional Tier 1 Capital (ATI) Sukuk in November 2019.

This is the first time that a Qatari bank has issued an AT1 Sukuk to boost its capital.

QIIB returned to the international Sukuk market in February 2019 with a benchmark US$500 million Sukuk issuance after an absence of seven years.  That transaction, as with the latest US$300 million issuance, was issued under the QIIB’s US$2 billion Trust Certificates Programme.

QIIB had mandated QNB Capital, Barwa Bank, Kuwait International Bank, QInvest and Standard Chartered Bank to structure the transaction and arrange a series of roadshows in East Asia and the United Kingdom, during which the bank team held a series of meetings with investors.

“The new Sukuk will help the bank to strengthen its financial position and implement its future strategic plans. It will also help us strengthen our presence in the global financial markets and deepen ties with investors and institutions from around the world,” explained QIIB Chief Executive Officer Dr Abdulbasit Ahmad al-Shaibei.

The transaction was priced at fixed rate of 4.875% per annum, which according to QIIB is the lowest pricing ever for an AT1 Sukuk issuance from the GCC. This equated to a spread of 175 basis points over the 5-year mid swaps.

There was strong demand for the Sukuk certificates from a variety of investors, with the issuance nine times oversubscribed with the order book exceeding US$2.6 billion. The February 2019 issuance similarly was oversubscribed six times.

According to CEO Dr Abdulbasit al-Shaibei, the demand for the Sukuk exceeded expectations from investors, and included more than 122 institutions from more than 22 countries, reflecting confidence in the bank in particular, and the Qatari economy in general.

“We are proud to develop the capital markets in Qatar to align it with the international markets. The bank enjoys a solid reputation for its strong financial position and a high rating by leading international credit rating agencies [Longer-Term IDR Rating of A by Fitch Ratings and an Issuer Rating of A2 by Moody’s Investor Service – both with a Stable Outlook]. This reflects the confidence of investors in the Qatari economy and the QIIB financial performance. This is the second time this year that QIIB has been very successful in issuing a Sukuk and obtaining highly competitive pricing,” he added.

Despite regional tensions and world oil and gas price dynamics, the Qatari economy and its banking sector including the Islamic finance segment has held its own.

Dr. Khalid Bin Thani Bin Abdullah Al Thani, Chairman and Managing Director of QIIB, not surprisingly attributed the demand for and competitive pricing of the latest QIIB Sukuk issuance “primarily to the strength of the Qatari economy, which enjoys great confidence on a global scale and to the excellent management of Qatar Central Bank in supervising the banking sector. The popularity of QIIB Sukuk among investors from around the world provided assurances and indications that the fallout of the blockade was behind us and that we were able to earn great global confidence.”

The US$300 million QIIB Sukuk was listed on 17 November on the London Stock Exchange. During the bell ringing ceremony marking the listing of QIIB Sukuk on the London Stock Exchange, Dr. Khalid bin Thani reminded: “We are delighted to be here for the second time in less than a year to list the bank’s Sukuk. The success we achieved last time and are achieving now is due to the Qatari economy’s prominent position and the global confidence therein….As a bank, we feel responsible to keep up with the country’s economic momentum and therefore, our presence today falls within this framework”.

According to CEO Dr. Abdulbasit Al-Shaibei, “QIIB’s decision to list its Sukuk on the London Stock Exchange was based on the fact that London will continue to play its prestigious global role, regardless of the Brexit outcome, and that London is considered one of the most important international markets for Islamic banking instruments”.

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