SNB Successfully Closes Latest Sukuk Offering – a SAR3.3bn Perpetual Additional Tier 1 Sukuk

The Saudi National Bank (SNB) (formerly National Commercial Bank (NCB) the largest bank in the Kingdom in terms of assets, returned to the international market with a Saudi-Riyal denominated Additional Tier 1 SAR3.3 billion Sukuk issuance on 15 September 2022.

In a disclosure to the Saudi Stock Exchange (Tadawul), SNB said that the perpetual Sukuk was priced at a final profit rate of 5.0% per annum from (and including) the issue date up to (but excluding) 15 September 2027. “If the Sukuk are not redeemed or purchased and cancelled in accordance with the terms and conditions of the Sukuk on or prior to 15 September 2027, the rate of return will then be reset on such date and every five years thereafter as detailed in the term sheet in relation to the Sukuk,” said the statement to Tadawul.

The Sukuk certificates are perpetual securities and accordingly do not have a fixed or final redemption date. They may be redeemed early due to a capital event, tax event or at the option of the bank as described in the terms and conditions of the Sukuk.

The Bank had mandated SNB Capital Company as Sole Lead Manager, Bookrunner, and Lead Arranger to the transaction. The Sukuk was distributed via private placement to institutional and qualified clients as defined in the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority.

The proceeds from the issuance will be used to strengthen the Bank’s capital base in accordance with the Basel III Capital Adequacy Framework.

Prior to this the Bank under its previous name National Commercial Bank (NCB) issued a further Tier 1 US$1.25 billion Mudaraba Sukuk offering in January 2021. The Sukuk certificates were issued through NCB Tier 1 Sukuk Limited, a wholly-owned special purpose vehicle incorporated in the Cayman Islands.

That transaction, also a perpetual Sukuk offering, was priced at a final profit rate of 3.50% per annum from (and including) the issue date up to (but excluding) 26 January 2027, after initial price guidance was set at 4.125%. That pricing was considered by bankers as the lowest-ever launch yield for perpetual bonds out of the Gulf Cooperation Council (GCC) market.

SNB reported interim profits for the six months ending 30 June 2022 of SAR4.6 billion up from the same period in 2021 of SAR2.33 billion. Total operating incomes reached SAR8.37 billion up from SAR7.58 billion for the same period. Total assets similarly reached SAR958.47 billion up from SAR914.14 billion at end June 2021. SNB’s total capital reached SAR127.33 billion and risk-weighted assets amounted to SAR692.113 billion at end June 2022 respectively.

Meanwhile, SNB Capital, the investment banking arm of SNB, signed a memorandum of understanding (MoU) with the Saudi Ministry of Finance and its National Debt Management Centre (NDMC) in August 2022 to develop and launch “individual savings Sukuk to motivate individuals to design better plans for the future, and to seek for strategic partnerships with the private sector.”

Details of the product have yet to be released. But according to the Ministry and NDMC, the aim is “to enhance the concept of saving across the Kingdom by driving the expansion of savings products. That is a part of the ongoing work under the Financial Sector Development Program to Promote and Enable Financial Planning.”

According to Abdulaziz AlFuraih of the Ministry of Finance and Chairman of the Steering Committee overseeing the initiative, the Sukuk “will be the first government-supported savings product and aims to increase the proportion of individuals’ savings on a regular basis, increase the supply of saving products, and to raise awareness of the importance of saving and its benefits in planning future objectives.”

The Ministry and NDMC is keen on this collaboration with the private sector “in the development and launching of a number of saving products for specific purposes and benefiting different groups of individuals, whether through banks, fund managers, fintech companies, or others.”

Share this post