ADIB, the largest sharia-compliant lender by market value in Abu Dhabi, will start investor meetings on 31 October ahead of a potential Islamic bond (sukuk) sale, a statement from the arranging banks said on Tuesday.
Considered as a rare move, Abu Dhabi Islamic Bank is planning to boost its core capital ratios through the sale of a sharia-compliant debt instrument.
One source at an arranging bank said the sukuk sale is likely to be benchmark-sized, which are bonds typically of $500 million or more in size.
ADIB itself, along with HSBC Holdings, Morgan Stanley Inc, National Bank of Abu Dhabi, and Standard Chartered Plc will arrange the roadshows that will be followed by a potential sale of tier one perpetual dollar-denominated sukuk, subject to market conditions.
Tier one capital is a key measure of a bank’s financial strength. ADIB had a tier one ratio of 13.45% at the end of June 2012, and said in its second quarter results that it aims to improve this to above 15% in the near term.
While lenders like Commercial Bank of Qatar, Burgan Bank and Saudi Hollandi Bank have sold tier two instruments in recent years, the public sale of a debt instrument to raise tier one capital is extremely rare in the Middle East, a Reuters report said.
Abu Dhabi government issued a $2 billion tier one sukuk instrument through ADIB in 2009 as part of a wider scheme to bolster the country’s banking system following the global financial crisis.
In a bourse filing last week, ADIB shareholders gave their nod to the issuance of tier one sukuk worth up to $2 billion. The Abu Dhabi Islamic Bank has warned in its last two quarterly results that global economic uncertainty and slow loan growth in the United Arab Emirates would affect earnings this year. It reported a 3% rise in third-quarter profit earlier this month.