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Wednesday, 31 October 2012

Abu Dhabi Islamic Bank (ADIB) plans capital boost through sukuk sale

Abu Dhabi Islamic Bank is planning to boost its capital through the sale of a Shariah-compliant debt instrument, in what would be a rare method by a regional lender to boost its core capital ratios. 

ADIB, the largest Shariah-compliant lender by market value in Abu Dhabi, will start investor meetings today ahead of a potential Islamic bond, or sukuk, sale, a statement from the arranging banks said yesterday. 

The sukuk sale is likely to be benchmark-sized, a source at one of the arranging banks said. Benchmark size bonds are typically $500mn or more in size. 

The bank has mandated HSBC Holdings, Morgan Stanley, National Bank of Abu Dhabi, Standard Chartered and itself to arrange the roadshows, with a potential sale of a tier one perpetual dollar-denominated sukuk to follow, 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. 

The public sale of a debt instrument to raise tier one capital is extremely rare in the Middle East. Lenders including Commercialbank (Qatar), Burgan Bank and Saudi Hollandi Bank have sold tier two instruments in recent years. 

ADIB issued a $2bn tier one sukuk instrument in 2009 to the Abu Dhabi government as part of a wider scheme by the authorities to bolster the country’s banking system in response to the global financial crisis. 

Shareholders approved the issuance of tier one sukuk worth up to $2bn, the bank said in a bourse filing last week

(Gulf Times / 30 Oct 2012)

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