UAE’s ADIB raises $750m in AT1 perpetual Sukuk

Abu Dhabi Islamic Bank (ADIB) has raised $750m US-dollar denominated additional tier-one (AT1) perpetual Sukuk.

The Sharia-compliant lender said the Islamic bonds will be listed and traded on London Stock Exchange. ADIB, which is rated A2 by Moody’s and A+ by Fitch, priced the perpetual non-call, five and half-year sukuk at a profit rate of 7.25 per cent per annum payable semiannually.

The issuance was met with robust demand, attracting interest from over 240 global and regional investors with the final order exceeding $7bn more than 9 times over-subscribed and final pricing 62.5 basis points (bps) tighter than the initial pricing thoughts.

“Demand for this issuance exceeded the initial offer by more than nine times, highlighting the tremendous demand and confidence from global investors in ADIB’s asset quality. We are also pleased to see this strong international demand continue as the final pricing tightened,” Nasser Al Awadhi, ADIB group CEO said, adding that the overall success of the issuance can be attributed to the bank’s ESG framework and its strong track record of both growing market share and delivering sustainable returns.

Similarly, the reset spread is 306 bps over US treasury yields, which is 121 bps lower than the previous AT1 Sukuk issued by the Abu Dhabi-based bank in 2018.

“The issuance was driven by broad demand across three regions, with final allocations of 83 per cent to MENA, 13 per cent to Europe and the remaining 4 per cent to Asia,” ADIB said in a bourse filing.

ADIB said by investor category, private banks accounted for 70 per cent, asset and fund managers 16 per cent, commercial banks 10 per cent and others 4 per cent. The issuance is expected to maintain the banking group’s optimised capital structure and its strong CET1 position.

The group’s tier-one perpetual Sukuk was structured to comply with the internationally agreed Basel III regulatory framework, which includes detailed criteria for capital and liquidity.

HSBC and Standard Chartered Bank acted as joint global coordinators and structuring agents for the Sukuk. They were joined by ADIB, Citi, Emirates NBD Capital, First Abu Dhabi Bank and JP Morgan as joint lead managers and joint bookrunners.

The Additional Tier 1 perpetual bonds are similar to an equity instrument in the fact that they have no maturity.

ADIB’s growth prospects

Meanwhile, Mubadala Investment Company sold a 7.6 per cent stake in ADIB to Emirates International Investment Company (EIIC), a subsidiary of investment firm National Holding.

EIIC was already ADIB’s top shareholder and the acquisition of a 7.6 per cent stake from Mubadala takes its shareholding to 47 per cent of the Shariah-complaint lender.

The banking group’s first-quarter net profit jumped by more than 54 per cent from a year earlier to $300m (Dhs1.1bn), driven by healthy business growth and higher margins. Its revenues in Q1 2023 rose by 45 per cent to Dhs2bn, compared to Dhs1.4bn in the corresponding period of last year.

“This was driven by 81 per cent growth in funded income to Dhs1.4bn, achieved from the growth in customer financing and higher margins,” the bank said in a bourse filing.

ADIB’s total assets edged up to Dhs172bn in the quarter, up 24 per cent compared to the same period last year, driven by a 19 per cent growth in gross financing and 22 per cent growth in investments. With a market capitalisation of Dhs39.3bn as of July 12, 2023, ADIB has a presence in six global markets including Egypt, Saudi Arabia, the UK, Sudan, Qatar and Iraq.

Read: Mubadala offloads 7.6% ADIB stake to National Holding