Emirates Islamic first UAE bank to issue a dirham sukuk

Emirates Islamic has become first bank in the UAE to issue a dirham sukuk in the wake of rising demand for local currency issue.

The Islamic subsidiary of Emirates NBD Group announced the successful pricing of its inaugural Dh1 billion dirham-denominated sukuk. The three-year issue witnessed robust demand and was oversubscribed 2.5 times.

The strong order book, which exceeded Dh2.5 billion, allowed the bank to tighten the profit rate to 5.05 per cent, at a spread of 67 basis points over the UAE government treasuries.

Salah Amin, chief executive officer of Emirates Islamic, said Emirates Islamic’s benchmark dirham sukuk further underscores the dirham bond market’s role as a significant and competitively priced source of funding for corporates.

"The robust demand is also a strong vote of confidence from global Sharia’a-compliant investors and demonstrates the strong appetite for dirham denominated fixed income products and services. Emirates Islamic is proud to play an important role in reinforcing the UAE’s position as the financial centre of the region and supporting government initiatives,” he said.

Sukuks still in demand

Referring to latest data issued by rating agency Fitch, experts said global outstanding sukuk reached $765.3 billion last year, reflecting a year-on-year growth of 7.6 per cent. They said there is a slow growth in sukuk issuance but it still outpaced conventional bonds sale last year.

"Sukuk issuance from the core markets of the Gulf Cooperation Council (GCC), Malaysia, Indonesia, Turkiye and Pakistan (including multilaterals) fell by 7.9 per cent to $244.3 billion in 2022, according to the Fitch.

S&P Global Ratings also believes that sukuk issuance volumes will continue to decline in 2023, albeit at a slower pace than 2022.

"We expect lower and more expensive global liquidity, increased complexity, and reduced financing needs for issuers in some core Islamic finance countries to deter the market," according to the S&P Global Ratings.

Local currency sukuk

The Emirates NBD Group’s sukuk sale will expand financing options for UAE corporations with Shariah-compliant needs while enhancing the development of the medium-term dirham yield curve.

The sukuk sale demonstrates Emirates Islamic’s commitment to deepening the liquidity of the local currency sukuk market following the creation of the Ministry of Finance’s medium-term dirham yield curve. The launch of the sukuk follows Emirate NBD’s Dh1 billion bond sale in January.

“Encouraged by the successful and heavily oversubscribed dirham bond issuance by Emirates NBD, Emirates Islamic has taken the opportunity to tap the market for an attractively priced dirham sukuk. The strong demand for the sukuk reflects the healthy appetite among Shariah-compliant investors for a dirham-denominated issue," Mohammad Kamran Wajid, deputy CEO of Emirates Islamic, said.

At the same time, he said the sukuk’s strict adherence to the latest Shariah-compliant standards has allowed us to tap a deep pool of global liquidity and attract a wide range of investors.

"This milestone sukuk is fully aligned to the UAE government’s objective of developing the local debt market and the ‘Dubai: Capital of Islamic Economy Initiative’,” he said.

Emirates NBD Capital was sole global coordinator, and Dubai Islamic Bank PJSC, First Abu Dhabi Bank PJSC and Standard Chartered Bank were joint lead managers and joint bookrunners for the sukuk.

— muzaffarrizvi@khaleejtimes.com

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