- Lender seeking funds as bank liqudity in U.A.E. tightens
- Syndicated loan will be first raised by FGB since 2012
First Gulf Bank PJSC, the United Arab Emirates’ third-biggest bank by assets, is seeking to raise about $1 billion from a syndicated loan to boost lending as liquidity in the economy tightens, two bankers familiar with the deal said.
The Abu Dhabi-based lender is paying less than 1 percentage point over the London interbank offered rate for the three-year facility, said the people, asking not to be identified because the information is not yet public. About 10 banks are expected to sign up for the loan, which is currently in the documentation stage, they said. The size may be raised on demand, one of the people said.
Banks in the six-nation Gulf Cooperation Council, which includes the U.A.E. and Qatar, are turning to the loan market to raise funds in addition to selling bonds as a drop in crude prices threatens economic growth in the oil-producing region. Qatar National Bank SAQ, the country’s biggest lender, borrowed $3 billion via a syndicated loan in March and Abu Dhabi-based Union National Bank PJSC is planning a $750 million 3-year facility, three people familiar with the matter said last month.
Bank liquidity in the U.A.E., the second-biggest Arab economy, is tightening as an increase in lending outpaces deposit growth. The loans-to-deposits ratio of the U.A.E.’s 49 banks climbed to 100.2 percent in June from 95 percent a year ago, rising above 100 for the first time since September 2013.
First Gulf Bank last raised a syndicated loan in November 2012, when it borrowed $900 million from a 3-year loan. That facility paid interest of 130 basis points, or 1.3 percentage points, over the dollar benchmark rate, it said at the time.
The lender reported a better-than-expected 8 percent rise in second-quarter profit to 1.45 billion dirhams ($395 million) as lending grew 16 percent in the 12 months to June. The bank had a loans-to-deposit ratio of 109 percent at the end of the first-half and last sold a U.S. dollar bond in February, raising $750 million from five-year securities.
A spokeswoman for FGB declined to comment.
First Gulf Bank’s shares rose 1.5 percent to close to 13.85 dirhams in Abu Dhabi as the benchmark index advanced 0.6 percent. The shares have dropped 6 percent this year, compared with a 3.3 percent decline in the index.