Dubai Islamic Said to Set Profit Rate at 6.25% on Dollar Sukuk
Dubai Islamic Bank PJSC, (DIB) the United Arab Emirates’ biggest Shariah-compliant lender, will pay a profit rate of 6.25 percent on a $1 billion Islamic bond it plans to sell, said a banker familiar with the matter.
The profit rate per year is payable semi-annually in arrear until the first call date in 2019, two bankers familiar with the details said separately yesterday, asking not to be identified because the matter is private. The rate will be reset on the first call date and every six years thereafter to a new fixed rate, they said.
Banks in the six-nation Gulf Cooperation Council are seeking to build their Tier-1 capital ratios as they attract deposits and extend loans to support state investment programs and retail demand. Dubai Islamic said on March 5 its shareholders approved raising as much as $1 billion to boost its Tier-1 capital, which includes common stock, retained earnings, and perpetual preferred stock and debt.
Abu Dhabi Islamic Bank PJSC (ADIB) in November sold $1 billion of the world’s first hybrid perpetual Tier-1 sukuk, which can be treated as equity and thus used to supplement capital. Dubai Islamic was placed on ratings watch at Moody’s Investors Service in December because loan quality “remains very weak compared to peers” and it hasn’t set aside enough money to cover losses. Tier-1 capital is used to cushion lenders against this.
The bank, which is taking over mortgage lender Tamweel PJSC, last issued sukuk in May, when it raised $500 million from the sale of five-year securities at a coupon of 4.752 percent. The yield on those notes has since fallen to 3.45 percent yesterday, according to data compiled by Bloomberg.
HSBC Holdings Plc, Standard Chartered Plc, Emirates NBD Capital, National Bank of Abu Dhabi PJSC and Dubai Islamic Bank itself are joint lead managers of the perpetual sukuk sale. Islamic bonds comply with the religion’s ban on interest and instead pay profit rates.
The shares, which trade on Dubai’s DFM General Index, decreased 0.5 percent to 2.1 dirhams at the close today, the lowest level since Jan. 22, as it went ex-dividend. The index declined today for the first time in five days, falling 0.9 percent to 1,922.04.
To contact the reporter on this story: Zahra Hankir in Dubai at firstname.lastname@example.org
To contact the editor responsible for this story: Claudia Maedler at email@example.com