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Abu Dhabi banks tap international bond markets

UNB raises $400m in note issue

Gulf News

Abu Dhabi: Abu Dhabi's banks are increasingly trying to diversify their funding base by tapping the international bond market, their activity in recent weeks suggests.

In doing so, the banks, backed by the Abu Dhabi government's phenomenal capital strength, may reinforce the global investor perception that they are less risky than some major European banks, say analysts.

Earlier this month, Union National Bank (UNB) announced that it had completed a $400 million bond issue.

In its first new bond issuance since 2005, UNB, rated A1 by Moody's and A+ by Fitch, priced its five-year bond due in November 2016 under its $3 billion Euro Medium Term Note Programme.

International banks such as Deutsche Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank were joint-lead managers and joint-bookrunners, and Commerzbank AG was the co-lead manager.

The transaction was priced at a coupon of 3.875 per cent with a spread of +287.5 basis points over the Dollar five-year mid swaps.

Last week, Abu Dhabi Islamic Bank (ADIB) said it would hold investor meetings for a potential dollar-denominated Islamic bond, or sukuk.

Meetings begin in Kuala Lumpur on November 17 and will cover Singapore and the UAE before ending in London on November 21.

Yesterday, Reuters reported that Abu Dhabi Commercial Bank (ADCB) has picked four banks for a potential sukuk, which could be launched this week.

The report said ADCB has picked itself as well as Bank of America, J.P. Morgan Chase and Standard Chartered as joint lead arrangers and bookrunners for a debut dollar-denominated sukuk. The sukuk is expected to be launched during the week of November 14 subject to market conditions.

As well, Al Hilal Bank has picked three banks to arrange its debut sukuk.

Standard Chartered, HSBC and National Bank of Abu Dhabi have been mandated by unlisted Al Hilal for a benchmark-sized deal under a bond programme which could be worth up to $3 billion, one source with knowledge of the matter told Reuters.

"Whether the issuances are going to be rewarding for the banks or not, will depend on the pricing of the bonds," Marwan Shurrab, Vice-President with Dubai-based Gulfmena Investments, told Gulf News.

Shabbir Malek, banking analyst with EFG-Hermes, said the Abu Dhabi banks are trying to have longer-term liabilities to match the duration of their assets.

"Retail and corporate loans are usually longer-term in nature, while the deposits are of a shorter duration, which creates a duration mismatch. This could impact the banks' liqudity," said Malik.