The Islamic unit of Bank Muscat, Oman’s largest lender, plans a dual-currency US dollar and riyal sukuk issue worth around $300 million (Dh1.1 billion) that would be the first sukuk sale by a bank in the country.
The issue, which could carry tenors of between three and five years, would be part of a 500 million riyal ($1.3 billion) sukuk programme which the bank’s shareholders approved in March, said Sulaiman Al Harthy, group general manager of Meethaq, Bank Muscat’s Islamic operation.
He added, “The idea is to have the sukuk in dual currency since Omani riyals are pegged to the US dollar.” The sukuk, which would be the first international issuance of Islamic bonds from Oman and still require regulatory approval, would help to fund Meethaq’s expansion.
“The sukuk issuance would be gradual and size would depend on the bank’s funding needs. The debut sukuk size could be around $300 million.” Last November, Omani real estate developer Tilal Development Co sold the country’s first sukuk, raising 50 million riyals through a five-year deal.
Meethaq estimates it has a 60 per cent share of Oman’s fledgling Islamic banking sector, partly due to a home financing portfolio inherited from Bank Muscat, and says it expects growth across its business lines.
“In the retail segment, home financing is gaining momentum. Meethaq started with a 100 million riyals (Dh953 million) legacy portfolio in home finance, hence the emphasis now is on building a corporate finance portfolio,” Harthy told Reuters.
“Presently, the Meethaq financing book size is 350 million riyals which we hope to grow to 450 million riyals by June.” Bank Muscat is one of several Omani conventional banks which offer Islamic finance through standalone units; two full-fledged Islamic banks started operations last year, Al Izz Islamic Bank and Bank Nizwa.
As of December, the country’s Islamic banking sector had total assets worth 808 million riyals, deposits of 170 million riyals and Islamic financing of 425 million riyals, the central bank said last month.