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Emirates NBD plans five-year sukuk issue

Timing vital as market is crowded, top official says

Funding options
Image Credit: Pankaj Sharma/Gulf News Archive
An Emirates NBD branch. The bank faces debt maturity ofDh8 billion next year.
Gulf News

Dubai: Emirates NBD, the UAE's largest bank by assets, is considering a five-year Islamic bond (sukuk) issue, chief executive Rick Pudner said yesterday.

"We are looking at opportunities, but timing is very important. At the moment the market looks crowded with a number of issues launched in recent weeks," Pudner said.

Pudner confirmed that the bank is actively considering the possibility of a sukuk issue. "We, like everybody else, are looking at the sukuk arena and just reviewing our options. There have been a lot of issues recently. So we are still waiting for the right opportunity and the right moment," he said.

Although there were reports that the bank has already appointed lead managers for the bond issue, Pudner said the bank has yet to decide on the size, type, timing and managers of the issue.

After the close of a slew of bond issues in the second quarter of this year, the market entered a long lull. The debt issuance window opened with International Petroleum Investment Company's (Ipic) $3.75 billion (Dh13.76 billion) bonds last month. Since then Union National Bank, Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank have issued benchmark-sized ($500 million) sukuk.

Among the sovereign issuers, Bahrain was the first regional issuer to tap the Islamic bond market with its $750-million sukuk after the Arab spring led to heightened risk perception and widening spreads. Majid Al Futtaim (MAF) Holding, the sole franchisee of hypermarket chain Carrefour in the Gulf, has set up a $1-billion sukuk programme and has announced its plans to go for a benchmark-size sukuk issue soon.

Pricing levels

Interestingly a majority of issuers have been tapping the sukuk markets in the recent rush of issues in the region. Analysts say there is ample liquidity with regional Islamic institutions and this liquidity pool is attracting new issuers. Sukuk sales in the Gulf have risen to $1.75 billion so far this quarter.

Emirates NBD has always maintained that it would look at funding options such as sukuk and conventional bonds. But the bank has repeatedly said it would not overpay for issuing new debt, and pricing levels so far this year have been too expensive. In May, the bank completed a debt swap for two existing notes due to expire in 2016 for longer-term debt.

Emirates NBD has a debt maturity of Dh8 billion in 2012. The bank has been looking at various funding options to finance the maturities. "The maturities next year are within our financing capabilities but we will be exploring various funding options," Pudner said during a conference call in October. For the new debt issue the bank is looking at 5-year maturity and is likely to be issued in US dollars.

Merger to be over by year-end

The acquisition of Dubai Bank by Emirates NBD will be completed by the end of the year and it will be reflected in the full-year balance sheet of the bank, said Rick Pudner, CEO of Emirates NBD.

"As we have already said that the acquisition will have practically no impact on the profit and loss account or the consolidated balance sheet of the group. But we will complete the process of acquisition this year," Pudner said.

Last month Emirates NBD took over Dubai Bank, an Islamic bank fully owned by Government of Dubai on the directives of the government.

Commenting on the integration of Dubai Bank with Emirates NBD Group, Pudner said the bank is currently evaluating the synergies between Emirates Islamic Bank, its Sharia-compliant subsidiary, and Dubai Bank.

"We have got two Islamic banking propositions and we want to see what the best Islamic proposition is going forward, and that will take a few months to work through," Pudner said. The bank has set up two committees.