Dubai: Dubai’s Noor Bank PJSC is considering the sale of Islamic bonds as the Sharia-compliant lender seeks long-term funding, its chief executive officer said.
“It is not a bad time to consider going to the market,” John Iossifidis said in an interview in Dubai. “It’s prudent to extend the maturity of your funding for a number of reasons, not the least of which is spreads being quite low right now.”
The bank, which is owned by the Dubai government, plans to spend about Dh500 million ($136 million) over the next three years mainly on technology upgrades to improve services and lower costs, said Iossifidis, who joined from Mashreqbank PSC in September.
Emirates NBD PJSC and Dubai Islamic Bank PJSC have already sold bonds this year in currencies such as Swiss francs, and Australian and US dollars. The average spread on bonds from the six-nation Gulf Cooperation Council (GCC), a measure of credit risk, fell to the lowest in nearly three years on February 2 as Brent crude traded near $70 (Dh257.11) a barrel, the first time since 2014.
Noor Bank last sold an Islamic bond in May 2016 when it raised $500 million in perpetual securities. The bank, which is rated the fourth-lowest investment grade by Fitch Ratings Ltd, also sold $500 million of securities in 2015.
Diversification
The lender plans to diversify its wholesale business from mainly government-related entities and real estate into new segments such as non-bank finance firms and trading companies, Iossifidis said. Noor Bank also plans to focus its retail banking on client segments such as small and medium enterprise customers, he said.
Noor Bank last year cut jobs to reduce costs and streamline operations, people familiar with the matter said at the time. It also hired a new chief financial officer, as well as new heads of investment banking, retail and risk.
Iossifidis expects industry lending to grow 6.5 per cent to 7 per cent this year and Noor’s Islamic financing to “grow a bit faster” than the industry, helped by an increase in mortgages. He also aims to improve the bank’s return on equity to double digits from mid- to high-single digits currently.
“Overall people seem more buoyant,” he said. “Our retail clients are saying they are doing bit better. Services are still doing quite well, education and health care.”