Emirates NBD plans bond sale to boost capital

Dubai: Emirates NBD plans to tap global debt markets for its first capital-boosting bond issue, as Gulf banks take advantage of tight pricing and high investor demand to shore up capital ratios.

Emirates NBD , which has already raised Tier 2, or supplementary capital, this year, has hired six banks, including its own investment banking unit, to arrange a Tier 1 bond issue, lead managers arranging the deal said on Thursday.

Tier 1 capital is a lender’s core capital as defined under the Basel banking industry rules, and a key measure of its financial strength. Gulf banks will need to comply with tighter Basel III global standards for core capital, which will be introduced gradually over coming years.

Emirates NBD ’s Tier 1 solvency ratio stood at 13.5 per cent of assets at the end of March.

The company plans to meet investors on roadshows in Asia, London and the UAE between May 20-22 ahead of issuing the bond, a statement from arranging banks said.

Bank of America Merrill Lynch, Deutsche Bank, HSBC Holdings, ING and Morgan Stanley as well as Emirates NBD’s investment banking unit are arranging the investor meetings.

Although benefiting from enviable capital adequacy ratios compared to many lenders in the developed world, banks in the UAE have in recent months sought to boost their capital ratios to support future growth and repair balance sheets impacted by Dubai’s 2009 debt crisis.

Both Abu Dhabi Islamic Bank and Dubai Islamic Bank have sold Tier 1-boosting Islamic bonds in recent months — the ADIB issue being the first such Sharia-compliant offering ever from the region.

However, non-Islamic banks in the Gulf have largely shied away from such deals. Commercial Bank of Qatar has appointed banks to sell a bond, sources told Reuters last month, but it has yet to come to market.