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Abu Dhabi, UAEWednesday 12 December 2018

ADIB approves Dh1bn rights issue and Dh2.75bn sukuk

Capital increase proposals to help bank expand its retail business and digital services

Gulf banks are posting higher profits this year compared to 2017 thanks to economic expansion led by the recovery in oil prices. ana Smillie for The National
Gulf banks are posting higher profits this year compared to 2017 thanks to economic expansion led by the recovery in oil prices. ana Smillie for The National

Shareholders of Abu Dhabi Islamic Bank, the emirate’s biggest Sharia-compliant lender, approved on Sunday a Dh1 billion rights issue and the issuance of a Dh2.75bn ($750 million) sukuk in line with its growth strategy.

“Our focus has always been on maintaining a solid capital base, which can provide stability and enable the bank to expand and grow from a position of strength,” said Khamis Buharoon, vice-chairman and acting chief executive of ADIB, in a statement following ADIB’s general assembly in Abu Dhabi.

The rights issue will increase ADIB’s issued and subscribed-to share capital to Dh3.6bn through the issuance of 464,000,000 new shares issued at Dh2.16 per share. This represents a 45 per cent discount to the market share price as of July 25, ADIB said in the statement.

The bank intends to expand its retail business, improve its digital banking services to customers and capture new opportunities across corporate, transaction and correspondent banking, while ensuring better control on costs, it added. The $750m perpetual tier 1 sukuk is also intended to help the bank fulfil its growth objectives.

By the end of 2018, ADIB aims to boost revenues above the 18 per cent increase reported for 2017 and trim operational costs, Mr Buharoon told shareholders during Sunday’s meeting. The introduction of a 5 per cent VAT in the UAE in January remains a new additional cost for the bank and must be taken into account, he added.

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Shareholders also approved the proposed repayment of ADIB’s $1bn hybrid tier 1 sukuk issued in 2012.

The proposed Dh1bn rights deal, as well as the sukuk issuance and repayment, are subject to regulatory approvals. ADIB said it will “shortly” announce the timetable for the rights issue, including the ex-rights date, trading period, subscription period and other details.

ADIB reported a 3.8 per cent increase in second-quarter net profit to Dh572.7 million as the cost of credit dropped and the number of customers increased. The results missed EFG-Hermes’ net income estimate of Dh595m for the period.

Revenue for the quarter decreased 3.1 per cent to Dh1.36bn, ADIB said in a bourse filing in July. “Our strategy now is to focus on innovation and leverage our digital capabilities to drive revenue growth and productivity,” Mr Buharoon said in a statement at the time.