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Abu Dhabi, UAEThursday 18 October 2018

ADIB raises Dh1bn through rights issue and closes $750m sukuk

Sharia-compliant lender will use proceeds to pursue growth strategy

The lender also raised its $ Tier 1 capital through the issuance of a $750 million perpetual sukuk that complies with Basel III banking rules.  Chris Whiteoak / The National
The lender also raised its $ Tier 1 capital through the issuance of a $750 million perpetual sukuk that complies with Basel III banking rules.  Chris Whiteoak / The National

Abu Dhabi Islamic Bank, the emirate’s biggest Sharia-compliant lender, raised Dh1 billion through a rights issue that was five times oversubscribed, attracting over Dh5bn in orders.

The lender also raised its Tier 1 capital through the issuance of a $750 million perpetual sukuk that complies with Basel III banking rules. The sukuk, which was priced at a profit rate of 7.125 per cent, was three times oversubscribed, generating $2.1bn in orders. A perpetual sukuk does not have maturity and may be treated as equity. Tier 1 capital includes equity capital and disclosed reserved and is used to describe the capital adequacy of a bank.

“This capital raise viewed in conjunction with the recent raising of US$750m in additional Tier 1 securities has resulted in the bank improving its capital structure and has positioned the bank to pursue growth opportunities in line with the expected improvements in the economic environment,” Khamis Buharoon, ADIB's acting chief executive and vice-chairman, said.

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ADIB approves Dh1bn rights issue and Dh2.75bn sukuk

ADIB plans a Dh1bn rights issue and tapping the sukuk market

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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 said in August.

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 a shareholders meeting in August. 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.

ADIB reported a 3.8 per cent increase in second-quarter net profit to Dh572.7m 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.