Saudi Sukuk market picks up as the end of the year approaches - IFN

Saudi Sukuk market picks up as the end of the year approaches

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SAUDI ARABIA: The holy month of Ramadan has driven issuers to postpone their Sukuk sales to after the Eid celebrations which may provide a potential boost to the Sukuk market in the last quarter of 2013. It has been reported that several Saudi Arabian institutions are issuing Sukuk in the second half of this year. Jeddah-based IDB is on course of raising its medium-term notes program by more than 50%, from US$6.5 billion to US$10 billion by the end of the year. Rated ‘AAA’, the multilateral organization is enhancing its Sukuk program to meet increasing financing demands from its member countries. The IDB recently provided a total of US$21.7 billion to 90 projects across its member countries in Africa, Asia as well as the Middle East. Saudi British Bank (SABB), an affiliate of HSBC Holdings, is also said to be auctioning a riyal-denominated Sukuk before the end of the year, to reinforce its Tier 2 capital foundation. In a rating update in June, together with Arab National Bank and Banque Saudi Fransi, SABB’s outlook was revised from stable to negative by Fitch on the back of lower capital ratios and lower capital buffers in comparison to their peers. SABB’s total capital ratio was recorded as the lowest at 14.78% among other banks in the kingdom. The bank reported a net profit of SAR1.95 billion (US$519.89 million) for the first half, with a 6.6% increase in assets to SAR161.94 billion (US$43.17 billion). HSBC maintains a 40% stake in SABB and is the advisor to the bank’s upcoming Sukuk issuance. In the first quarter of 2013, a total of SAR11.6 billion (US$3.09 billion)-worth of Sukuk was issued in Saudi Arabia. The kingdom's Sukuk market was at its peak in the second quarter of this year. Substantial Sukuk issuances were made by corporate and sovereign entities such as the IDB, Dar Al Arkan, Saudi Electricity Company, Dana Gas and Sadara Chemicals Company. A report by Moody’s has projected that these numbers will surpass last year’s issuances of SAR25.2 billion (US$6.71 billion) as the market responds to strong investor demands and sizable infrastructure investments in the country.