Emirates NBD may have to issue more bonds this year

Bank needs to honour AED16.5 bn worth redemptions this year

DUBAI/January 07-2021: Emirates NBD, the largest Dubai-based bank with an asset base of AED692.1 billion, is likely to launch more bonds (including Islamic sukuks) so as to honour its large amount of upcoming maturities during the current year.

As per the statistics disclosed by the bank, out of its AED59.7 billion gross outstanding in debts/sukuks (as of September 30, 2020), AED16.5 billion, the largest portion or close to 28 per cent of the total, is maturing during 2021 and another AED10.2 billion in 2022.

Thus, the two-year aggregate redemptions add up to a substantial AED26.7 billion, accounting for almost half of the total outstanding in debt/sukuks sitting in the bank’s book.

Emirates NBD said it had already refinanced 100 per cent of its 2020 maturities and approximately one-third of the 2021 maturities as per the financials for the period ending September 30, 2020.

$750 mn bond

Emirates NBD said on Thursday (Jan 07) the bank had issued five-year bonds worth $750 million (AED2.75 billion).  A bank statement filed with Dubai Financial Market (DFM) also said the bonds will settle on January 13, 2021 and mature on January 13, 2026.

Media reports said Emirates NBD, which is majority owned by the Investment Corporation of Dubai (ICD), has already mandated financial institutions to arrange for an investor call with regard to the new bond issue.

The mandated institutions are reported to be Emirates NBD Capital, ICBC, ING, Mizuho Securities, and Standard Chartered.

Near-record-low interest rates

There are financial experts, who view that more banks may come forward during the coming months to raise funds in order cash in on the low interest rates prevailing in the market.

Pradeep Chandra (seen in the picture), an investment expert based in Dubai International Financial Centre (DIFC), told businessbenchmark.news that although long-term interest rates have risen recently, they are still at historically low levels.

“This provides an ideal opportunity for banks to consider extending the maturity profile of their wholesale debt by issuing longer-term i.e 10- or even 30-year bonds,” Chandra added. Current 10-year and 30-year US Treasury rates are around 1 per cent and 1.85 per cent respectively one of the lowest in the history.

Longer-term bonds will also enable the banks to match the tenor of some of their typically long-term assets such as home mortgages and could help them in facilitating the financing of large projects, which naturally tend to be of long tenors.

Perpetual bonds

In July, Emirates NBD had raised $750 million by issuing perpetual bonds, non-callable for six years, a document showed.

According to reports then, the bank had offered investors 6.125 per cent for the paper, which is similar to an equity instrument with no maturity.

It could be said that the bank is not in dire need for capital as it sits on a Tier1 capital ratio of 18 per cent and enjoys a capital adequacy ratio of (CAR) 19.1 per cent, far above the minimum required, as of September 30, 2020.

The bank’s advance deposit ratio (ADR) was 96.6 per cent as of September 30, 2020 versus 92.6 per cent a year ago. The bank will need additional capital only if it goes for new acquisitions.

Emirates NBD had said in a regulatory filing on Dubai’s Financial Market on August 12.that it was in discussion with BLOM Bank SAL, Lebanon regarding a potential acquisition of BLOM Bank’s existing shareholding in BLOM Bank S.A.E., Egypt.


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