Saudi Awwal Bank (SAB) Issues SAR4bn (USD1.07bn) Additional Tier One Sukuk to Support its Capital Base as its Expands its Operations and Market Share in Saudi Arabia
Saudi Awwal Bank (SAB) is the latest Islamic bank to raise funds through an Additional Tier One (AT1) Sukuk issuance, which seems to be the preferred instrument for Gulf Cooperation Council (GCC) Islamic financial institutions in support of Basel III capital requirements.
SAB was established on 21 January 1978 by taking over the activities and services of the British Bank of the Middle East in Saudi Arabia and is considered as one of the major banking investment joint-stock companies in the region.
SAB first announced its intention to issue a Sukuk on 21 November 2024 following approval from its Board “to complement and support the Bank’s capital base enabling achievement of its long-term strategic objectives.”
The Bank mandated HSBC Saudi Arabia as sole lead manager for the purpose of the Proposed Offer. SAB launched the offering on 27 November 2024 for a two-tranche transaction with an aggregate amount of SAR4bn (USD1.07bn). The transaction comprised a SAR3.65bn (USD970mn) tranche and a SAR350mn (USD93.19mn) tranche.
The Sukuk was offered by way of private placement to qualified local and international investors under the Bank’s SAR20bn (USD5.33bn) Additional Tier 1 Sukuk Issuance Programme. In a disclosure to Tadawul (the Saudi Exchange) SAB stressed that the SAR3.65bn tranche was priced at a fixed profit rate of 6.07% per annum paid semi-annually in arrears, and the SAR350mn tranche was priced at a floating rate of 3 months SAIBOR + 1.34% payable on a quarterly basis, starting from the settlement date on 12 December 2024.
The Sukuk are perpetual securities and accordingly do not have a fixed or final redemption date but may be redeemed by the Bank in certain cases as detailed in the base offering circular, the supplement base offering circular and the applicable final terms relating to the Sukuk.
SAB announced interim results for the first nine months of the year in November 2024. Clients’ deposits increased by 14.3% to SAR260.632bn at end Q32024 (SAR228.053bn at end Q3 20243); Total assets increased by 16.11% to SAR395.35bn at end Q3 2024 (SAR340.48 at end Q3 2023); Net profit increased by 15.53% to SAR 5.944bn at end Q3 2024 (SAR5.15bn at Q3 2023).
Lubna Olayan, Chair of SAB, commented: “I am pleased to share that SAB continues to demonstrate a robust financial performance. Our results for Q3 2024 demonstrate the success of the bank’s strategy, with continued growth and strong performance across all customer segments. Our year-to-date Return on Tangible Equity (RoTE) reached an impressive 15.8%.”
Looking ahead, Ms. Olayan added: “While shifting interest rates, geopolitical tensions and a challenging macro environment created increased uncertainty, we remain very optimistic. We have confidence in the ongoing progress of the Saudi Vision 2030-driven transformation and the pivotal role that SAB and the banking sector play in driving progress forward.”
Aligned with SAB’s growth strategy, the bank sustained its investment in digital transformation programs focusing on market leading digital journeys, enhanced payment capabilities and a personalized digital experience, and ensuring that SAB remains at the forefront of the banking sector. Recently, SAB forged a partnership with UnionPay, marking a significant step toward enhancing the digital payment ecosystem in the Kingdom.
“SAB,” stressed Ms Olayan,” certified three large scale solar projects as Sustainable Finance projects, reinforcing its commitment to sustainability and responsible investment. These initiatives align with the bank’s broader ESG strategy and contribute to the dual national goals of economic diversification and renewable energy promotion. Our strong financial position, in addition to our strategic partnership with HSBC, position us well to capitalise on the opportunities ahead.”