Abu Dhabi Islamic Bank said it would raise its capital and tap more sukuk to help it fund growth plans that include beefing up its business in Egypt and other emerging markets.
The lender, also known as ADIB, said it is seeking to raise Dh504 million by offering new shares to existing shareholders as well as taking on more Islamic debt by increasing its so-called tier 1 capital instruments program to US$3 billion from the existing approved limit of $2bn. That comes as a period of rapid expansion for the bank has left its so-called capital ratios tighter than its peers, analysts say. Shares of ADIB, which can only be bought and sold by UAE nationals, rose 1.4 per cent to Dh5.10 on the news making it one of the best-performing stocks on the Abu Dhabi Securities Exchange yesterday.
“ADIB has experienced a period of strong expansion and we expect this growth trajectory to continue,” Tirad Al Mahmoud, the bank’s chief executive, said at a news conference at the bank’s headquarters in Abu Dhabi. “In order to support our growth, the bank is looking to raise additional capital and as such we are inviting our shareholders to participate in a rights issue. We are committed to maintain a solid capital base “
Mr Al Mahmoud declined to comment on whether the move to bolster its capital base was related to its bid to buy the retail banking network of Citibank Egypt.
ADIB, Abu Dhabi’s biggest Sharia-compliant lender, has been shortlisted as a buyer for Citigroup’s Egypt retail business in what is set to be a heated battle to tap into one of the world’s fastest-growing economies. The lender has had a presence in Egypt since 2007.
Citi has been quitting its retail businesses in countries where it no longer has a competitive edge, while UAE lenders are spreading their wings into nearby emerging markets such as Egypt to boost earnings amid slower growth at home. Emirates NBD is also reportedly bidding to buy Citi’s Egypt consumer banking network while Mashreq is said to have dropped out.
UAE banks are set to feel the pinch from a dramatic drop in oil prices as demand for loans slows, analysts including those at Standard & Poor’s have warned. The price of crude, upon which Arabian Gulf countries fuel their growth, has lost more than 40 per cent of its value since last June.
Meanwhile, Egypt, which is coming out of an economic slump after four years of political turbulence during which two presidents were removed following popular uprisings, has attracted a multitude of investors betting on robust growth. The country, a net oil importer, will also be boosted from the drop in crude prices.
ADIB, which also has operations in Saudi Arabia, Sudan, Qatar, Iraq and the UK, said it would hold an extraordinary general meeting on June 21 to approve the capital raise and vote on the proposal to increase its capital instruments programme. A timetable for the rights issue will follow an approval, it said.
For the rights issue, the bank proposes to issue 168 million new shares at a price of Dh3 per share.
“ADIB’s capital ratio was starting to look a bit light as compared to peers because of the very strong growth of the bank, as the bank was gaining market share and the bank needed to address it, particularly as regulatory minimums continue to increase,” said Jaap Meijer, managing director at the Dubai-based investment bank Arqaam Capital.
mkassem@thenational.ae
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KEY DATES IN AMAZON'S HISTORY
July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington
July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon
1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024
1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs
2000: Amazon Marketplace opens, allowing people to sell items on the website
2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006
2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black
2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year
2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video
2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started
2009: Amazon introduces Amazon Basics, its in-house label for a variety of products
2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013
2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS
2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa
2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition
2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone
SQUADS
Pakistan: Sarfraz Ahmed (capt), Azhar Ali, Shan Masood, Sami Aslam, Babar Azam, Asad Shafiq, Haris Sohail, Usman Salahuddin, Yasir Shah, Mohammad Asghar, Bilal Asif, Mir Hamza, Mohammad Amir, Hasan Ali, Mohammad Abbas, Wahab Riaz
Sri Lanka: Dinesh Chandimal (capt), Lahiru Thirimanne (vice-capt), Dimuth Karunaratne, Kaushal Silva, Kusal Mendis, Sadeera Samarawickrama, Roshen Silva, Niroshan Dickwella, Rangana Herath, Lakshan Sandakan, Dilruwan Perera, Suranga Lakmal, Nuwan Pradeep, Vishwa Fernando, Lahiru Gamage
Umpires: Ian Gould (ENG) and Nigel Llong (ENG)
TV umpire: Richard Kettleborough (ENG)
ICC match referee: Andy Pycroft (ZIM)
FFP EXPLAINED
What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.
What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.
What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
