ADIB joins list on early repayment

Abu Dhabi Islamic Bank repays Dh2.2bn of funding that helped the UAE's banking sector to ride out the financial crisis, as the local economy improves and access to markets becomes easier.

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Abu Dhabi Islamic Bank has repaid in full Dh2.2 billion (US$598.9 million) in loans to the Ministry of Finance.

The bank said it had received consent from the Central Bank and Ministry of Finance to remove itself from government support, as increasing numbers of banks opt to repay the funding facilities that helped them to ride out the financial crisis.

The Dh2.2bn facility of Tier 2 capital was due to be repaid at the end of 2016, but was structured so as to become more expensive for banks to hold on their balance sheets as that date drew closer.

ADIB, having rebuilt its balance sheet after the global financial crisis, was now able to access capital markets more cheaply and could afford to forgo funding support from the Government, said Tirad Al Mahmoud, the bank's chief executive.

The Ministry of Finance's capital injection "helped to reinforce confidence in the country's banking system at a time when the global financial system was experiencing a liquidity crunch and capital ratios were under pressure," he said.

ADIB has since been able to raise cheap finance from financial markets, raising $1bn through the sale of perpetual Tier 1 sukuk, an Islamic instrument that raises "equity-like" funding and which does not have to be repaid on a set maturity date.

The announcement comes on the heels of a similar repayment by Dubai Islamic Bank, which this weekend said it had repaid Dh3.75bn to the Ministry of Finance. The ministry supplied Dh70bn in Tier 2 deposits in October 2008, which were convertible into loans.

At least nine banks, including National Bank of Abu Dhabi and First Gulf Bank, have repaid these loans in full or in part.

That year, the Central Bank also provided banks with a Dh50bn liquidity facility to ensure banks had access to emergency financing.