ADIB plans a Dh1bn rights issue and tapping the sukuk market

The lender plans to maintain growth and pay off old debt

The lender also raised its $ Tier 1 capital through the issuance of a $750 million perpetual sukuk that complies with Basel III banking rules. Chris Whiteoak / The National

Abu Dhabi Islamic Bank, the biggest Sharia-compliant lender in the emirate, plans to approach both debt and equity capital markets to shore up finances and pay some of its old debt.

The board of ADIB is recommending to increase the bank’s issued capital through a Dh1 billion rights issue, the lender said in a statement on Thursday. The proposed deal includes issuing 464 million new shares at a nominal face value of Dh1 per share, which also carries an issuance premium of Dh1.16 per share, it said.

“This increase supports ADIB’s objectives in achieving its 2020 vision while meeting regulatory requirements," the bank said.

Adib posted a 3.8 per cent increase in second quarter net profit to Dh572.7 million as the cost of credit dropped and the number of customers increased. It missed EFG-Hermes' net income estimate of Dh595m for the period.

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The proposed rights deal is subject to regulatory approvals and the bank will also seek shareholder approval at a general meeting, which will be scheduled in the coming weeks, it said.

The new shares will be issued at Dh2.16 per share, which represents a 45 per cent discount to the ADIB’s closing share price on July 25.

The bank’s board has also proposed the issuance of a $750m (Dh2.75 billion) perpetual tier 1 sukuk, and the repayment of its $1bn hybrid tier 1 sukuk issued in 2012, the lender said without giving further details.

Adib said it will set the timetable for the rights issue and the tier 1 debt capital market deal once it obtains shareholder approval for the transactions.

“The pace of the bank's growth has been fast, increasing its number of customers to 1 million in the UAE, nearly double the number it had five years ago,” Khamis Buharoon, ADIB’s vice-chairman and acting chief executive said.

The bank is raising capital to maintain its growth trajectory, while maintaining a capital buffer, he noted.

“This will enable ADIB to continue to invest in innovation to provide top-quality banking services, and to deliver the returns our investors have come to expect from ADIB," he added.