International Sukuk House: Standard Chartered
Top dog The international Islamic bond market is now a firmly established avenue of funding for issuers, especially those from the Gulf Cooperation Council region. For its leadership, the variety of its transactions and its ability to help grow the market, no bank stood out more in 2024 than Standard Chartered. It is IFR’s International Sukuk House of the Year.
The international sukuk market had a great 2024, becoming an important source of liquidity for issuers, especially in the Middle East and parts of Asia.
Issuance of foreign currency transactions rose 29% to US$72.7bn, according to S&P.
No bank did more to lead the market than Standard Chartered. It wasn’t just that it was number one in the league table with a 10.6% market share, according to LSEG data. More than that was its ability to bring innovative transactions and deliver for clients, both big and small, especially as the sukuk market offers better pricing dynamics for issuers than its conventional counterpart.
“Finding different pools of liquidity is important,” said Hussain Zaidi, global head of syndicate.
One standout transaction was Omantel’s US$500m 2031 bond, which provided a template for the telecoms sector and other asset-light businesses looking to access Islamic financing by structuring a sharia-compliant deal backed by its provision of broadband services.
This contrasts with the vast majority of sukuk deals, which incorporate physical assets such as real estate into the structure, with the rent then calibrated to match the periodic distributions of sukuk deals.
“When an issuer needs a new structure, they come to us,” said Sarmad Mirza, head of corporate debt capital markets, Middle East and North Africa.
The Omantel structure works by passing the proceeds of the sukuk sale from the issuing entity – a special purpose vehicle named Otel Sukuk – to Omantel as a consideration for the purchase of broadband data services. The provision of these services to customers should generate the required funds to finance distributions to sukuk holders. If they do not, funds are transferred from a reserve account.
Not every deal requires such structural work. But they can still be intense because of the pressure to deliver the best outcome.
One of the biggest highlights in 2024 was Saudi Aramco’s return to the sukuk market in September after a three-year absence.
The oil company priced US$1.5bn 4.25% October 2029s and US$1.5bn 4.75% October 2034s at respective spreads to Treasuries of 85bp and 100bp, around 10bp–15bp inside the issuer’s conventional bond curve.
The Aramco deal was one of a number of sukuk transactions from Saudi Arabia on which Standard Chartered was either an active bookrunner or global coordinator. The cast list is impressive: Public Investment Fund, Saudi Electricity and Alrajhi Bank among them.
But it’s not just deals in Saudi Arabia that stood out, nor necessarily big ones. “You can be number one by hitting the gigantic deals but miss the smaller ones – you can be number one but with no diversity,” said Salman Ansari, global head of DCM, said about the bank’s business in general.
That certainly wasn’t the case with Standard Chartered. One deal, for instance, that may not have grabbed the headlines in the way that Aramco’s jumbo offering did was a US$500m perpetual non-call six AT1 for Dubai Islamic Bank in October. It had one of the lowest reset spreads globally for a Basel III-compliant US dollar AT1 at 133.4bp over Treasuries.
That was a subordinated deal, but many FIG transactions from the GCC are relatively small, senior offerings. Again, they may not capture the headlines, but they represent the flow that keeps a market ticking over. No bank intermediates these flow trades in sukuk format better than Standard Chartered, which is often a global coordinator – a testament to the trust and faith placed in it by its clients.
It wasn’t just on GCC trades that the bank demonstrated its leadership. The bank was an active bookrunner on Indonesia’s US$2.75bn multi-tranche sukuk in November and was also a lead manager on Turkey’s US$2.5bn April 2030 sukuk, the single biggest US dollar sukuk tranche of 2024, according to IFR data.
Moreover, it was global coordinator on the debut sukuk from Turkey Wealth Fund, a US$750m January 2030 note in October that gave sukuk investors an opportunity to capture yield and diversify their portfolios.
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