RPT - DIB sets sustainable first

2 min read
EMEA, Emerging Markets
Robert Hogg

Dubai Islamic Bank set a new precedent for the UAE by becoming the first bank from the country to print a sustainable sukuk, when it sold a US$750m five-year senior unsecured on Tuesday.

DIB followed up the publication in October of its sustainable finance framework by the sale of the sukuk, which attracted a book that peaked at over US$1.6bn. A banker familiar with the matter said the success of the sale meant DIB was considering all future issuance to be in ESG format.

DIB sold the note at 155bp over Treasuries, after a 20bp move from IPTs. Leads had circulated pricing comparables, including DIB sukuk due February 2027, which on Tuesday was bid at a G-spread of plus 133bp, according to Refinitiv. Other notes from GCC banks due in 2027, including bonds in green and conventional format, as well as sukuk, were seen at spreads from 110bp to 140bp.

"Our interest in the new issue will likely not be meaningful for us as the guidance does not offer enough of a concession over the existing curve," said Faisal Ali, a senior portfolio manager at Azimut, after books opened. "We will look to pick up the bonds should we see weakness in the secondary markets."

But many other buyers came in, and Ali sees DIB as an attractive credit. DIB is the second-largest Islamic bank in the world and the largest Islamic bank in the UAE by assets. It is rated A3 by Moody's and A by Fitch.

"We like DIB’s credit profile which is benefiting from Dubai’s economic growth," he said. "DIB senior bonds, along with most other senior bonds issued by GCC banks, trade cheap for the rating. However, we see limited catalysts for outperformance as DIB is a frequent issuer in the Eurobond market, which limits scope for spread tightening given lukewarm demand for EM debt this year."

Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, KFH Capital, HSBC, Sharjah Islamic Bank and Standard Chartered Bank were lead managers and bookrunners.