Saudi British Bank Prices SAR1.5bn Capital-Boosting Sukuk

Saudi British Bank (SABB), an affiliate of HSBC Holdings, has completed a SAR1.5 billion ($400 million) capital-boosting sukuk issue, it said on Wednesday.

The Islamic bond has a lifespan of seven years, with a clause allowing the bank to redeem the paper after five years, and was priced at 1.4 per cent over the six-month Saudi interbank offered rate (Saibor), the bourse filing said.

The subordinated offering will improve the Tier 2 – or supplementary – capital of Saudi Arabia’s fourth-largest listed lender by market value, although no specifics were given.

SABB’s total capital ratio – combining core Tier 1 and supplementary Tier 2 capital – was one of the lowest among banks in the Kingdom at the end of June, at 14.78 per cent.

Reuters had reported in August that SABB was looking to sell a capital-boosting sukuk before the end of the year and that HSBC was advising it on the issue.

SABB is the latest Saudi bank to boost its capital through the sale of debt instruments; while the Kingdom’s lenders are well capitalised compared to their Western peers, a sustained period of high loan growth has put downward pressure on their capital positions.

Earlier this week, Saudi Hollandi Bank priced a SAR2.5 billion, 10-year subordinated sukuk at 1.55 per cent over Saibor.