Banque Saudi Fransi Plans $533m Sukuk By End-June

Banque Saudi Fransi (BSF) plans to sell a capital-boosting Islamic bond worth around SAR2 billion ($533 million), two banking sources aware of the matter said on Sunday, with a deal likely to happen by the end of June.

The Kingdom’s fourth-largest listed bank by assets has chosen its own investment banking arm, Saudi Fransi Capital, to arrange the transaction, the sources said, speaking on condition of anonymity as the information has not been made public.

An announcement that the bank plans to meet with Saudi fixed income investors to market the offering is expected before the end of May, with the bond completing some time next month, one of the sources, a banker in the Kingdom, added.

BSF could not be reached for comment.

The sukuk will enhance the bank’s Tier 2, or supplementary, capital.

The bank’s total capital adequacy ratio at the end of March, which combines both Tier 1 – or core – and Tier 2 capital, and is a key indicator of the bank’s financial health, stood at 15.57 per cent, down from 16.29 per cent at the same time last year, according to its latest financial statement.

While lenders in the Kingdom have high capital ratios compared to Western banks, due to the regulator’s conservative stance, a period of sustained lending growth has led many banks to sell capital-boosting sukuk to strengthen their reserves.

Bank lending growth to the private sector rebounded to 12.8 per cent year-on-year in March from a two-year low of 12.2 per cent in February, the latest central bank data said.

Saudi Investment Bank is expected to sell a subordinated sukuk in the first half of 2014 after picking the investment banking arm of Riyad Bank to arrange the deal, sources told Reuters in March. Its total capital adequacy ratio at the end of March was 15.63 per cent.

Meanwhile, National Commercial Bank, the Kingdom’s largest lender, sold a SAR5 billion subordinated sukuk in February.