Coverage: weekly note · Information to 25 July 2024
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TGB Weekly Research Note · 25 July 2024
Saudi Arabia placed SAR 36.2bn of riyal sukuk and a USD 5bn international sukuk in the first half of 2024, while UAE banks met deep hard-currency demand.
The desk view
Among the deals reviewed here, Saudi government borrowing was by far the largest source of sukuk supply in the first half of 2024, about USD 14.6bn at the NDMC's own conversion rate. Its six monthly riyal issues and a USD 5bn international sukuk together equalled 64% of the SAR 86bn financing need set in January, and in April the NDMC said 2024 funding could reach SAR 138bn. In the UAE, the federal government, Dubai Islamic Bank and Emirates Islamic all issued, and outstanding sukuk listings in Dubai stood at USD 93bn in early June. Hard-currency order books in our sample ran from just over 1.9x for Indonesia to 4x for Saudi Arabia. Our reading is that Saudi sovereign funding set the scale of supply in this sample, while UAE banks used the window for sustainability-labelled paper.
Saudi Arabia's financing plan sets the volume
The 2024 Annual Borrowing Plan, approved on 4 January 2024, put Saudi financing needs at about SAR 86bn, covering debt maturities and the expected budget deficit, and projected total debt of SAR 1,115bn by the end of 2024. Monthly riyal sukuk issues ranged from SAR 8.825bn in January to SAR 3.232bn in May, for a first-half total of SAR 36.2bn.
On 29 May 2024 the NDMC added a USD 5bn international sukuk, equivalent to SAR 18.75bn, split into USD 1.25bn, USD 1.5bn and USD 2.25bn tranches maturing in 2027, 2030 and 2034. The longest tranche was the largest, at 45% of the deal. It called this the Kingdom's first triple-tranche international sukuk and part of a strategy to widen the investor base. Orders reached about USD 20bn, four times the issue.
The ceiling had already risen: on 24 April 2024 the NDMC said 2024 funding could reach up to SAR 138bn, above the borrowing plan, to capitalise on market opportunities, finance the coming year early, bolster reserves or speed up Vision 2030 projects. That leaves room for further sovereign supply.
Saudi riyal sukuk issuance by month, 2024, SAR bn
Source: NDMC, Saudi Arabia, January 2024 riyal sukuk issuance closure, 16 January 2024; NDMC, Saudi Arabia, February 2024 riyal sukuk issuance closure, 13 February 2024; NDMC, Saudi Arabia, March 2024 riyal sukuk issuance closure, 19 March 2024; NDMC, Saudi Arabia, April 2024 riyal sukuk issuance closure, 24 April 2024; NDMC, Saudi Arabia, May 2024 riyal sukuk issuance closure, 21 May 2024; NDMC, Saudi Arabia, June 2024 riyal sukuk issuance closure, 25 June 2024.
UAE government and bank issuance
The UAE federal government issued AED 2.8bn of Treasury Sukuk on 11 January 2024 at a fixed 4.12%, maturing in 2029. Dubai Islamic Bank priced a USD 1bn five-year sustainable sukuk on 27 February 2024 at 5.243%, 95bp over US Treasuries, with orders above USD 2.5bn. The bank said this was its third sustainable sukuk and the largest sustainable issue by a Middle East financial institution in nearly a year. Emirates Islamic followed with a debut USD 750mn sustainability sukuk at 5.431%, 100bp over Treasuries, 2.8 times covered, with 44% of orders from outside MENA. Its spread was 5bp wider than Dubai Islamic Bank's in February. Both UAE bank deals carried sustainability labels.
Emirates Islamic listed the sukuk on Nasdaq Dubai, its fourth sukuk listing there, taking the bank's total to USD 2.02bn. Outstanding sukuk listings in Dubai stood at USD 93bn on 5 June 2024, 44% by value from UAE issuers, about USD 40.9bn.
Hard-currency demand stayed deep
The Islamic Development Bank raised USD 2bn over five years on 8 May 2024 at 4.754%, or 50bp over the five-year SOFR mid-swap. It placed 58% of the deal in MENA and 60% with central banks and official institutions. On 25 June 2024 Indonesia priced a USD 2.35bn global sukuk, including a 30-year green tranche, at 5.10% to 5.50%, with USD 4.5bn of final orders. Middle East and Malaysian investors took 58% of the 10-year tranche, and it will list on NASDAQ Dubai as well as in Singapore.
For bank treasurers, the half suggests that investor demand was not the constraint on hard-currency sukuk: every deal here with a published order book was covered more than 1.9 times.
Selected sukuk, first half of 2024
| Issuer | Date | Size | Profit rate | Orders |
|---|---|---|---|---|
| Saudi Arabia | 29 May 2024 | USD 5bn | Not stated | c. USD 20bn |
| IsDB | 8 May 2024 | USD 2bn | 4.754% | Not stated |
| UAE federal government | 11 January 2024 | AED 2.8bn | 4.12% | Not stated |
| Dubai Islamic Bank | 27 February 2024 | USD 1bn | 5.243% | Over USD 2.5bn |
| Emirates Islamic | 5 June 2024 (listing) | USD 750mn | 5.431% | Over USD 2.10bn |
| Indonesia | 25 June 2024 | USD 2.35bn | 5.10-5.50% | USD 4.5bn |
Source: NDMC, Saudi Arabia, USD 5bn trust certificates issuance, 29 May 2024; IsDB, USD 2bn sukuk press release, 8 May 2024; UAE Ministry of Finance, Treasury Sukuk final terms, 11 January 2024; Dubai Islamic Bank, sustainable sukuk press release, 27 February 2024; Emirates Islamic, Nasdaq Dubai listing press release, 5 June 2024; Indonesia Ministry of Finance, global sukuk press release, 25 June 2024.
What to watch
- Rest of 2024: Saudi funding of up to SAR 138bn, above the SAR 86bn in the borrowing plan.
Primary sources: NDMC, Saudi Arabia, January 2024 riyal sukuk issuance closure, 16 January 2024; NDMC, Saudi Arabia, USD 5bn trust certificates issuance, 29 May 2024; Dubai Islamic Bank, sustainable sukuk press release, 27 February 2024; Emirates Islamic, Nasdaq Dubai listing press release, 5 June 2024; NDMC, Saudi Arabia, February 2024 riyal sukuk issuance closure, 13 February 2024; NDMC, Saudi Arabia, March 2024 riyal sukuk issuance closure, 19 March 2024; NDMC, Saudi Arabia, April 2024 riyal sukuk issuance closure, 24 April 2024; NDMC, Saudi Arabia, May 2024 riyal sukuk issuance closure, 21 May 2024; NDMC, Saudi Arabia, June 2024 riyal sukuk issuance closure, 25 June 2024; IsDB, USD 2bn sukuk press release, 8 May 2024; Indonesia Ministry of Finance, global sukuk press release, 25 June 2024; NDMC, Saudi Arabia, 2024 Annual Borrowing Plan approval, 4 January 2024; UAE Ministry of Finance, Treasury Sukuk final terms, 11 January 2024.