Al Rajhi Bank, one of the world’s largest Islamic banks by market capitalization and assets, announced its intention to issue additional Tier 1 capital sukuk denominated in US dollars. This announcement is a strategic step aimed at strengthening the bank’s financial position and diversifying its funding sources, under its international capital sukuk program established on April 18, 2024, and pursuant to the Board of Directors’ resolution dated March 25, 2024.
In a statement published on the Saudi Stock Exchange (Tadawul) website, the bank explained that the offering will be conducted through a Special Purpose Vehicle (SPV), targeting qualified investors both within and outside the Kingdom of Saudi Arabia. The bank has appointed a strong banking consortium to manage this potential issuance, comprising Al Rajhi Capital, Goldman Sachs International, HSBC, Morgan Stanley, Standard Chartered Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, Mashreq Bank, Nomura, and Warba Bank as joint lead managers, in addition to appointing Aveen Bank as a co-manager.
This step is of paramount importance in the context of the current economic landscape of the Kingdom of Saudi Arabia, as national banks seek to strengthen their capital bases to keep pace with the increasing demand for credit, especially with the accelerating pace of implementation of major projects related to the Kingdom’s Vision 2030. Issuing Tier 1 sukuk is a vital financial instrument that enables banks to increase their lending capacity and growth without directly affecting the equity of existing shareholders, and it also enhances the stability of the banking sector and its compliance with Basel III capital adequacy requirements.
Internationally, Al Rajhi Bank's recourse to global debt markets reflects the strong confidence that foreign investors have in the Saudi economy and Saudi financial institutions. Furthermore, choosing the US dollar as the issuance currency contributes to attracting a wider range of international investors seeking Sharia-compliant investment instruments with attractive returns and manageable risk.
The bank indicated that the final value and terms of the offering will be determined based on market conditions at the time of issuance. This offering primarily aims to enhance Tier 1 capital for general banking purposes, as well as to meet the bank's financial and strategic objectives in accordance with its sustainable financing framework, reflecting Al Rajhi's commitment to environmental, social, and governance (ESG) standards in its financing operations.
