Bank Al-Jazira, one of the leading Sharia-compliant banks in Saudi Arabia, announced the launch of its Tier 1 Additional Capital Sukuk (T1S) denominated in Saudi Riyals. This issuance is part of the bank's previously approved Tier 1 Sukuk issuance program, with a total value of up to SAR 5 billion.
In an official statement published on the Saudi Stock Exchange (Tadawul) website, the bank clarified that the offering period began on February 24 and will continue until March 16. This issuance targets qualified investors in the Kingdom, reflecting the sophisticated nature of these financial instruments, which require significant investment expertise and knowledge.
General context and the importance of capital enhancement
The issuance of these sukuk comes within a strategic framework aimed at strengthening the bank's capital base, which is vital for bolstering its financial solvency and its ability to withstand economic challenges and comply with stringent regulatory requirements. Tier 1 sukuk are an important financial instrument for banks and financial institutions, as they are classified as part of the bank's core capital, directly contributing to improving the capital adequacy ratio (CAR) according to the Basel III standards implemented by the Saudi Central Bank (SAMA).
Historically, the Saudi banking sector has witnessed an increasing trend towards issuing debt instruments, including sukuk, to diversify funding sources and support ambitious growth plans in line with the Kingdom’s Vision 2030. Through these issuances, banks seek to finance mega-projects in diverse sectors such as real estate, infrastructure, renewable energy, and entertainment.
Details of the offering and its expected impact
Bank Al-Jazira has set the minimum subscription amount for these sukuk at SAR 1 million, noting that the final offering size and terms, including the expected return, will be determined based on prevailing market conditions during the offering period. Al-Jazira Capital and Al Rajhi Financial have been appointed as joint lead managers and bookrunners for the institutional subscription.
These sukuk are perpetual, with an option for early redemption by the bank after five years from the issuance date, subject to specific conditions detailed in the underlying memorandum. Domestically, this move will enable Bank Al-Jazira to enhance its lending capacity and offer more innovative financing products to its individual and corporate clients. Regionally, this issuance strengthens the depth of the Saudi sukuk market, which is the largest and most active in the world, and underscores the attractiveness of the Kingdom's investment environment for investors seeking Sharia-compliant opportunities.
