Riyad Bank, one of the leading financial institutions in Saudi Arabia, announced its intention to redeem SAR 3 billion in Tier 2 sukuk five years before their maturity date. This decision is based on the bank's right to call the sukuk in accordance with the terms and conditions under which they were issued.
Details of the recovery process and timeline
In an official statement published on the Saudi Stock Exchange (Tadawul) website, the bank clarified that the sukuk in question (trading symbol: 1013) were issued on February 9, 2021, with a total nominal value of SAR 3 billion, and an original maturity period of ten years ending in 2031. However, the issuance terms allow the bank the right to redeem these sukuk in full at their nominal value (100% of the issuance price) at the end of the fifth year, which corresponds to February 9, 2026.
The bank indicated that the total number of sukuk to be redeemed is 3,000, and that all necessary regulatory approvals have already been obtained. The funds will be deposited into the sukuk holders' accounts on Monday, 21 Sha'ban 1447 AH, corresponding to February 9, 2026.
Financial context and the importance of Tier 2 sukuk
Tier 2 sukuk are a vital financial instrument used by banks to strengthen their capital base and support capital adequacy ratios in accordance with Basel III requirements and the Saudi Central Bank (SAMA). Banks typically issue these instruments with long maturities (such as 10 years) while retaining the option to redeem them after 5 years, giving them significant flexibility in managing their financial obligations and funding costs.
Riyad Bank's decision to redeem these sukuk on the first available call date reflects its strong financial position and its ability to manage its liquidity efficiently. This action also demonstrates the bank's proactive strategy in structuring its capital in line with economic changes and prevailing interest rates in local and global markets.
The implications of the decision on the market and investors
The sukuk and bond market in Saudi Arabia is one of the key pillars of the Financial Sector Development Program within the Kingdom’s Vision 2030. The commitment of major financial institutions such as Riyad Bank to repayment schedules and redemption options contributes to enhancing confidence in the Saudi financial market and attracting more local and foreign investments.
For investors and sukuk holders, this redemption represents a contractual obligation guaranteeing the return of capital on a specified date, allowing them to reinvest this liquidity in new investment opportunities within the market. Analysts affirm that such steps enhance the attractiveness of Saudi debt instruments as a safe and reliable investment option.
