(MENAFN - Khaleej Times) Abu Dhabi Islamic Bank's debut perpetual sukuk have rallied since their sale last month on bets the lender is well positioned to capitalise on the emirate's economic upturn, even as debt of emerging market peers dropped.
The world's first dollar-denominated Islamic notes that don't mature yielded 6.05 per cent on Thursday, down 33 basis points, or 0.33 percentage point, since their November 8 issuance, according to data compiled by Bloomberg. Over the same period, the average yield on HSBC/Nasdaq Dubai's US Dollar Sukuk Financial Services Index gained 17 basis points to 2.9 per cent.
ADIB, the second-biggest lender complying with Muslim banking rules in the UAE, sold 1 billion of so-called hybrid Tier-1 bonds to boost capital as it seeks to expand loan growth from this year's five per cent. Lending opportunities are climbing in Abu Dhabi as the government forecasts economic growth will accelerate to 5.7 per cent a year through 2016.
The bank's debt "outperformed the sector, benefiting from its strong position in the Abu Dhabi retail market," Apostolos Bantis, a credit analyst at Commerzbank AG in London, said by e-mail on December 17.
Lenders hold Tier 1 capital, which includes common stock, retained earnings and perpetual preferred stock and debt, to guard against unexpected losses. ADIB's notes also beat other perpetual bonds in the period, with the effective yield on Bank of America Merrill Lynch's Perpetual Preferred Securities Index rising 20 basis points to 4.85 per cent.
Abu Dhabi is home to about six per cent of proven global oil reserves. The pickup in economic growth from an estimated 3.9 per cent this year will happen amid government plans to diversify away from oil by investing in metals, chemicals and the arts, including branches of the Guggenheim and Louvre. If the government meets its 2013 target, growth will exceed expansion in Saudi Arabia and Qatar of 3.9 per cent and five per cent, respectively, estimates compiled by Bloomberg show.
ADIB is poised to benefit from its link to the AA-rated government, said Aliasgar Tambawala, a fixed-income investment manager at Mashreq Capital DIFC Ltd. The Abu Dhabi Investment Council, a sovereign wealth fund, owns 7.6 per cent of the lender.