DUBAI: Emirates NBD (ENBD), Dubai’s largest lender, plans to sell a benchmark-sized capital-boosting bond, a document from lead managers said yesterday, looking to take advantage of favourable markets to strengthen its reserves.
ENBD has chosen Citigroup, Commerzbank, Deutsche Bank, Morgan Stanley, Standard Chartered and its own investment banking arm to arrange investor meetings ahead of a potential issue, the document said, confirming what banking sources told Reuters earlier yesterday.
The US dollar-denominated bond, which will boost the bank’s Tier 1 - or core - capital, will have a perpetual tenor which can only be redeemed by the bank after six years and be of benchmark size — traditionally understood to mean worth upwards of $500m.
ENBD was taking the opportunity to secure higher quality Tier 1 capital after repaying all its UAE Ministry of Finance capital support earlier this year, as well as responding to the global demand for banks to hold more capital, it said in an investor presentation.
“Banks globally have increased Tier 1 ratios in the last few years in response to regulatory changes (Basel III) and financial markets’ expectations of stronger balance sheets,” the presentation said.
It is the second time in 18 months that the bank has sold a bond which enhanced its Tier 1 capital. In May 2013, ENBD priced a $1bn offering with a 5.75 percent coupon. The bond was trading to yield 5.795 percent on the bid side at 1215 GMT, according to Thomson Reuters data.
The bank repaid the final tranche of government support worth a total Dh12.6m ($3.43bn) in July, part of a Dh70bn package of support given to all lenders in the United Arab Emirates in 2008 during the global financial crisis.
Roadshows for the new bond will be held in the UAE on Thursday, London and Hong Kong on September 8 and Singapore on September 9, lead managers said.
ENBD has rebuilt its profitability in recent quarters after a real estate crash and sovereign-related debt crisis in Dubai towards the end of the last decade forced it to take significant provisions for bad loans.
Impairments have remained high in 2014 as the bank set aside cash as a buffer against potential problems in the future, but a rebounding local economy has helped ENBD’s profitability jump compared to last year.
ENBD’s Tier 1 capital ratio stood at 15.6 percent at the end of June. Such a level is in line.
However, the bank “intends to maintain above-average capitalisation levels”, the presentation said. ENBD’s finance head, Surya Subramanian, has said on a number of occasions this year the bank had no plans to raise capital unless an opportunity arose to do so cheaply.
Reuters
