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Wednesday April 25, 2012

Al Rajhi plans maiden sukuk for M’sian ops


KUALA LUMPUR: Saudi Arabia’s Al Rajhi Bank, the world’s largest Islamic lender, is turning to the ringgit-denominated debt market for its debut sukuk sale to fund the opening of new branches in Malaysia.

The Riyadh-based bank was considering the issuance as it planned a 20% increase in annual profits in the country by adding to 23 existing outlets, Azrulnizam Abdul Aziz, chief executive officer of Al Rajhi’s Malaysian unit, said in an interview.

The lender, which has never sold debt since it was founded 60 years ago, would also expand underwriting, said Mudassir Amray, head of wholesale banking in Kuala Lumpur.

Azrulnizam says the bank plans to focus on corporate financing and introduce innovative new products such as structured deposits this year. – Bernama

The lender would join Persian Gulf issuers such as Islamic Development Bank, Abu Dhabi National Energy Co and Gulf Investment Corp in selling ringgit securities in the largest Islamic bond market, diversifying borrowing away from dollars.

Ringgit sukuk offers higher yields, with benchmark Malaysian three-year government notes yielding 3.25%, compared with 1.89% for similar-maturity dollar bonds.

“High-quality credits from the Gulf Cooperation Council have been well-received in the ringgit sukuk market, with the added benefit of an ever-growing Islamic liquidity base that has substantial breadth and depth,” Malek Khodr Temsah, vice-president of treasury and investment at Albaraka Banking Group BSC in Manama, Bahrain, said by e-mail on April 22.

“Added volatility and uncertainty in global dollar markets is also pushing regional borrowers to tap non-dollar funding in Asia.”

Malaysia’s syariah-compliant banking assets grew an average 21% in the past five years to an all-time high of RM435bil in 2011, according to the central bank’s annual report.

The nation accounted for 73% of global Islamic bonds outstanding, while the size of the sovereign and corporate sukuk market stood at RM353bil compared with RM120bil in 2005, the central bank said.

Yields on Malaysia’s sovereign sukuk maturing in 2015 and used as a benchmark for pricing corporate notes reached a record-low 3.14% on Feb 15, according to Bank Negara data. Al Rajhi Bank Malaysia was given a licence to operate an Islamic bank in 2006.

It currently has RM6.5bil of assets and more than 145,000 customers, Azrulnizam said.

The lender is rated A1 by Moody’s Investors Service and A+ by Standard & Poor’s, the fifth-highest investment grades.

The bank planned to focus on corporate financing and introduce innovative new products such as structured deposits this year, Azrulnizam said. – Bloomberg

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