Emirates Islamic Bank, majority-owned by Dubai’s biggest lender Emirates NBD, has seen its inaugural dirham-denominated sukuk oversubscribed, highlighting strong demand for local fixed income products in the UAE. 

The lender confirmed late Wednesday that it has just successfully priced its sukuk offering, which was oversubscribed 2.5 times.  Valued at AED 1 billion ($272.3 million), the new sukuk is a first of its kind issued by a bank in the UAE. 

The strong order book allowed the bank to tighten the profit rate to 5.05%, at a spread of 67 basis points, Emirates Islamic Bank said in a statement. 

Global sukuk issuance has fallen in recent years due to a decline in foreign-currency-denominated instruments. According to S&P, sukuk issuance in Saudi Arabia alone dropped from $39.6 billion in 2021 to $33.3 billion in 2022. 

The trend is expected to continue this year, with the total issuance forecast to reach $150 billion, compared with $155.8 billion in 2022 and $170.4 billion in 2021. 

Strong appetite 

According to Salah Amin, CEO of Emirates Islamic, there is a strong appetite for dirham-denominated fixed income products and services in the UAE, as demonstrated by the bank’s latest sukuk offering. 

“The robust demand is also a strong vote of confidence from global Shariah-compliant investors,” Amin said. 

“The strong demand for the sukuk reflects the healthy appetite among Shariah-compliant investors for a dirham-denominated issue,” added Mohammad Kamran Wajid, Deputy CEO of Emirates Islamic. 

Just last month, Emirates NBD successfully priced its inaugural AED 1 billion dirham-denominated bond. Since May last year, the UAE’s Ministry of Finance has also issued a total of AED 9 billion in bonds in two, three and five-year tenors. 

(Writing by Cleofe Maceda; editing by Daniel Luiz )