Dubai Islamic Bank carries out rights issue to enhance liquidity

Dubai Islamic Bank (DIB) has completed a AED 5.1 billion ($1.4 billion) rights issue.

The bank, rated A3/A3 stable, by Moody’s, has closed the subscription for an approximately AED5.1 billion ($1.4 billion) rights issue on 30 May 2018 that increases total shareholder equity to AED 31.2 billion from AED 26.1 billion as of March 2018.

According to a commentary, the ratings agency highlighted that the capital increase is credit positive for DIB because it replenishes reserves and enhances the bank’s liquidity and loss-absorption buffers after high growth during 2013-17.

The approximately 1.6 billion new shares had a face value of AED 1 per new share and a premium of AED 2.11 per share, raising the issue price to AED 3.11 per new share. As a result of this rights issue, Moody’s estimate that DIB’s pro forma ratio of consolidated tangible common equity to risk-weighed-assets will improve to around 12.9 per cent from 9.9 per cent as of March 2018 and reverse a declining trend in the core equity ratio since 2016, when the bank raised AED3.2 billion of additional capital through a rights issue.

Additionally, the new capital will also increase the bank’s reported Tier 1 capital ratio to 16.6 per cent from 13.6 per cent as of the same date. A 16.6 per cent Tier 1 capital ratio significantly exceeds the 11 per cent regulatory minimum, which includes hybrid Additional Tier 1 Sukuk instruments comprising around 3.5 per cent of total assets as of March 2018.

Disclaimer: The content of this article is syndicated or provided to this website from an external third party provider. We are not responsible for, and do not control, such external websites, entities, applications or media publishers. The body of the text is provided on an “as is” and “as available” basis and has not been edited in any way. Neither we nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this article. Read our full disclaimer policy here.