Union National Bank considers bond sale

10 August 2016

Abu Dhabi-based lender may sell benchmark-sized bond in third quarter of this year

Abu Dhabi-based Union National Bank (UNB) is considering the sale of a potentially benchmark-sized bond this year.

The lender, which is 50 per cent owned by Abu Dhabi government, is speaking with banks, people aware of the matter have told news agency Reuters.

The size of UNB’s issue is still uncertain, but it is likely to be benchmark-sized, which usually refers to at least $500m and it will under the lender’s existing $3bn bond programme. The lender is said to be preparing a final list of arranging banks for the issue, which would likely take place during the third quarter.

UNB, which is the fifth-largest bank in Abu Dhabi by assets, last raised money in October 2015, when it completed a $750m three-year loan. The deal was arranged by Commerzbank, First Gulf Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered. The last three lenders, along with Deutsche Bank and Citigroup, helped arrange the lender’s last foray into the bond market in late 2012.

UNB chief executive Mohammad Nasr Abdeen in February said that the bank could tap the debt market in 2016 to shore up deposit levels, which were expected to remain stable, according to the report.

The lender recorded a 17.3 per cent year-on-year drop in net profit for the second quarter of this year, citing pressure on the net interest income on the back of higher cost of deposits.

Banks and sovereigns in the Gulf region are lining up to secure funds from debt markets as the cost of borrowing remains relatively low ahead of a possible interest rate hike by US Federal Reserve. Financial Institutions are struggling with tightening liquidity and slower deposit growth. The regional governments, which rely heavily on the sale of hydrocarbons for revenues, are raising capital to help plug the widening budget deficits on the back of despressed oil prices.

The Bahraini government is the latest to hold talks with banks to raise funds through the sale of benchmark-sized eurobonds later this year.

Oman in June raised $2.5bn through the sale of dual-tranche bonds, while Qatar secured $9bn in a three-tranche bond offering in May. Saudi Arabia is looking to raise as much as $15bn from a bond offering later this year. In April, Riyadh also agreed terms with a group of international lenders for a $10bn loan, its first sovereign debt in at least 15 years.

Abu Dhabi, the biggest emirate in the UAE, launched a two-part $5bn bond, while Kuwait has indicated interest in tapping capital markets to raise funds.

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