GCC Banks Accelerate Toward USD‑Denominated AT1 Sukuk Surge

Arabian Post

a day ago

Sharjah Islamic Bank and Warba Bank have spearheaded a flurry of USD‑denominated Additional Tier 1 sukuk issuances across the Gulf Cooperation Council, as institutions capitalise on narrower spreads, robust investor demand and abundant liquidity to bolster capital under Basel III norms. Sharjah Islamic priced a US$500 million perpetual issuance with a six‑year non‑call period at 6.125%, tightening from initial guidance of 6.5%, after books exceeded US$1 billion.
Simultaneously, Kuwait's Warba Bank concluded a US$250 million AT1 sukuk issuance, re‑offering at a 6.25% yield—also tightened from initial guidance of 6.5%. The instrument, based on a perpetual structure with a 5.5‑year non‑call window, follows Warba's major equity move: the acquisition of a 32.75% stake in Gulf Bank from Alghanim Trading and a KWD 436.7 million rights issuance completed in April.
Sharjah Islamic Bank's listing on Nasdaq Dubai marks its fifth sukuk issuance, raising its total sukuk portfolio on the exchange to US$2.5 billion. The deal attracted strong interest from regional and international investors, reinforcing Dubai's growing role as a nexus for Islamic capital. The transaction's pricing depth, with a reset spread of 195.6 basis points—125.7 bps tighter than its 2019 equivalent—highlights an improved cost of capital.
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Analysts attribute this wave of AT1 issuances to an increasingly mature Islamic fixed‑income market. GCC banks are under pressure to meet Basel III capital thresholds while tapping investor appetite for Sharia‑compliant instruments amid a global shift towards ethical finance. The depth and oversubscription observed signal confidence in GCC financial stability and growth trajectories.
Banking insiders view Sharjah Islamic's move as emblematic of a broader trend. Its programme is now a benchmark in AT1 pricing within the Islamic sukuk arena, and the issuance is being seen as a signpost to other regional banks eyeing capital diversification. Global Capital, a financial news provider, has reported that Warba's issuance helped catalyse the broader GCC AT1 market, with Saudi banks preparing similar deals.
Warba Bank's issuance was structured via Warba Tier 1 Sukuk Limited, and it is dual‑listed on the London Stock Exchange's International Securities Market and Nasdaq Dubai. The sukuk follows a Mudaraba structure and was syndicated by joint global coordinators and bookrunners including Emirates NBD Capital, Standard Chartered, Abu Dhabi Commercial Bank and HSBC.
The financial backdrop has been supportive: increasing liquidity in global markets, stable benchmark yields in the US, and sustained inflows into Islamic finance vehicles. Sharjah Islamic underscores its confidence in long‑term strategy, stating the issuance supports its capital base aligned with Basel III standards ‫. Meanwhile, Warba's move is synchronised with its stake acquisition in Gulf Bank, reflecting a broader expansion and capital optimisation strategy.
Investor sentiment continues to favour GCC issuers. Demand for Sharia‑compliant fixed‑income paper is rising, particularly from European institutional investors and Islamic funds, seeking diversification. Sharjah's issuance was oversubscribed by over two‑times its size, with participation spanning the GCC, Europe and Asia. Gulf markets are responding in kind: Saudi banks are preparing their own AT1 sukuk to finalise in the coming months, encouraged by the positive reception to these pricings.