Latest news with #SR3.72
Arab News
22-04-2025
- Business
- Arab News
Saudi Arabia raises $990m through April sukuk issuance
RIYADH: Saudi Arabia's National Debt Management Center raised SR3.71 billion ($990 million) through its riyal-denominated sukuk issuance for April, reflecting a 40.5 percent increase compared to the previous month, according to an official statement. The amount marks a significant rise from March, when the Kingdom secured SR2.64 billion through sukuk. In previous months, Saudi Arabia issued SR3.07 billion in February and SR3.72 billion in January, continuing a trend of strong activity in the domestic debt market. Sukuk are Shariah-compliant financial instruments similar to bonds, offering investors partial ownership in an issuer's assets. They are structured to adhere to Islamic finance principles, which prohibit interest payments. According to the NDMC, the April issuance was divided into four tranches. The first tranche was valued at SR1.31 billion and is set to mature in 2029. The second amounted to SR80 million, maturing in 2032, while the third tranche, worth SR765 million, will expire in 2036. The largest portion, valued at SR1.55 billion, is due in 2039. The Kingdom's debt market has seen rapid growth in recent years, drawing increased interest from investors seeking fixed-income instruments amid a global environment of rising interest rates. Earlier this month, a report by Kuwait Financial Center, known as Markaz, revealed that Saudi Arabia led the Gulf Cooperation Council region in primary debt issuances in the first quarter of the year. The Kingdom raised $31.01 billion from 41 offerings, accounting for 60.2 percent of all issuances across the GCC during that period. In a separate development, global credit rating agency S&P Global said Saudi Arabia's expanding non-oil sector and healthy sukuk issuance levels could contribute significantly to the growth of the global Islamic finance industry. The agency projected global sukuk issuance could reach between $190 billion and $200 billion in 2025, with foreign currency-denominated issuances contributing up to $80 billion, provided market volatility remains contained. A report published in December by Kamco Invest further projected that Saudi Arabia would account for the largest share of bond maturities in the GCC from 2025 to 2029, with a total of $168 billion expected to mature during that period.
Arab News
20-04-2025
- Business
- Arab News
Saudi Arabia leads GCC fixed income issuances in Q1: Markaz report
RIYADH: Saudi Arabia dominated the Gulf's primary debt market in the first quarter of 2025, raising $31.01 billion through 41 bond and sukuk issuances, a new analysis showed. According to the Kuwait Financial Center, also known as Markaz, the Kingdom accounted for 60.2 percent of total issuances across the Gulf Cooperation Council, reaffirming its status as the region's largest fixed income market. Despite its lead, Saudi Arabia's issuance volume declined 19.6 percent year on year from $38.55 billion in the first quarter of 2024. Overall, the GCC's primary debt issuances totaled $51.51 billion in the first quarter, marking a 7.1 percent decrease from the same period last year. 'As for issuer preferences, Q1 2025 saw an increased appetite for conventional bond issuances in the GCC, representing 65.5 percent of total issuances for the quarter,' Markaz noted. It added: 'This follows the same trend as in Q1 2024, where conventional bonds also represented the bulk of issuances, with 52.6 percent of all issuances in Q1 2024 being conventional bonds.' Regional outlook The Kingdom's debt market has grown significantly in recent years, driven by investor interest in fixed income amid rising interest rates. In February, Saudi Arabia raised €2.25 billion ($2.36 billion) through a euro-denominated bond sale, which included its inaugural green tranche, as part of its Global Medium-Term Note Issuance Program. The National Debt Management Center also completed a riyal-denominated sukuk issuance worth SR3.07 billion ($818 million) in February, following an issuance of SR3.72 billion in January. Following Saudi Arabia, the UAE ranked second with $10.17 billion raised from 29 offerings, representing a 19.7 percent market share. The UAE's issuances also surged 61.6 percent from the same period last year, according to Markaz. Qatar came third, raising $7.14 billion through 38 offerings, accounting for 13.9 percent of total issuances. Bahrain recorded issuances worth SR1.53 billion, a 44.5 percent drop year on year. Kuwait raised $1.41 billion from nine issuances, marking a 40.9 percent increase from the previous year. Omani entities issued just $260 million from one transaction, the lowest in the region, representing 0.5 percent of the total value. Issuances by type GCC corporate issuances totaled $32.11 billion in the first quarter, a 45.3 percent year-on-year increase. These made up 62.4 percent of total issuances. Government-related corporate entities raised $6.8 billion, accounting for 21.2 percent of corporate issuance. The report noted that total sovereign primary issuances in the GCC fell to $19.39 billion in the first quarter, marking a 41.8 percent decline from the same period last year. In December 2024, an analysis by Kamco Invest highlighted the growth of the region's debt market and projected that Saudi Arabia would account for the largest share of bond and sukuk maturities in the GCC, reaching $168 billion between 2025 and 2029. Kamco Invest added that maturities in the Kingdom would be driven primarily by government-issued bonds and sukuk, expected to total $110.2 billion during the period. In its latest report, Markaz noted that conventional issuances rose 15.8 percent year-on-year to $32.12 billion in the first quarter. In contrast, sukuk issuances declined 32.5 percent over the same period, totaling $17.75 billion. Sector breakdown The financial sector led bond and sukuk activity in the first quarter, raising $22 billion through 100 issuances — or 42.8 percent of the total. The government sector followed with $19.4 billion from 12 issuances, representing 37.6 percent of the market. The real estate sector raised $4.3 billion from five transactions. Maturity and currency profile Markaz said that primary issuances with tenors of less than five years accounted for 53.1 percent of the GCC debt capital markets in the first quarter, with a total value of $27.4 billion across 99 issuances. Issuances with tenors of five to ten years followed, raising $18.4 billion through 20 deals, representing 35.8 percent of the total. Offerings with maturities of 10 to 30 years made up 1.6 percent of the market in the first three months of the year, with a single issuance valued at $809 million. 'One issuance also came in with a maturity greater than 30 years, with a value of $1 billion. Finally, perpetual issuances saw an increase in both the size and number of issuances when compared to the first quarter of 2024, with a total value of $3.9 billion through 4 issuances,' Markaz added. In the first quarter of this year, GCC primary issuances ranged in size from $2 million to $5 billion. The report noted that issuances valued at $1 billion or more raised the largest share, totaling $31.9 billion across 18 offerings. This segment represented 61.9 percent of the total amount issued in the GCC during the same period. Issuances between $500 million and $1 billion followed, raising $14.4 billion through 22 deals. The highest number of issuances came in the under $100 million category, with 65 transactions collectively raising $1.9 billion during the first quarter. Markaz also highlighted that US dollar-denominated issuances dominated the bonds and sukuk primary market in the GCC, raising $44.9 billion through 92 offerings. These issuances accounted for 87.2 percent of the total value raised in the region. The second-largest currency for issuances was the euro, which raised $3 billion through four transactions. In February, credit rating agency Fitch projected that Saudi Arabia would play a key role in driving US dollar debt and sukuk issuance in 2025 and 2026, as the Kingdom's financial institutions and corporations continue to tap international debt markets for diversified funding sources. Fitch added that Saudi banks alone are expected to issue over $30 billion in dollar-denominated issuances this year. The agency further noted that Saudi banks have significantly expanded their international debt capital market activities since 2020, aligning with their growth strategies and foreign-currency requirements. Additionally, Fitch forecasted that Saudi Arabia's debt capital market would reach $500 billion by the end of 2025, supported by the Kingdom's economic diversification efforts under Vision 2030.
Arab News
21-03-2025
- Business
- Arab News
Saudi banks shift focus to debt markets during sukuk surge
RIYADH: As Saudi Arabia's financial system turns increasingly to debt markets for funding, it will face new opportunities and increased risk in relation to its stability and resilience, experts told Arab News. The growth of sukuk issuance and other debt market activities are essential to the Kingdom's economic diversification targets and objectives set out in the Vision 2030 initiative. Saudi Arabia raised SR2.64 billion ($704 million) through sukuk issuances in March, following the SR3.07 billion secured in February and SR3.72 billion in January. A report by Fitch Ratings in February showed that the Kingdom holds the largest share of the Gulf Cooperation Council's debt capital market — which itself surpassed the $1 trillion milestone at the end of January. This represented a 10 percent year-on-year growth across all currencies. Another report by Fitch earlier this year showed that Saudi Arabia became the largest dollar-denominated debt issuer in emerging markets — outside China — and the world's largest sukuk issuer in 2024. The Kingdom's debt capital market grew by 20 percent year on year in 2024, reaching $432.5 billion in outstanding debt. Funding uses Saudi Arabia uses sukuk issuance as a mechanism to finance giga-projects such as NEOM, the Red Sea, and Qiddiya, which collectively require hundreds of billions of dollars in funding. Ian Khan, a technology futurist and author, said this highlights the Kingdom's commitment to Islamic finance as a driver of sustainable development. 'Sukuk aligns with Vision 2030 by attracting both domestic and international ethical investors, particularly from markets in Southeast Asia, the Middle East, and North Africa. Additionally, sukuk's structure, which ties returns to tangible assets, ensures that funds are channeled into real economic activities such as renewable energy, infrastructure, and technology, all of which are cornerstones of Saudi Arabia's diversification agenda,' Khan said. 'Furthermore, by developing its domestic sukuk market, the Kingdom reduces its dependence on oil revenues, which currently account for over 50 percent of GDP,' he said. Khan emphasized that sukuk also supports green finance initiatives, with Saudi entities already issuing green sukuk to fund renewable projects such as the 300 MW Sakaka Solar Project. Risks and rewards According to Mohammad Nikkar, principal at Arthur D. Little Middle East, reports published by the Kingdom's central bank highlight the capitalization strength of the Saudi banking system. 'However, an overreliance on external funding such as debt markets could potentially weaken the credit quality of the banking system, highlighting the need for more prudent risk management,' he said. There is no doubt that as the focus shifts toward debt markets, new dynamics and opportunities emerge. 'As the sector progresses toward 2030 and beyond, the increasing reliance on debt markets necessitates continued regulatory vigilance and the implementation of robust risk management practices to maintain overall stability and resilience,' Nikkar said. Khan said that the Kingdom's sovereign bond issuances have been met with strong global demand, with oversubscriptions often exceeding several billion dollars, reflecting investor confidence in the country's economic reforms. 'However, the increasing exposure to external debt introduces risks, particularly if global interest rates rise or oil revenues fluctuate significantly,' he said. The author went on to emphasize that to address these challenges, the Saudi Central Bank is likely to strengthen regulatory frameworks and risk buffers, ensuring that banks maintain adequate capital and manage foreign currency risks effectively. According to Edmond Christou and Basel Al-Waqayan, analysts at Bloomberg Intelligence, the increasing reliance on debt markets will improve the resilience of Saudi Arabia's banking sector by diversifying funding sources and providing more stable capital to support long-term project financing. 'With banks managing significant duration and liquidity risks, stable funding is critical for driving growth in key sectors aligned with Vision 2030. Senior unsecured paper, for instance, are issued at an average spread of 90 basis points above benchmark treasuries, while subordinated AT1 bonds range between 150–200 basis points,' the analysts told Arab News in a joint statement. 'In 2024, Saudi banks raised approximately $11.5 billion in debt markets, and they are on track to exceed that figure as they continue to finance major projects,' they added. Martin Blechta, partner at Boston Consulting Group, explained that some of the largest and most recent issuances were done by AlRajhi Bank, Riyad Bank, and Banque Saudi Fransi, as well as Arab National Bank, Saudi Investment Bank, and Gulf International Bank, among others. For some, this was a first-time issuance. 'The increasing reliance on the debt market is an expected progression of the banking sector overall and very much on the strategic agenda of the Saudi Capital Market Authority aiming to expand the debt instrument market,' Blechta said. 'Additional Tier 1 capital plays an important role in the capital structure of leading international banks and the recent developments in the Saudi banking sector are very much in line with that.' Vision 2030 alignment From ADL's point of view, Nikkar explained that by fostering a robust debt capital market, the Kingdom enables growth of alternative sources of funding — a pillar of its National Investment Strategy and aligned with Pillar 1 of the Financial Services Development Program. The ADL partner added: 'This expansion not only opens the country to more investments from international investors but also provides new opportunities for domestic investors to participate in the investment drive fueled by the country's unprecedented infrastructure and flagship projects within Vision 2030.' Christou and Al-Waqayan from Bloomberg Intelligence argued that growing focus on sukuk issuance and debt market activities is pivotal to support Saudi Vision 2030's objectives of economic diversification and sustainable growth. 'A deeper and more developed local capital market attracts foreign investment flows, which are critical to supporting the Kingdom's expanding economy. Initiatives such as last year's Saudi ETF listing in Hong Kong and China, as well as the Lenovo deal are key to attract international capital,' the analysts said. Blechta from BCG noted that banks are diversifying funding sources to match the changing nature of government and large corporate financing needs. 'The majority of large-scale projects are in need of very long-term debt that is typically USD-denominated, to increase international investor demand. Banks are accordingly matching this demand on their funding side. Interestingly, most recent Saudi bank debt issuances were heavily oversubscribed, which shows strong investor confidence in the Saudi banking sector overall,' the partner said. 'However, most demand for the SAR denomination was still domestic, while the USD titles have seen more international investor uptake,' he added. Transformative effects on the Kingdom's financial landscape The accelerating trend of Saudi banks looking toward debt markets is set to transform the Kingdom's financial landscape, From ADL's perspective, Nikkar believes that this shift is likely to deepen the capital markets, enhance liquidity, and introduce a wider array of financial instruments to market participants, thereby attracting a more diverse group of investors. 'The Saudi debt capital market is poised to exceed SR2 trillion outstanding over the next few years, driven by government projects under Vision 2030, deficit funding, diversification efforts, and ongoing reforms,' he said. 'This substantial growth indicates a maturing financial market capable of supporting large-scale economic initiatives. Collectively these developments will foster a more dynamic and diversified financial services ecosystem in Saudi Arabia,' the ADL representative added. Additionally, the accelerated shift of Saudi banks toward debt markets will fundamentally transform the Kingdom's financial landscape by enabling greater sophistication, resilience, and competitiveness. From Khan's point of view, Saudi banks hold an average capital adequacy ratio that provides a strong foundation for leveraging debt markets without compromising financial stability. The shift coincides with the Kingdom's efforts to develop the domestic capital markets, as evidenced by initiatives such as the Saudi Stock Exchange reforms and the Financial Sector Development Program. Khan believes this trend is likely to have a transformative effect on the expansion of debt market instruments. 'Saudi banks are increasingly involved in issuing corporate bonds, sukuk, and hybrid instruments to diversify their funding sources. This diversification reduces reliance on short-term deposits, thereby enhancing long-term stability,' Khan said. The trend will also lead to greater integration with global markets, technology and innovation in finance, and enhanced environmental, social and governance alignment. On integration with global markets, Khan said: 'Participation in international debt markets has already attracted significant foreign investments. For instance, Saudi Arabia's $10 billion green bond issued in 2023 was oversubscribed threefold, reflecting investor confidence. This global integration will help Saudi banks build stronger partnerships and access lower-cost capital.' With regards to technology and innovation in finance, he believes the way debt instruments are issued and traded will be transformed, saying: 'The Kingdom is embracing fintech to streamline debt market activities. For example, digital sukuk issuance platforms and blockchain-based systems are being explored to enhance transparency and efficiency.' Khan added: 'The rise of ESG-focused investments, particularly green bonds and sukuk, will push Saudi banks to prioritize sustainable finance. This aligns with Vision 2030 goals of achieving net-zero emissions by 2060 and attracting investors who prioritize sustainability.' Bhavya Kumar, managing director and partner at BCG, believes that an increasing reliance on debt markets presents opportunities and risks for the Kingdom's banking sector. 'While it supports Saudi's broader economic goals under Vision 2030 by diversifying funding sources — reducing dependency on deposits, improving risk management practices required to meet international investor expectations, and fostering financial market development — it also introduces vulnerabilities related to market volatility, leverage, and systemic risks,' Kumar said.
Arab News
19-03-2025
- Business
- Arab News
Saudi Arabia raises $704m through sukuk issuances in March
RIYADH: Saudi Arabia has raised SR2.64 billion ($704 million) through sukuk issuances in March as the Kingdom continues to explore opportunities in debt markets to accelerate economic diversification efforts. The latest riyal-denominated offering follows an SR3.07 billion issuance in February and SR3.72 billion in January. Saudi Arabia also raised SR11.59 billion in December and SR3.41 billion in November. The Kingdom has been playing a pivotal role in the global sukuk market, leveraging debt sales to finance projects under its Vision 2030 economic transformation plan. According to a statement by Saudi Arabia's National Debt Management Center, the issuance for March was divided into four tranches, with the first one valued at SR364 million and set to mature in 2027. The second tranche has a value of SR316 million, due in 2029, while the third, at SR1.46 billion, is set to mature in 2032. The fourth tranche worth SR500 million will expire in 2039. Sukuk, a Shariah-compliant financing instrument, allows investors to hold partial ownership of an issuer's assets while adhering to Islamic finance principles. Saudi Arabia's debt market has seen significant growth in recent years, attracting investors' interest in debt instruments amid rising interest rates. In March, a report released by Kuwait Financial Center, also known as Markaz, said that Saudi-based primary issuances of bonds and sukuk led the Gulf Cooperation Council region in 2024, raising $79.5 billion through 79 issuances. Markaz added that the Kingdom contributed to 53.7 percent of the overall primary debt issuances in the GCC region in 2024. In February, Saudi Arabia also raised €2.25 billion ($2.36 billion) through a euro-denominated bond sale, including its first green tranche, as part of its Global Medium-Term Note Issuance Program. Affirming the growth of the market of such Islamic bonds, S&P Global, in January, said that global sukuk issuance is projected to hit between $190 billion and $200 billion in 2025, driven by increased activity in key markets, including Saudi Arabia and Indonesia. In December, another report released by Kamco Invest projected that the Kingdom is expected to witness the greatest share of bond and sukuk maturities in the GCC, reaching $168 billion from 2025 to 2029. According to Kamco Invest, Saudi Arabia's maturities will be led by government issuances that are projected to hit $110.2 billion during the period.
Arab News
19-02-2025
- Business
- Arab News
Saudi Arabia raises $818m in February sukuk sale
RIYADH: Saudi Arabia raised SR3.07 billion ($818 million) through its February sukuk issuance as the Kingdom continues to tap debt markets to support economic diversification efforts. The latest riyal-denominated offering, managed by the National Debt Management Center, follows a SR3.72 billion issuance in January. The Kingdom raised SR11.59 billion in December and SR3.41 billion in November, according to official data. Sukuk, a Shariah-compliant financing instrument, allows investors to hold partial ownership in an issuer's assets while adhering to Islamic finance principles. Saudi Arabia has been a key player in the global sukuk market, leveraging debt sales to finance projects under its Vision 2030 economic transformation plan. According to the NDMC, the February issuance was split into four tranches. The first, valued at SR585 million, matures in 2029, while the second, at SR1.70 billion, is set to mature in 2032. The third tranche, worth SR404 million, is due in 2036, and the final portion, totaling SR376 million, will expire in 2039. Saudi Arabia is expected to play a leading role in driving global debt and sukuk issuance over the next two years, Fitch Ratings said earlier this month. The Kingdom's financial institutions and corporations are increasingly turning to international debt markets to diversify their funding sources, the agency noted. A separate report by Fitch projected Saudi Arabia's debt capital market to reach $500 billion by the end of 2025, supported by a growing pipeline of infrastructure and development projects. The Kingdom is also set to lead bond and sukuk maturities in the Gulf region, with redemptions expected to total $168 billion between 2025 and 2029, according to a December report by Kamco Invest. Government-issued debt will account for the largest share, with maturities projected to reach $110.2 billion during the period. Across the Gulf Cooperation Council, the debt capital market surpassed the $1 trillion mark in outstanding issuances by the end of November, Fitch said in a separate report. Meanwhile, global sukuk issuance is forecast to range between $190 billion and $200 billion in 2025, driven by activity in key markets such as Saudi Arabia and Indonesia, according to S&P Global. The credit rating agency reported that global sukuk sales totaled $193.4 billion in 2024, slightly down from $197.8 billion in 2023.
