UAE's RAK Bank eyes benchmark-sized debut bond issue

National Bank of Ras Al Khaimah joins others from the Gulf Arab state in tapping bond markets
RAK Bank
By Reuters
Mon 09 Jun 2014 05:16 PM

UAE-based lender National Bank of Ras Al Khaimah (RAKBANK) may sell a benchmark-sized debut bond issue after announcing plans to meet fixed income investors, a document from lead managers said on Monday.

RAKBANK, rated BBB+ by Fitch, joins others from the Gulf Arab state in tapping bond markets at a time when borrowing costs have tightened thanks to increased interest from foreign investors and turmoil in other emerging markets.

Both Emaar Malls Group, a unit of Dubai's largest listed developer Emaar Properties, and telecom operatorEtisalat conclude investor meetings on Tuesday, with the latter expected to price one of the largest ever bond deals by a Gulf corporate.

The bank, the sixth-largest by market value listed on the Abu Dhabi stock exchange, has chosen National Bank of Abu Dhabi and Standard Chartered to arrange roadshows.

Investor meetings are set for the UAE on June 11, followed by Singapore on June 13 and London on June 16, a separate document from lead managers said.

A benchmark-sized, dollar-denominated bond issued through the Rakfunding Cayman Ltd special purpose vehicle may follow, subject to market conditions. Traditionally, benchmark size is understood to mean at least $500 million.

Just over 50 percent owned by the government of Ras al-Khaimah, one of the seven emirates which make up the UAE, RAKBANK is primarily focused on retail banking, with the lender deriving 91 percent of its operating income in 2013 from the area, an investor presentation, obtaining by Reuters, showed.

This strong customer base has been the source of much of the bank's finance in the past, with deposits providing 75 percent of its funding needs at March 31, the presentation said.

The bank's Tier 1 - or core - capital ratio stood at 27.6 percent at the end of the first quarter, much higher than most banks in the UAE and well ahead of Western lenders.

Recently, the lender, with a market capitalisation of $3.8 billion, received approval to lift its foreign ownership cap to 40 percent from 20 percent. A number of companies in the country have been doing this in recent months after the UAE's inclusion in the MSCI emerging markets index.

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