DOHA: Qatar’s Islamic banks will continue to maintain strong credit growth and are expected to become more active issuers of sukuk over the next few years. A double-digit growth in issuance by the Gulf corporate and infrastructure entities are expected to boost the Global Sukuk Market in 2014, Stand & Poor’s Rating Services said in its “Outlook for Global Sukuk Market in 2014” released yesterday.
S&P contends that there are two main regions for sukuk issuance in 2014. The first is Asia, particularly Malaysia. The second is Gulf Cooperation Council. After a slowdown in 2013, with sukuk volumes globally declining by 13 percent, S&P anticipates that the sukuk industry will expand again in 2014, partly driven by corporate and infrastructure issues in the Gulf. Global growth in sukuk issuance could be further supported through meeting the high demand for infrastructure spending across the GCC, where the S&P expects issuance to continue climbing at a double-digit pace in the next two years.
The ratings agency forecasts that oil prices will remain close to $100 per barrel. It foresees good economic prospects in major Gulf countries, which should translate into lending and balance sheet growth opportunities for the banks. “This in turn should trigger some issuance in the debt capital markets issuance from Saudi Arabia, as well as key hydrocarbon exporters with large infrastructure needs such as the UAE and Qatar, should benefit from a robust economy in 2014”, the report noted.
Traditionally, financial institutions in the UAE and Saudi Arabia have led Sukuk issuance in the Gulf with sporadic issues from Qatar. In 2013, two conventional Saudi banks issued sukuk totaling $1.5bn, representing 42.3 percent of total regional issuance whereas issuance by Islamic banks in the UAE represented 57.7 percent of regional issuance.
“We expect to see a healthy issuance volume in the GCC in 2014 as a result of the supportive economy and regulatory developments. However, we believe the Fed’s move to taper its quantitative easing programme could influence issuance through a shift toward local currencies from dollar denominated issuances. Banks in Saudi Arabia will likely continue to display double-digit credit growth in 2014, which could add further support for sukuk issuance….”
“We also witnessed some innovation in the market as banks issued sukuk to strengthen their capital ratios. Dubai Islamic Bank for instance, issued a $1bn Tier 1 perpetual note in March, while the Saudi British Bank issued a Tier II subordinated note of SR 4bn in November 2013”
“In Qatar, despite slowdown in credit growth largely due to administrative delays in certain projects we expect credit growth to accelerate in 2014. The Qatari Islamic banks continue to maintain strong credit growth and we anticipate that they will become more active issuers of sukuk over the next few years”.
The Peninsula
