15 Feb 2018 - 0:34

Al Rayan Bank-UK to issue £250m RMBS Sukuk

By Satish Kanady / The Peninsula

DOHA: Al Rayan Bank-UK, which is 68.4 percent owned by Masraf Al Rayan, a Qatar public shareholding company, announced that it is about to complete the first ever issuance of Sukuk valued at £250m through residential mortgage backed securities (RMBS). Thus, Al Rayan Bank UK will be the first bank to issue Sukuk outside an Islamic country and it will be the largest ever sterling pound issuance of Sukuk by a UK entity, a regulatory filing to Qatar Stock Exchange (QSE) noted yesterday.
Al Rayan Bank-UK took this step in order to diversify its sources of funding and to pave the way forward for other Islamic Banks to be able to issue similar Sukuk in an effort to encourage Islamic Banking in UK.
The book-building was launched with an indicative pricing of 80 basis points over the 3 months LIBOR. This is expected to be very attractive for investments and should be well received even in the conventional mortgage-backed securities market, according to the bank.
The bank is expected to grow its financing assets book to more than £2bn this year, from a current £1.8bn.
The Sukuk certificates will be issued via a special purpose vehicle backed by a portfolio of home purchase plans from clients in England and Wales. Such asset-backed transactions are relatively rare in Islamic finance, but depending on market conditions, the bank could issue another Sukuk in late 2019.
The bank believes that there will be more opportunities to issue Sukuk in the futre and a higher potential for other Islamic banks to tap into the RMBS market.
The Sukuk by Al Rayan Bank UK has a preliminary rating of ‘AAA’, from S&P Ratings and ‘Aaa’ from Moody’s Investors Service.