KARACHI: Meezan Financial institution goes to lift as much as Rs10 billion through sukuk or Islamic bonds, a regulatory submitting mentioned on Friday.
The nation’s largest Islamic financial institution will rely the proceeds of the sukuk in the direction of its tier-II capital, which is the secondary layer of capital that each financial institution retains as a part of its required reserves. In contrast to tier-I capital that’s contributed primarily by shareholders, tier-II capital is commonly raised by way of debt devices just like the upcoming sukuk.
The Rs10bn concern contains the Rs3bn green-shoe choice, which grants Meezan Financial institution the best to lift extra funds than initially deliberate.
On the identical time, the financial institution goes to train the “call option” with respect to an earlier tier-II capital sukuk of Rs7bn that it issued in September 2016. The decision choice offers Meezan Financial institution the best, however not the duty, to purchase again the 2016 sukuk earlier than its maturity in 10 years.
Talking to Daybreak, Meezan Financial institution Head of Product Improvement and Sharia Compliance Ahmed Ali Siddiqui mentioned the 2 transactions are anticipated to end in value financial savings for the financial institution. “Our credit rating (at the time of 2016 sukuk) was AA. Now it’s AAA. This means we have a better risk profile than before,” he mentioned, noting that the difficulty will help the financial institution in its ongoing “growth phase”.
Meezan Financial institution Head of Funding Banking Urooj Hassan mentioned the upcoming concern would be the lender’s third tier-II capital sukuk. The financial institution raised Rs7bn in 2016 at six-month Karachi interbank provided fee (Kibor) plus 50 foundation factors. In 2019, it issued one other sukuk of Rs4bn at Kibor plus 90bps.
“We’re maturing the 2016 sukuk. We expect to get a rate lower than Kibor plus 50bps,” he mentioned.
However the extra necessary purpose for changing the outdated sukuk with a brand new one is a regulatory provision beneath which a reduction issue of 20 per cent is utilized to tier-II capital sukuk in every of the final 5 years to its maturity, mentioned Mr Hassan.
In different phrases, Meezan Financial institution would be capable of rely solely Rs5.6bn as a substitute of Rs7bn in the direction of fairness ought to it resolve towards exercising the decision choice earlier than December 2021.
Meezan Financial institution lately turned probably the most useful Pakistani lender by way of the market worth of shares. Its internet revenue amounted to Rs6.7bn within the April-June quarter, up 2pc from a yr in the past. Its share value inched up 0.3pc to Rs140.66 on Friday.
Printed in Daybreak, August 14th, 2021