Arab National Bank starts offer of USD AT1 sustainable sukuk

Arab National Bank starts offer of USD AT1 sustainable sukuk

Arab National Bank (ANB) has initiated the offer of USD-denominated Additional Tier 1 (AT1) Sustainable Sukuk, a significant move in the Islamic finance landscape. The bank plans to issue the sukuk through a special purpose vehicle (SPV), with the proceeds aimed at enhancing its Tier 1 capital and supporting general banking operations.

The sukuk, which will be denominated in USD, is part of ANB's international AT1 sukuk issuance program established on August 14, 2025, following a board decision on June 30, 2025. The issue is expected to be open to qualified investors both inside and outside Saudi Arabia. The value and terms of the sukuk will be determined later based on market conditions.

ANB has appointed a group of lead managers and bookrunners for the potential offering, including ANB Capital, Arqaam Capital, Citigroup, Crédit Agricole, Deutsche Bank, HSBC, Kamco Investment, Merrill Lynch, SMBC Bank International, and Standard Chartered. The issuance is subject to regulatory approvals and will be carried out in accordance with relevant laws and regulations.

The sukuk's structure adheres to Shariah principles, with a special commission rate of 3.326% and a callable feature in five years. This aligns with the bank's commitment to sustainable financing, as the instrument is designed to fund projects aligned with environmental and social goals, such as renewable energy and affordable housing [2].

The USD denomination of the sukuk is a strategic move to diversify ANB's funding sources and attract international investors, mitigating domestic liquidity risks. This aligns with the broader trend of global sukuk issuance, which is projected to exceed USD1 trillion in 2025, driven by OIC countries and emerging markets [5].

Comparative studies show that sukuk exhibit lower tail-risk connectedness during crises, making them a resilient tool for capital raising. For instance, ANB's sukuk, with its perpetual structure and high-yield potential, offers a hedge against interest rate fluctuations and geopolitical uncertainties [7].

The issuance of ANB's USD AT1 Sustainable Sukuk exemplifies how Islamic finance is evolving to meet modern capital demands while adhering to Shariah principles and sustainability goals. As sukuk issuance continues to grow, its role in stabilizing portfolios and supporting sustainable development is likely to expand, offering a compelling alternative to conventional instruments in an increasingly uncertain world.

References:
[1] https://www.argaam.com/en/article/articledetail/id/1839416
[2] https://www.ainvest.com/news/strategic-implications-arab-national-bank-usd-denominated-at1-sustainable-sukuk-2508/
[5] https://www.theasset.com/article/54359/islamic-finance-awards-2025-best-issuers-banks-advisers
[7] https://www.sciencedirect.com/science/article/pii/S2214845023001461