Strong interest from foreign investors coupled with a prevalent bearish trend in the local stock markets contributed to the heavy oversubscription of the initial public offering (IPO) of Ajman Bank, say analysts.
Investors offered at least 86 times more than the Dh550 million ($150m) Ajman Bank was looking to raise in its IPO that closed on Wednesday, Reuters said quoting a person familiar with the sale.
Investors preferred to apply for the offering in the UAE’s seventh Islamic lender at the competitive price of Dh1 per share rather than place their cash in the bearish markets. And positive performance by the UAE’s banking sector and high liquidity in the market added to the demand for the IPO.
Ajman Bank offered 55 per cent of its stock – or 550 million shares – valuing the bank at Dh1 billion.
“Islamic products always attract local and GCC investors, especially Saudis,” said Kareem Khashab, a financial analyst at EFG-Hermes.
Alaa Seif, a financial researcher at Damac Securities, said the Islamic banking sector has become very attractive to investors – and not only those in the Middle East.
“There is a high demand on Shariah-compliant products, especially sukuk, worldwide,” he said. “Islamic banks account for 13 per cent of total banking assets in the UAE and hold 30 per cent of total deposits. Islamic banks have more flexible and varied credit products than conventional banks.
“Islamic banks have shown an average 25 per cent annual growth rate since 2001, so Ajman Bank attracted many investors who expect it to perform positively when it starts operating.”
He pointed out that banks are offering high levels of credit to investors wishing to subscribe in share offers and said stock markets have become more volatile, prompting investors to turn to the IPO. “Recently we noticed a decline in deposits and the liquidation of stocks in the markets as investors prepared for the Ajman Bank IPO and other offers expected later this year.”
Khashab said trading in UAE stocks was slowing down so investors focused on the IPO as an alternative investment vehicle.
“Also Ajman Bank is still being set up and there are high expectations regarding its future performance. The banking sector announced very good financial results last year and this raised prospects for the performance of the new bank.”
Khashab said the IPO was well timed as there was high liquidity in the market as investors waited for opportunities that offered good prospects.
This article previously stated the IPO to be 60 times over subscribed at Dh33bn.
Ajman Bank IPO gathers Dh48 billion