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05 December 2023

RAKBank to repurchase debt notes in advance

RAKBank has converted its liquidity support loans given in 2008 into seven-year loans. (EB FILE)

By CL Jose

The Ras Al Khaimah-headquartered RAKBank said it would seek opportunities in the market to make advance repurchase of the outstanding euro medium-term notes (EMTN) issued by the bank, a statement from the management said.

During 2009, Dh360 million EMTN programme matured and was settled. The opportunity was taken to repurchase a further Dh217m of this programme and through this the bank was able to book a profit of Dh4.59m.

The bank has also stated that it will consider further repurchase in order to reduce liability on maturity given the present state of market.

Talking to Emirates Business, the bank Chief Executive Graham Honeybill said: "We are comfortable with our liquidity position and hence we will keep our options open to repurchase further notes when they come for trading."

The EMTN programme was pioneered by Emirates NBD about a decade ago and this was followed by almost all local banks. "The programme has helped the UAE banks in building up long-term liability base and has helped them manage their asset-liability in a healthy way," said analysts.

Most banks have EMTN programmes coming up for repayments in the coming months and years and since the market has dried up globally following the recession, raising fresh funds has become a tough proposition.

Banks are facing the challenge of buying back those notes issued by them in the last few years as they mature for repayment. RAKBank's capital adequacy ratio (CAR) at the end of the year was 14.2 per cent and was composed entirely of Tier 1 capital against a minimum requirement of 11 per cent Tier 1 capital prescribed by the Central Bank of the UAE.

With the approval of the Ministry of Finance, RAKBank has converted its liquidity support loans given in 2008 into seven-year loans dating from December 31, 2009, which because of their term are eligible for Tier 2 status. If that finance is also taken into account then the bank's overall capital adequacy ratio rises to 18.8 per cent, which will be further enhanced on approval by the shareholders of the proposed dividend.

The total debt securities issued by the bank stands at Dh1.068bn as of September 30, 2009 against Dh1.644bn as of the same period in 2008.


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