Dubai Islamic Bank (DIB) has completed a AED 5.1 billion ($1.4 billion) rights issue.
The bank, rated A3/A3 stable, by Moody’s, has closed the subscription for an approximately AED5.1 billion ($1.4 billion) rights issue on 30 May 2018 that increases total shareholder equity to AED 31.2 billion from AED 26.1 billion as of March 2018.
According to a commentary, the ratings agency highlighted that the capital increase is credit positive for DIB because it replenishes reserves and enhances the bank’s liquidity and loss-absorption buffers after high growth during 2013-17.
The approximately 1.6 billion new shares had a face value of AED 1 per new share and a premium of AED 2.11 per share, raising the issue price to AED 3.11 per new share. As a result of this rights issue, Moody’s estimate that DIB’s pro forma ratio of consolidated tangible common equity to risk-weighed-assets will improve to around 12.9 per cent from 9.9 per cent as of March 2018 and reverse a declining trend in the core equity ratio since 2016, when the bank raised AED3.2 billion of additional capital through a rights issue.
Additionally, the new capital will also increase the bank’s reported Tier 1 capital ratio to 16.6 per cent from 13.6 per cent as of the same date. A 16.6 per cent Tier 1 capital ratio significantly exceeds the 11 per cent regulatory minimum, which includes hybrid Additional Tier 1 Sukuk instruments comprising around 3.5 per cent of total assets as of March 2018.