Gulf Cooperation Council (GCC) banks’ US dollar debt issuance is on track for its strongest quarter ever in 1Q24, with issuance already exceeding the full-year 2023 total, Fitch Ratings has said.
Year-to-date issuance is USD20.1 billion, already surpassing the 2023 total of USD15.2 billion.
Annual issuance in 2024 and 2025 could exceed the 2020 record of USD25.2 billion, boosting liquidity to meet strong credit demand, Fitch Ratings said on Thursday.
Banks in Saudi Arabia and the UAE account for 33% and 26% of the YTD figure, respectively.
This is the first time that Saudi Arabian banks have issued more US dollar debt than UAE banks. “They have been increasingly active in international debt capital markets since 2020 to support their strong financing growth plans, diversify their funding bases, and more recently, to offset the high cost of liquidity domestically,” said Fitch Ratings.
It expected Saudi banks’ US dollar issuance to continue gathering pace due to the strong credit growth outlook, especially in the corporate segment, and tight liquidity in the banking sector.
“Coupon rates on Saudi banks’ five-year senior unsecured issuance in 1Q24 averaged 5.1%. This is well below the three-month Saudi Interbank Offered Rate of 6.2% ... as the cost of liquidity in the Saudi banking sector is likely to remain high,” it said.
GCC banks have about USD16.9 billion of US dollar debt maturing in 2024, split fairly even between the UAE, Saudi Arabia, Qatar and Kuwait.
GCC banks account for about 10% of the medium-term US dollar debt issued by investment-grade banks in 1Q24.
They are also expanding their investor base through increasing issuance of sukuk. Sukuk accounts for 51% of YTD issuance excluding CDs, reflecting strong investor demand and pricing dynamics.