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UAE's First Auction of Federal Treasury Bonds Achieves Bids Worth $400 Million

The UAE seeks government treasury bonds denominated in dirhams to build a local currency bond market (Reuters)
The UAE seeks government treasury bonds denominated in dirhams to build a local currency bond market (Reuters)
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UAE's First Auction of Federal Treasury Bonds Achieves Bids Worth $400 Million

The UAE seeks government treasury bonds denominated in dirhams to build a local currency bond market (Reuters)
The UAE seeks government treasury bonds denominated in dirhams to build a local currency bond market (Reuters)

The first auction of the dirham denominated UAE Treasury Bonds (T-Bonds), with a benchmark auction size of AED1.5 billion ($400 million), drew bids worth AED9.4 billion ($2.5 billion), an oversubscription of 6.3 times.

The auction by the UAE, represented by the Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and payment agent, is part of the AED9 billion ($2.4 billion) T-Bonds issuance program for 2022.

The launch of the AED1.5 billion ($400 million) UAE T-Bond program witnessed a strong demand through the six primary bank dealers across both tranches, with a final allocation of AED750 million for the two-year tranche, and AED750 million for the three-year tranche, with a total issuance of AED1.5 billion ($400 million) as previously announced.

Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said the success of the first auction is part of strengthening the UAE’s economic competitiveness and supporting the sustainability of economic growth.

He stressed that this success is reflected in the attractive market driven prices which achieved a spread of 28 bps over US Treasuries for two years, and a spread of 29 bps over the US Treasuries for 3 years.

“This successful first issuance is a milestone towards building a dirham denominated yield curve and providing safe investment alternatives for investors which contributes to strengthening the local financial market and developing the investment environment,” Sheikh Maktoum said.

The minister also invited international investors to participate in the T-bonds issuance program which is widely open for all eligible investors, and will soon be followed by a listing on Nasdaq Dubai to promote secondary market trading along with primary dealers.

“The success of the first auction of the Federal T- bonds and the strong demand for them, which witnessed an oversubscription by 6.3 times, is a milestone.

This reflects confidence in the UAE’s economic and financial policies and its future development plans. It also reflects the UAE's position as an attractive hub for investment, its strong creditworthiness and economic and competitive capabilities at the global level,” Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister, Minister of Presidential Affairs and Chairman of the Board of Directors of the Central Bank of the UAE, said.

“The Federal T-bond issuance constitutes a new phase in promoting the robust performance of the UAE’s financial sector, providing safe and advanced dirham-denominated investment. It will achieve the objectives of the new Dirham Monetary Framework,” he added.

The T-Bonds program was developed in uniform pricing (the Dutch Auction) for final bid acceptance of bids and final allocation amounts, regardless of the lower-priced bids received to ensure full transparency in accordance with global best practices for bond structuring.

The lowest bid for the two-year tenor was at 2.88 percent, with the weighted average bids at 2.96 percent and the final uniform coupon rate fixed at 3.01 percent.

The lowest bid for the 3-year tenor was at 2.95 percent, with the weighted average bids at 3.09 percent and final uniform coupon rate fixed at 3.24 percent.

The auction will be followed by a series of subsequent periodic auctions, in line with the proposed 2022 issuance plan.

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Business

Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.