Meezan Bank to raise Rs seven billion through Sukuk issue

Pakistan's largest Islamic Bank - Meezan Bank has planned to raise some Rs 7 billion through the sale of Shariah-compliant Tier 1 Sukuk to improve its Capital Adequacy Ratio (CAR). Sources in banking industry told Business Recorder Wednesday that Meezan Bank's board had already approved a plan for Sukuk issue earlier this year and accordingly obtained regulatory approval from the State Bank of Pakistan (SBP) for this issue.
The issue will be first Shariah-compliant Tier 1 Sukuk in Pakistan and will be a privately placed, tradable and unlisted based on Modaraba structure. The basic aim of issuance of Sukuk is to meet the regulatory requirement of CAR and after successful issuance of Sukuk, Meezan Bank's CAR will improve significantly.
The total volume of Sukuk will be Rs 7 billion including total issue of Rs 5 billion with a green shoe option of Rs 2 billion, which will be sold out in case of oversubscription.
The Sukuk will be offered to select corporate entities, banks, Financial Institutions (FIs) and pension funds, etc. The Sukuk can be subscribed with a minimum investment of Rs 1 million. The tenure is perpetual and can be converted into share as per the State Bank regulation.
Profit on these Sukuk will be paid on a monthly basis. The highly attractive Sukuk's expected return will be 3-month Kibor plus 1.75 percent based on profit weightages assigned to the Modaraba pool.
Industry sources said it will be very attractive for Islamic banks, Islamic banking windows of conventional banks, Takaful companies, Modaraba companies, pension funds, Shariah-compliant investment by companies and other entities. In 2016, Meezan Bank had raised Rs 7 billion through Tier 2 Sukuk.
Meezan bank is one of the fastest growing Islamic bank in the country and now the 7th largest bank. For the first quarter ended March 31, 2018 Meezan Bank's profit after tax increased by 27 percent to Rs 1.915 billion up from Rs 1.512 billion in the preceding quarter of last year. The bank's deposits also roseto Rs 669.559 billion in March 2018.