Deutsche Bank To Announce A Major Sukuk Issuance In Saudi Arabia

Deutsche Bank expects to bring to the market a “major” Islamic bond in Saudi Arabia by the end of the first quarter, as part of a wider push into the world’s largest oil exporter, a company executive said on Tuesday.

Hussein A.Hassan, head of structuring, Middle East and North Africa told the Reuters Islamic Banking & Finance Summit that the Sukuk will be greater than the benchmark size of $500 million. He declined to identify the sector.

He added that this mandate comes even as the industry struggles from a slowdown in issuances in the Gulf.

“The beginning of this year has not been encouraging,” Hassan said, adding that issuances should be “at par or slightly lower than 2009.”
Despite the industry’s difficulties, Deutsche Bank continues to see interest in issuances by sovereign and quasi-sovereign entities, with a number of mandates coming out of Saudi Arabia.

He added that Deutsche Bank has less than 10 but more than five mandates in the pipeline, with many of them coming from Saudi Arabia. Hassan said that he expects Saudi Arabia to play a larger role in this area in the future.
And Deutsche Bank’s relationship with Saudi Arabia will continue to grow in 2010 as the company plans to launch a sharia-compliant mortgage product to tap increasing demand for housing in Saudi Arabia.

Saudi Arabia’s population has risen to over 25 million, according to government estimates, posing a challenge to the government in terms of providing jobs and housing. Annual housing demand may hit 160,000 new units each year with up to 50,000 units in unmet demand, according to Egyptian investment bank EFG Hermes.

Hassan said Deutsche Bank will focus on the residential, rather than commercial, real estate market in Saudi Arabia. There has been increasing interest in the mortgage industry within Saudi Arabia ahead of the much-anticipated Saudi mortgage law, expected to pass this year. Observers expect the law to usher in a new boom period for mortgage financing in the kingdom — an area traditionally avoided by financial institutions due to a lack of proper regulations.