Dukhan Bank secures tighter pricing on sukuk sale

Dukhan Bank has raised $500 million through an Additional Tier 1 sukuk priced at 6 per cent, drawing strong demand from investors and tightening sharply from the 6.5 per cent area indicated at the start of marketing.

The perpetual non-call 5.5-year instrument was issued at par with a semi-annual coupon and yield of 6 per cent. Final orders reached about $1.4 billion, excluding interest from joint lead managers, leaving the book nearly three times covered and giving the Qatari lender room to cut pricing by 50 basis points.

The transaction adds fresh capital flexibility for Dukhan Bank at a time when Gulf lenders are using still-active debt markets to strengthen balance sheets, refinance older instruments and lock in investor demand before the next major shift in US interest-rate expectations. The bank carries an A2 rating with a stable outlook from Moody’s and an A rating with a negative outlook from Fitch, placing the issue among the better-rated bank capital trades from the region.

The sukuk is structured as Additional Tier 1 capital, a subordinated form of funding that counts towards regulatory capital and typically carries higher risk than senior debt. Such instruments are perpetual, though issuers are usually able to redeem them on the first call date, subject to regulatory approval and market conditions. Investors are compensated through higher coupons for accepting loss-absorption features and payment discretion built into AT1 structures.

Dukhan Bank entered the market after investor calls began on 23 June for a benchmark dollar-denominated AT1 sukuk that was capped at $500 million and would not grow. The rapid move from initial price thoughts to final pricing reflected firm demand for Gulf bank capital paper, particularly from accounts seeking exposure to high-grade issuers with domestic banking franchises and strong sovereign operating environments.

The deal also marks another step in Dukhan Bank’s use of international sukuk markets. The bank issued its debut $500 million AT1 sukuk in July 2021 at a 3.95 per cent profit rate, when global borrowing costs were far lower and regional banks were taking advantage of abundant liquidity. The latest pricing shows the reset in funding costs after successive monetary tightening cycles, while still indicating sufficient demand for well-capitalised Gulf lenders.

Dukhan Bank reported a net profit of QAR429.5 million for the first quarter of 2026, a 2 per cent decline from the same period a year earlier. Total assets stood at QAR126.5 billion at the end of March, supported by QAR91 billion of financing assets and QAR25.9 billion of investment securities. Customer deposits reached QAR90.9 billion, while the net financing assets-to-deposits ratio was 95.4 per cent.

Capital levels remained comfortably above regulatory thresholds before the new sukuk. The bank’s total capital adequacy ratio stood at 19.1 per cent at the end of March, compared with the Qatar Central Bank minimum requirement of 14.6 per cent. Its non-performing loan ratio was 4.2 per cent, with Stage 3 coverage at 75.7 per cent, indicating steady provisioning against impaired exposures.

For the full year 2025, Dukhan Bank posted a record net profit of QAR1.41 billion, up 5 per cent from the previous year. Total assets reached QAR123.8 billion, financing assets stood at QAR90 billion and customer deposits were QAR87.8 billion. The board proposed total cash dividends of QAR0.16 per share for the year, split between interim and additional distributions.

The issuance comes as Qatar’s banks continue to benefit from strong public-sector linkages, large project pipelines and stable domestic liquidity, while facing higher funding costs and competition for deposits. The Qatari riyal’s peg to the US dollar means local rates remain closely tied to Federal Reserve policy, making timing important for banks seeking to optimise funding and capital plans.

Across the Gulf, Islamic debt issuance has remained active as banks, sovereigns and corporates diversify funding away from conventional bonds and tap a deep investor base for Sharia-compliant instruments. AT1 sukuk have formed a steady part of this market, especially for banks seeking instruments that support capital ratios without diluting shareholders.