GCC Banks Set for Record Dollar Debt Issuance in Q1 2024

Fitch Ratings predicts that GCC banks would issue more dollar-denominated debt in the first quarter of 2024 than in any previous year, surpassing both the record-breaking $25.2 billion in 2020 and the entire year of 2023.

In the initial quarter of 2024, Gulf Cooperation Council (GCC) banks are poised to witness their most significant dollar-denominated debt issuance to date, outpacing the previous record set in 2020 at $25.2 billion, as indicated by Fitch Ratings.

The surge in debt offerings is attributed to robust investor confidence buoyed by elevated oil prices and brisk credit expansion in Saudi Arabia.

Fitch Ratings anticipates the prevailing factors to persist, further fueled by approximately $30 billion worth of debt reaching maturity between 2024 and 2025, coupled with the downward trajectory of US dollar interest rates.

As of the current year, total issuance stands at $20.1 billion, already eclipsing the entire sum for 2023, which amounted to $15.2 billion. Notably, Saudi Arabian and Emirati banks contribute significantly to this figure, representing 33% and 26% of the total issuance, respectively.

This marks the inaugural instance where Saudi Arabian banks have outpaced their Emirati counterparts in issuing US dollar-denominated debt. Since 2020, they have increasingly engaged in international debt capital markets to bolster their expansion strategies, diversify funding sources, and, more recently, offset the substantial liquidity costs domestically.

Sukuk, comprising 51% of the year-to-date issuance, excluding certificates of deposit, underscores robust investor interest and favorable pricing dynamics, as highlighted by Fitch.

An update from the agency forecasts the Federal Reserve to implement rate reductions of 75 basis points in 2024 and 125 basis points in 2025, underscoring evolving monetary policy dynamics.

Read also: UAE: ADNOC Gas Shareholders Endorse $1.625B Cash Dividend Distribution

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