SIB seeks bigger capital buffer

Sharjah Islamic Bank is pressing ahead with a rights issue worth up to AED2.59 billion, or about $705 million, in a move designed to reinforce its capital base, fund balance-sheet expansion and preserve financial flexibility as the lender pushes for further growth. The bank said the offer will raise issued capital from about AED3.24 billion to as much as AED4.31 billion through the sale of up to 1.08 billion new shares priced at AED2.40 each.

Under the terms of the offer, existing shareholders will receive one right for every three shares held. Rights are due to trade on Abu Dhabi Securities Exchange from April 20 to May 1, with the subscription period running from April 27 to May 8. ADX has also flagged April 15 as the eligibility date. The bank’s investor material says the issue has secured the required approvals from the Central Bank of the UAE and the Capital Markets Authority, removing a key execution risk before books open.

SIB has framed the fundraising as a strategic step rather than a defensive one. Management has said the net proceeds will be used to strengthen capital adequacy beyond minimum regulatory requirements, extend the runway for balance-sheet growth and support returns to shareholders. That language matters because Gulf banks have been balancing strong loan demand with the need to keep capital ratios comfortable as regulators maintain close scrutiny on funding resilience, asset quality and buffers.

The bank is coming to market from a position of stronger earnings momentum. Sharjah Islamic Bank reported net profit after tax of AED1.32 billion for 2025, up about 26% from AED1.05 billion a year earlier. Its annual filings show total assets reached AED90.3 billion at the end of December 2025, up 14%, while investments in Islamic financing rose nearly 20% to AED45.6 billion. That performance gives the lender a more supportive backdrop for a capital call, especially as shareholders also approved a cash dividend of 20% of capital, equal to AED647.1 million or AED0.20 a share.

Even so, the capital raise also reflects the pressures created by growth. S&P Global Ratings said this month that SIB’s capital ratios had shown signs of recovery in 2025, while noting that its forecasts incorporate the announced rights issue by the end of May 2026. Earlier rating commentary showed the bank’s core equity tier 1 ratio had fallen between 2023 and early 2025 as rapid balance-sheet expansion outpaced internal capital generation. By the third quarter of 2025, SIB reported a common equity tier 1 ratio of 11.98%, a tier 1 ratio of 15.29% and a capital adequacy ratio of 16.30%, indicating improvement but also explaining why fresh equity would be useful if asset growth continues.

Pricing will be watched closely. The new shares are being sold at AED2.40, made up of AED1 nominal value and AED1.40 premium. Market reports described that as a discount of about 37% to the closing share price on February 13, a structure intended to encourage take-up by existing investors and reduce the risk of a shortfall. Discounted rights issues are common in Gulf equity markets when issuers want certainty of execution, though they can also sharpen questions about dilution for holders who choose not to subscribe or sell their rights.

For Sharjah Islamic Bank, the offer lands at a time when lenders in the UAE are trying to capture financing demand tied to infrastructure, corporate expansion and household borrowing while adapting to a more demanding capital and tax environment. SIB’s own disclosures point to balanced growth across financing activities, sukuk income and deposits, while non-performing financing metrics improved in 2025. That combination gives the bank a stronger narrative than a pure rescue-style capital raising, but investors will still weigh whether earnings growth can offset the enlarged share base over time.