Abu Dhabi Commercial Bank · ADX:ADCB
Abu Dhabi Commercial Bank — Debt Investor Presentation (2019)
45 slides from Abu Dhabi Commercial Bank's debt investor presentation, 2019
Slide 1: GCC Bond Chart Book
GCC Bond Chart Book A comprehensive overview of the risk and return parameters of the key securities in the GCC Fixed Income space Prerana Seth Luciano Jannelli Kishore Muktinutalapati Mohammed Al Hemeiri Noor Alameri 1Q 2019
Slide 2: GCC Bond Markets – Key Takeaways
GCC Bond Markets – Key Takeaways This GCC Bond Chart Book provides a comprehensive overview of the bond market performance in 1Q 2019 (Chapter I), the trends in GCC dollar bond issuances (Chapter II) and finally the bond valuations compared mostly with other emerging market peers (Chapter III and Ch
Slide 3: Index
Index Chapter I: GCC bond performance in 1Q19 Chapter II: Primary market bond issuances in GCC Chapter III: Credit rating valuation Chapter IV: GCC valuation analysis 3
Slide 4: Chapter I: GCC bond market performance in 1Q19
Chapter I: GCC bond market performance in 1Q19
Slide 5: GCC countries: US dollar bond performance versus EM indices
GCC countries: US dollar bond performance versus EM indices 8.0 7.0 7.0 6.0 6.0 5.0 % return 5.0 % return 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 EM EM EM EM Bahrain Saudi UAE Kuwait Qatar LATAM EMEA Asia Arabia 1Q 2019 Source: Bloomberg, Barclays indices, ADCB 5
Slide 6: GCC Sovereign: 10-year dollar bond yield performance
GCC Sovereign: 10-year dollar bond yield performance Better quality GCC sovereigns yields have Bahrain has outperformed its EM peers 5.3 declined in line with EM peers 11.75 4.8 10.75 10-year bond yield (%) 10-year bond yield (%) 9.75 4.3 8.75 3.8 7.75 6.75 3.3 5.75 4.75 2.8 3.75 Mar-18 Jun-18 Sep-1
Slide 7: GCC Sovereign: 30-year dollar bond yield performance
GCC Sovereign: 30-year dollar bond yield performance Dubai is trading at attractive levels versus its Bahrain has outperformed its EM peers EM peers 6 11 5.5 10 30-year bond yield (%) 30-year bond yield (%) 5 9 4.5 8 4 7 3.5 6 3 5 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
Slide 8: GCC corporate bond performance
GCC corporate bond performance EM middle east has performed well relative to GCC credit has positively reacted to the 600 its peers 165 upward move in oil prices 120 550 110 160 500 100 155 450 90 150 Spread (bp) 400 80 145 70 350 140 60 300 50 250 135 40 200 130 30 150 125 20 Dec-17 Mar-18 Jun-18 S
Slide 9: GCC CDS performance versus EM
GCC CDS performance versus EM Bahrain CDS spreads have tightened the CDS spreads have tightened in line with EM most Turkey 210 Romania Dubai Czech CDS spread (Indexed at Jan 2018=100) 1Q 19 change in 5-year CDS 190 Poland Kuwait Thailand 170 Oman Abu Dhabi South Korea 150 Hungary Qatar 130 Argentin
Slide 10: Chapter II: Primary market bond issuances in GCC
Chapter II: Primary market bond issuances in GCC
Slide 11: GCC economies to expand fiscal budgets in 2019
GCC economies to expand fiscal budgets in 2019 ..will need to raise borrowing to fund their Current Account Balance (% of GDP) Bahrain and Oman have weak external 45 balances.. fiscal deficits 60 Fiscal balance (% of GDP) 35 40 25 15 20 5 0 -5 -20 -15 -40 -25 2008 2010 2012 2014 2016 2018 2008 2010
Slide 12: Reduced dependency on oil
Reduced dependency on oil Oil breakevens have declined Dependency on Oil revenue 90% 140 oil revenue (% of total revenue) 80% Oil breakeven (USD/bbl) 120 Bahrain Oman 70% Kuwait Saudi 100 80 60% 60 UAE 50% Qatar 40 20 40% 0 30% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 40 60 80 100 120
Slide 13: More diversification needed
More diversification needed 100% 90% Oil revenue (% of total revenue) 80% 70% 60% 50% 40% 30% 20% 10% 0% Bahrain Oman Saudi Arabia Kuwait UAE Qatar 2013 2014 2015 2016 2017 2018f 2019f Source: IIF, ADCB 13
Slide 14: Sovereign dollar bond issuance seen increasing this year
Sovereign dollar bond issuance seen increasing this year Sovereign dollar bond issuance in 2019 so far, Bulk of issuance in 2019 from Qatar and more than half of 2018 Saudi Arabia 60 50 2019* 50 40 40 37 2018 USDbn 30 20 20 2017 10 4 3 3 3 0 10 20 30 40 50 60 0 2012 2013 2014 2015 2016 2017 2018 201
Slide 15: Corporate dollar bond issuance has been subdued so far..but likely to pick up
Corporate dollar bond issuance has been subdued so far..but likely to pick up Corporate dollar bond issuance has been Financials and agencies again dominate subdued so far issuances in 1Q19 40 45 42 35 40 30 35 31 USDbn 30 25 USDbn 24 20 25 22 19 15 20 14 10 15 11 10 9 5 5 0 2017 2018 2019* 0 2012 2
Slide 16: Inclusion in JP Morgan bond index to absorb demand
Inclusion in JP Morgan bond index to absorb demand Potential weight in the EMBI global diversified • Sovereign and quasi-sovereign debt issuers index (%) from Saudi Arabia, Qatar, UAE, Bahrain and Kuwait eligible to be included in the EMBI 0.8 3.1 2.1 Global Diversified (EMBIGD), EMBI Global (EMBIG)
Slide 17: Scope for more inflows due to index inclusion
Scope for more inflows due to index inclusion Top 10 biggest increase in allocations (As of Scope for more inflows into GCC bonds 600 Jan'19) 0.6 3.5 500 0.5 3 400 0.4 2.5 USDm ppt 300 0.3 2 200 0.2 1.5 100 0.1 1 0 0 0.5 Saudi UAE Lebanon Malaysia Venezuala Uruguay Nigeria Argentina Equador China 0
Slide 18: Saudi's first dollar bond sale of 2019 was a success
Saudi’s first dollar bond sale of 2019 was a success Strong demand at 1st Saudi USD7.5bn bond sale bond sale of 2019 Issue size (bn) 270 T+250 40 250 230 T+230 30 27 3.5 210 T+200 190 USDbn 4 20 T+175 170 150 10 130 7.5 10y 30y 0 10y 30y Issue size Total bids Final Pricing Initial Pricing 80% Subscr
Slide 19: Major corporate dollar bond deals of 1Q 2019
Major corporate dollar bond deals of 1Q 2019 Priced at issue Bloomberg Amount Maturity Moody (spread Corporate Issuer Ticker Sector Country Issued Coupon Maturity Type Issue Date Rtg^ , bp)* QNB Finance Ltd QNBK Agency QA 1000 3.50 3/28/2024 AT MATURITY 3/28/2019 Aa3 T+135.5 Emirates NBD PJSC EBIUH
Slide 20: Abu Dhabi Sovereign Dollar Debt Maturity Profile
USDbn 0 1 2 3 4 0.5 1.5 2.5 3.5 4.5 Source: Bloomberg, ADCB 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Principal 2031 2032 2033 2034 2035 Interest 2036 2037 2038 2039 2040 2041 2042 2043 Abu Dhabi Sovereign Dollar Debt Maturity Profile 2044 2045 2046 2047 20
Slide 21: Dubai Sovereign Dollar Debt Maturity Profile
Dubai Sovereign Dollar Debt Maturity Profile 1 0.9 0.8 0.7 0.6 USDbn 0.5 0.4 0.3 0.2 0.1 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 Principal Interest Source: Bloomberg, ADCB 21
Slide 22: Saudi Arabia Sovereign Dollar Debt Maturity Profile
USDbn 0 1 2 3 5 6 7 8 4 2019 Source: Bloomberg, ADCB 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Principal 2033 2034 2035 2036 Interest 2037 2038 2039 2040 2041 2042 2043 2044 Saudi Arabia Sovereign Dollar Debt Maturity Profile 2045 2046 2047 2048 2049 2050 22
Slide 23: Kuwait Sovereign Dollar Debt Maturity Profile
Kuwait Sovereign Dollar Debt Maturity Profile 5 4.5 4 3.5 3 USDbn 2.5 2 1.5 1 0.5 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 Principal Interest Source: Bloomberg, ADCB 23
Slide 24: Bahrain Sovereign Dollar Debt Maturity Profile
USDbn 0 1 2 0.5 1.5 2.5 Source: Bloomberg, ADCB 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Principal 2032 2033 2034 2035 Interest 2036 2037 2038 2039 2040 2041 2042 2043 2044 Bahrain Sovereign Dollar Debt Maturity Profile 2045 2046 2047 24
Slide 25: Oman Sovereign Dollar Debt Maturity Profile
USDbn 0 1 2 3 0.5 1.5 2.5 3.5 Source: Bloomberg, ADCB 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Principal 2031 2032 2033 2034 Interest 2035 2036 2037 2038 2039 2040 2041 2042 2043 Oman Sovereign Dollar Debt Maturity Profile 2044 2045 2046 2047 2048 25
Slide 26: Chapter III: Credit rating valuation
Chapter III: Credit rating valuation
Slide 27: GCC sovereigns vs EM peers- 10yr segment
GCC sovereigns vs EM peers- 10yr segment 12 GCC sovereigns trading cheap versus peers 11 Argentina 10 9 10-year yields 8 Turkey Oman Egypt 7 Bahrain 6 South Africa Brazil 5 Dubai* Mexico Russia Saudi Arabia Indonesia Kuwait Qatar 4 Colombia Chile Philippines Abu Dhabi Peru 3 China AAA AA+ AA AA- A+
Slide 28: GCC vs EM peers- 30yr segment
GCC vs EM peers- 30yr segment 11.00 GCC sovereigns appear cheap versus other EM 10.00 Argentina 9.00 Egypt 8.00 Oman Turkey 30-year yields Bahrain 7.00 South Africa 6.00 Brazil Mexico Romania 5.00 Saudi Arabia Qatar Russia Abu Dhabi Indonesia 4.00 Chile Peru South Korea 3.00 AAA AA+ AA AA- A+ A A- B
Slide 29: GCC CDS versus ratings
GCC CDS versus ratings 450 GCC bond markets attractive versus its EM peers Turkey 400 350 Oman 300 CDS spreads (bp) 250 Bahrain Italy 200 South Africa Brazil 150 Dubai* Mexico Russia Colombia Romania 100 Saudi Arabia Spain Indonesia Kuwait Qatar Poland Hungary India Abu Dhabi Malaysia Peru 50 Czech
Slide 30: GCC Financials credit rating
A- A+ AA- B B+ BB A BB- BB+ BBB- BBB BBB+ FAB HSBC ME NBK ADCB Source: Bloomberg, ADCB ADIB Emirates Islamic Bank Emirates NBD UNB CBK Gulf Bank Al Ahli Bank of Kuwait Al Ahli United bank Burgan Bank Kuwait International Bank Kuwait Finance House Boubyan Bank Warba Bank Qatar National Bank Dubai Isl
Slide 31: GCC corporates credit rating
GCC corporates credit rating GCC Corporates AA Mubadala IPIC AA- Qatari Petroleum Etisalat Qatari Diar A+ Nakilat Dolphin energy** A Etihad** SECO RASGAS TAQA** A- Ooredoo Saudi Telecom SABIC BBB+ Jafz** DP World ** BBB MAF DEWA Aldar^ BBB- Topaz world** Emaar DIFC Kuwait projects Co BB+ Ezdan Holdi
Slide 32: Chapter IV: GCC valuation analysis
Chapter IV: GCC valuation analysis
Slide 33: GCC sovereign dollar yield curves
GCC sovereign dollar yield curves 8 OMAN 6.75 1/48 7 OMAN 5.625 1/28 BHRAIN 7.5 9/47 6 OMAN 4.125 1/23 OMAN 3.875 3/22 BHRAIN 6.75 9/29 5 BHRAIN 6.125 7/22 BHRAIN 5.624 2/24 S 4 3yr 5yr 10yr 30yr 6 5.5 KSA 5 4/49 5 DUGB 5.25 1/43 QATAR 4.817 4.5 KSA 4.303 01/29 03/14/2049 KSA 4 04/25 DUGB 5 04/29 4
Slide 34: Abu Dhabi z-spread and yield curve (YTD change)
Abu Dhabi z-spread and yield curve (YTD change) 5.5 300 5 250 4.5 4 200 Z-spread (bps) 3.5 Yield 150 3 2.5 100 2 50 1.5 1 0 DUGB DUGB DUGB DUGB DUGB DUGB 5 DUGB 7.75 5.59 6/21 6.45 3.875 3.89 04/29 5.25 1/43 10/20 05/22 01/23 03/25 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-sprea
Slide 35: Dubai z-spread and yield curve (YTD change)
Dubai z-spread and yield curve (YTD change) 5.5 300 5 250 4.5 4 200 Z-spread (bps) 3.5 Yield 150 3 2.5 100 2 50 1.5 1 0 DUGB DUGB DUGB DUGB DUGB DUGB 5 DUGB 7.75 5.59 6/21 6.45 3.875 3.89 04/29 5.25 1/43 10/20 05/22 01/23 03/25 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread) T
Slide 36: Saudi Arabia z-spread and yield curve (YTD change)
Saudi Arabia z-spread and yield curve (YTD change) 5.5 260 5 240 4.5 220 Z-spread (bps) 4 200 3.5 Yield 180 3 160 2.5 2 140 1.5 120 1 100 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread) The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spr
Slide 37: Kuwait z-spread and yield curve (YTD change)
Kuwait z-spread and yield curve (YTD change) 4 120 110 3.5 100 3 90 Z-spread (bps) 80 Yield 2.5 70 2 60 50 1.5 40 1 30 KUWIB 2.75 3/22 KUWIB 3.5 3/27 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread) The z-spread is our preferred measure for analyzing the relative value of a bon
Slide 38: Bahrain z-spread and yield curve (YTD change)
Bahrain z-spread and yield curve (YTD change) 9 550 8 500 7 450 Z-spread (bps) 400 6 350 Yield 5 300 4 250 3 200 2 150 1 100 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread) The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the ad
Slide 39: Oman z-spread and yield curve (YTD change)
Oman z-spread and yield curve (YTD change) 9.0 600 8.0 500 7.0 400 Z-spread (bps) 6.0 Yield 5.0 300 4.0 200 3.0 100 2.0 1.0 0 OMAN OMAN OMAN OMAN OMAN OMAN OMAN OMAN 3.625 3.875 4.125 4.75 5.375 5.625 6.5 3/47 6.75 6/21 3/22 1/23^ 6/26 3/27 1/28^ 1/48^ 31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-sprea
Slide 40: GCC corporate top performers (spread performance in 1Q19)
GCC corporate top performers (spread performance in 1Q19) Performance from 31 Dec 2018 to 31 Mar 2019 BDRILL 3 ⅞ 05/23/23 -241 DAMACR 6 ¼ 04/20/22 -193 SHLFDI 8 ¼ 02/15/25 -180 SHLFDI 8 ¼ 02/15/25 -180 ERESQD 4 ⅜ 05/18/21 -169 DARALA 6 ⅞ 04/10/22 -154 DUBAEE 4 ½ 08/01/22 -147 DUBAEE 4 ½ 08/01/22 -14
Slide 41: GCC corporate bottom performers (spread performance in 1Q19)
GCC corporate bottom performers (spread performance in 1Q19) Performance from 31 Dec 2018 to 31 Mar 2019 1 ETIAIR 2.785 12/01/24 1 ETIAIR 2.785 12/01/24 5 DEWAAE 7 ⅜ 10/21/20 5 DEWAAE 7 ⅜ 10/21/20 7 BGBKKK 7 ¼ PERP 8 DIFCAE 4.325 11/12/24 12 QTELQD 4 ½ 01/31/43 12 QTELQD 4 ½ 01/31/43 13 MUBAUH 3.386
Slide 42: GCC Investment Grade corporates spread performance in 1Q19
GCC Investment Grade corporates (BBB- rated and above only) spread performance in 1Q19 Top performers.. ..bottom performers KWIPKK 9 ⅜ 07/15/20 -121 0 QGTS 6.267 12/31/33 KWIPKK 4 ½ 02/23/27 -92 KWIPKK 5 03/15/23 -85 0 QGTS 6.267 12/31/33 ABQKQD 3 ½ 02/22/22 -80 TABRED 5 ½ 10/31/25 -80 1 EBIUH Float
Slide 43: GCC High Yield corporates spread performance in 1Q19
GCC High Yield corporates (rated BB+ and below only) spread performance in 1Q19 Performance from 31 Dec 2018 to 31 Mar 2019 SHLFDI 8 ¼ 02/15/25 -180 SHLFDI 8 ¼ 02/15/25 -180 DARALA 6 ⅞ 04/10/22 -154 DUBAEE 4 ½ 08/01/22 -147 DUBAEE 4 ½ 08/01/22 -147 DUBAEE 4 08/01/20 -145 DUBAEE 4 08/01/20 -145 DARAL
Slide 44: UAE financials (spread performance in 1Q19)
UAE financials (spread performance in 1Q19) Top performers Bottom performers CBIUH 6 ½ PERP -110 -9 MASQUH Float 06/08/22 NOORBK 6 ¼ PERP -75 -8 DIBUH 2.921 06/03/20 BOSUH 3.374… -71 HSBC Float 05/29/23 -68 -8 MASQUH Float 02/15/21 ALHILA 5 ½ PERP -60 -8 DIBUH 6 ¾ PERP BOSUH 4.23 03/07/22 -59 -7 MAS
Slide 45: Disclaimer
Disclaimer ADCB Asset Management Limited (“AAML”), is a member of ADCB Group, licensed by Financial Services Regulatory Authority in Abu Dhabi Global Markets under financial services permission number 170036. This publication is intended for general information purposes only. It should not be constr
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