Mashreq has kicked off the UAE banking sector’s capital market activity for 2026 by raising $500 million through an Additional Tier 1 (AT1) bond, marking the first such transaction by a UAE bank this year and signalling strong investor confidence in the country’s financial sector.
The Dubai-based lender, rated A3 by Moody’s and A by both S&P and Fitch with stable outlooks, priced the perpetual non-call 5.5-year bond at a coupon of 6.25 per cent per annum. The deal drew overwhelming demand from investors across the Middle East, Europe and Asia, with the order book peaking at $2.1 billion — more than four times the amount Mashreq intended to raise.
In simple terms, an AT1 bond is a form of capital that strengthens a bank’s financial buffer. It is designed to absorb losses if needed and helps lenders meet regulatory capital requirements while continuing to support lending and expansion. By issuing this bond, Mashreq has effectively bolstered its balance sheet and ensured it has additional financial flexibility to fund growth in the year ahead.
The timing of the transaction proved strategic. Mashreq moved ahead of other anticipated UAE bank issuances and launched the deal before the Asian Lunar New Year break and the start of the holy month of Ramadan — a period when market activity often slows. The bank also seized a favourable window in global debt markets, building on renewed investor appetite for emerging market and regional bank credit.
Initial price thoughts were set between 6.75 per cent and 6.875 per cent. However, strong early demand allowed the bank to tighten pricing significantly. As orders crossed $1 billion and then surged beyond $1.85 billion, Mashreq revised guidance downward. Ultimately, it priced the bond at 6.25 per cent, tightening by 62.5 basis points from initial guidance.
The transaction also achieved Mashreq’s tightest ever reset margin — about 252 basis points — for any of its previous AT1 or Tier 2 capital issuances.
Notably, the pricing came broadly in line with its existing AT1 bond in the secondary market, despite the new bond having a maturity extension of more than 20 months. It was also priced inside the secondary levels of some recent AT1 issuances by leading Saudi banks, underscoring investor confidence in Mashreq’s credit profile.
Ahmed Abdelaal, Mashreq’s Group Chief Executive Officer, said the strong response reflected investor trust in the bank’s strategy and financial strength. “This issuance underscores the depth of investor confidence in Mashreq’s credit profile, strategy and long-term growth prospects,” he said, adding that the oversubscription demonstrated effective execution even amid global market volatility.
Salman Hadi, Group Head of Treasury and Global Markets, noted that the bank moved ahead of competitors with confidence in its fundamentals. He said the clear market window and proactive engagement with investors generated significant interest from both regional and international buyers.
Norman Tambach, group chief Financial officer, highlighted that demand came from both existing and new investors, reinforcing Mashreq’s standing in global capital markets. He said the transaction strengthens the bank’s capital base and positions it to accelerate growth into 2026.
Investor participation was broad-based. The Middle East and North Africa accounted for 67 per cent of the order book, while Europe — including the United Kingdom — represented 22 per cent and Asia 8 per cent. High-quality institutional investors, including banks, private banks and asset managers, made up 81 per cent of demand, with hedge funds accounting for the remainder.
The bond was arranged by a syndicate of leading regional and international banks, including Abu Dhabi Commercial Bank, ANZ, BofA Securities, Barclays, Citi, Emirates NBD Capital, First Abu Dhabi Bank, Mashreq, Mizuho and MUFG.
