GCC Fixed Income Chart Book: 9M 2017 Review

GCC Fixed Income Chart Book: 9M 2017 Review 12 October 2017

Disclaimer The information contained herein has been prepared by First Abu Dhabi Bank P.J.S.C ( FAB ). FAB relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. This presentation has been prepared for information purposes only and is not and does not form part of any offer for sale or solicitation of any offer to subscribe for or purchase or sell any securities nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of FAB. These forward-looking statements include all matters that are not historical facts. The inclusion of such forward-looking information shall not be regarded as a representation by FAB or any other person that the objectives or plans of FAB will be achieved. FAB undertakes no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. 2

Foreword Welcome to our 9M 2017 chart book for the GCC fixed income market. The idea is very simple to give those of you who follow this market a quick snapshot of some of the key points in s of the following: Primary Market issuance year to date and the new issue trend over the past seven years Deal dynamics and relative value analysis Secondary Market performance of key instruments (snapshot from 30th December 2016 to 6th October 2017) We have deliberately made the report text-light in an attempt to make it easier to digest. Hopefully you will find it both interesting and useful. If you have any feedback on the report, or indeed would like to discuss any of the points highlighted, please do contact me. Regards, Chavan Bhogaita / Rakesh Sahu Market Insights & Strategy Global Markets, FAB Chavan.Bhogaita@nbad.com +971 2 6110 127 Please click here to view our recent publications on MENA and Global Markets 3

GCC bonds & sukuk issuance year-to-date For the analysis below we have considered major hard currency ($/ / /A$) bonds and sukuk issuances from the six nations in the GCC. This includes both fixed and floating rate issuances above $m and maturity of 1-year or above. 90 Total issuance Issuance projection for rest of 2017 Sukuk 2017 will be another record year for GCC fixed income primary market Total annual issuance now stands at an all-time high 24 80 Conventional bond 70 60 69.1 14.4 20.9 50 40 30 25.6 25.9 2.4 4.8 32.2 29.8 14.1 11.4 32.6 13.7 22.6 54.6 55.6 20 7.6 10 23.2 21.1 18.2 18.4 18.9 15.0 0 2010 2011 2012 2013 2014 2015 2016 YTD'17 Source: Bloomberg/FAB 4

GCC sovereigns issued a record level of debt this year GCC Sovereign issue trend 60 55 50 45 40 35 30 25 20 15 10 5 0 Sov as % of total GCC issue Sov bond issue in US$ bn (LHS) Avg brent price in $/bbl (RHS) 6.4 7.3 6.8 3.3 3.4 2010 2011 2012 2013 2014 2015 2016 YTD'17 25% 28% 21% 11% 10% 9% 58% 52% 2.1 40.0 50.1 120 80 60 40 20 0 Sov issue by country 2017 2016 Kingdom of Saudi Arabia Qatar Kuwait Oman Bahrain Abu Dhabi UAE ex AD 0 5 10 15 20 25 30 35 40 45 50 55 US$ bn Source: Bloomberg/FAB 5

Yield to Maturity (%) Spread over Treasury (bps) Spread over Treasury (bps) Risk-reward offered by GCC Sov paper overshadows the Qatar situation evidenced by recent order books Abu Dhabi (Aa2/AA/AA) 3-tranche deal in Oct KSA (A1/A-/A+) 3-tranche deal in Sep 170 220 150 130 Deal size: $10bn Orderbook size: ~$30bn (3.0x) T+150-20 bps T+130 200 180 Deal size: $12.5bn Orderbook size: ~$40bn (3.2x) T+165 T+200-20 bps T+180 110 T+105 160-20 bps -20 bps 90 70-20 bps T+85 T+85 IPT Final Pricing 140 120 T+130-20 bps T+145 IPT Final Pricing 50 T+65 ADGB 20.05Y ADGB 20.010Y ADGB 20.030Y 2.50% 11/10/2022 3.125% 11/10/2027 4.125% 11/10/2047 T+110 KSA 20.0 long 5Y KSA long 20.0 10Y KSA 20.0 30Y 2.875% 04/03/2023 3.625% 04/03/2028 4.625% 04/10/2047 Bahrain (B1/BB-/BB+) 3-tranche deal in Sep Deal distribution by geography 8.00 7.50 7.00 Combined deal size: $3bn Orderbook size: ~$15bn (5x) 7.25% -50 bps 7.875% -37.5 bps 7.50% ADGB MENA 22% Europe 29% Asia 10% US 39% 6.50 6.75% Investor base for GCC Sovereigns are well diversified with more than 75% of the demand coming from outside the MENA region 6.00 5.50 5.625% -37.5 bps IPT Final Pricing KSA MENA 8% Europe 26% Asia 18% US 48% 5.25% 5.00 BHRAIN7.5Y 37.5 Suk BHRAIN12Y 50.0 BHRAIN 37.5 30Y 5.25% 20/03/2025 6.75% 20/09/2029 7.5% 20/09/2047 Source: Bloomberg/FAB; The credit ratings shown are from Moody s/s&p/fitch 0% 20% 40% 60% 80% % 6

0 2 4 6 8 10 12 14 16 18 20 22 45 Sovereign/SWF Bonds Fins & Corp. Bonds Overall demand remains anchored for GCC papers Amount issued Orderbook Times oversubscribed Qatar Reinsurance Perp 6.5 14.4x Equate Petrochemical 7Y Sukuk 3.7 7.4x Majid Al Futtaim Perp Ahli Bank Qatar 5Y FAB 5Y Green Bond 1.1 1.8 2.0 3.6x 4.0x 2.2x National Bank Kuwait 5Y Bond Omangrid 10Y Bond Dubai Islamic Bank 5Y Sukuk 2.1 2.9 2.7 3.9x 2.7x 2.1x Mubadala 2-tranche (5y & 10y) 4.3 2.9x Inv. Corp. of Dubai 10Y Sukuk in Feb 3.1 3.1x Oman 3-tranche (5, 10 & 30y) in Mar 19.5 3.9x Kuwait 2-tranche (5y & 10y) in Mar KSA 2-tranche Sukuk (5y & 10y) in Apr 30.0 33.0 3.8x 3.7x Oman 7Y Sukuk in Jun 7.0 3.5x Bahrain 3-tranche (7.5y sukuk, 12y & 30y) in Sep 15.0 5.0x KSA 3-tranche (long 5y, long 10y & 30y) in Sep 40.0 3.2x Abu Dhabi 3-tranche (5y, 10y & 30y) in Oct 30.0 3.0x Amount in billion US$ Source: Bloomberg/FAB 7

CDS (bps) GCC sovereign credit ratings & CDS spreads versus peers 240 Bahrain 220 200 180 160 The chart shows that Gulf sovereigns are rated favourably as compared to many of their peers from the EMEA region. Indeed Abu Dhabi and Kuwait have maintained their AA ratings from all major rating agencies amid a persistent low oil price environment. The ratings of these sovereigns underpin the fact that they have substantial reserves and a range of tools available to them to deal with the new normal oil price and other geo-political threats. Turkey 140 120 Italy Dubai* Russia Qatar Indonesia 80 60 40 20 Austria Abu Dhabi Hong Kong France South Korea Kuwait UK China Belgium Japan Kingdom of Saudi Arabia Malaysia Poland 0 AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- Notes: * X-axis represents the composite rating (please refer Appendix for calculation method); Dubai is not rated by any rating agency and we have assigned a proxy rating of BBB+ based on its fundamentals with a relative comparison to DEWA (BBB+) & Emirate of Sharjah (BBB+). The ratings have been arranged from higher to lower starting from AA, followed by AA- and so on; Source: Bloomberg/FAB Spain India 8

Yield to Maturity (%) GCC sovereign curves 8.00 BHRAIN 7.5 09/47 7.00 BHRAIN 7.0 10/28 OMAN 6.5 03/47 6.00 5.00 BHRAIN 6.125 07/22 OMAN 5.375 03/27 DUGB 5.25 01/43 4.00 DUGB 5 04/29 KSA 4.625 10/47 QATAR 4.625 06/46 ADGB 4.125 10/47 OMAN 3.875 03/22 3.00 DUGB 6.45 05/22 KSA 2.875 03/23 QATAR 2.375 06/21 ADGB 2.5 10/22 KUWIB 3.5 03/27 KUWIB 2.75 03/22 2.00 ~5-year bonds 5Y ~10-year 10Y bonds ~30-year 30Y bonds ADGB KUWAIT QATAR KSA DUGB OMAN BAHRAIN Source: Bloomberg/FAB 9

ADCB Doha Bank QIIB KFH Gulf Bank Intnl Bank of Qatar Ahli Bank QSC CBQ NCB Al Rajhi Riyad Bank Noor Burgan Bank Saudi Hollandi Saudi Inv Bank Com Bank of Dubai Bank of Sharjah RAKBANK UAB Oman Arab Bank NBO Bank Sohar NBB BBK Mashreq QNB UNB ADIB QIB FAB NBK Al-Hilal Ind Bank of Kuwait Kuwait Intl Bank Al Ahli Bank of Kuwait CBK Al Khalij Samba SABB INTBOQ Emirates Islamic Bank Boubyan bank Dubai Islamic Bank Gulf Inv Corp Warba Bank BSF Arab National Bank HSBC Bank Oman Gulf Intl Bank Tamweel Sharjah Islamic Bank NBF (Fujairah) Ahli United Bank Bank Muscat Bank Dhofar Ahli Bank SAOG ABC Composite Rating IsDB United Arab Emirates (UAE) Kingdom of Saudi Arabia Emirate of Ras Al-Khaimah Emirate of Sharjah Kingdom of Bahrain OMGRID Kuwait Projects Co Dubai Inv Park Mumtalakat Damac Composite Rating Emirate of Abu Dhabi Sultanate of Oman Dolphin Energy Saudi Telecom MAF DP World Dar Al Arkan Aldar Batelco Investcorp Qatar Kuwait Emirate of Dubai* Composite Rating Qatari Diar Qatar Petroleum SECO Etihad Mubadala Etisalat DEWA Taqa DIFC Investment JAFZ IPIC TDIC Waha RASGAS Industries Qatar QGTS (Nakilat) SABIC EQUATE Petrochem Emaar Malls Grp Emaar Prop Ezdan Holding Ooredoo (Qtel) Qatar Reinsurance GCC credit quality at a glance GCC Sovereigns AA+ 15 14 AA AA- 13 12 A+ 11A 10 A- BBB+ 9 BBB 8 BBB- 7 BB+ 6 BB 5 BB- 4 B+ 3 15 AA+ 14AA 13 AA- 12A+ 11A 10A- BBB+ 9 BBB 8 BBB- 7 BB+ 6 5BB BB- 4 3B+ 2B- GCC Corporates GCC Financials AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- Note: The ratings mentioned here are composite credit rating for each issuer. Please see appendix for the methodology of calculating composite credit rating; * Dubai is not rated by any rating agency and we have assigned a proxy rating of BBB+ based on its fundamentals with a relative comparison to DEWA (BBB+) & Emirate of Sharjah (BBB+); Source: Bloomberg/FAB 10

GCC spread performance summary YTD Top 10 / bottom 10 bond/sukuk performers (z-spread, bps) in each category from 30 th Dec 2016 to 6 th Oct 2017 Sovereigns Financials Corporates DUGB 43 RAKS 18 (S) BHRAIN 18 (S) Unsec KSA 26 DUGB 21 PUTA BHRAIN 21 BHRAIN 22-45 -40-39 -39-39 -71-85 BGBKKK Jr Sub PERP Nxt C: 30-09-2019 ALHILA (S) Jr Sub PERP Nxt C: 30-06-2019 AUBBI Jr Sub PERP Nxt C: 29-04-2020 BKDBOM Jr Sub PERP Nxt C: 27-05-2020 EBIUH Jr Sub PERP Nxt C: 17-09-2020 EBIUH Jr Sub PERP Nxt C: 30-05-2019 ADIBUH (S) Jr Sub PERP Nxt C: 16-10-2018-99 -98-98 -92-129 -149-165 DAMACR 19 (S) GMSEDU (S) Jr Sub PERP Nxt C: 21-11-2018 MAFUAE Jr Sub PERP Nxt C: 29-10-2018 DOLNRG 19 Sec SINK DPWDU 37 DARALA 19 (S) DICUH 19 (S) -163-143 -132-126 -125-102 -211 QATAR 30-38 RAKBNK 19-90 JAFZSK 19 (S) -95 ADGB 21-37 FABUH Jr Sub PERP Nxt C: 17-06-2020-84 KWIPKK 23-81 DUGB 20-36 FABUH 3.25 19-79 EMAAR 19 (S) -79-7 QATAR 21 +10 ALKHAL 18-17 INTPET 23-6 SHARSK 24 (S) +10 INTBOQ 20-16 QTELQD 18 (S) -5 QATDIA 20 +11 ADCBUH Sub CALL Nxt C: 28-05- 2018-16 TAQAUH 19-4 ADGB 22 *11/10/17 +13 QNBK 20-13 OMGRID 27 *16/5/17-0 BHRAIN 29 *20/9/17 +15 COMQAT 21-13 MUBAUH 24 *19/4/17 +1 ADGB 27 *11/10/17 +30 ABQKQD 21-13 SECO 22 (S) +3 QATAR 22 +31 QIBKQD 22 (S) *23/5/17-6 KWIPKK 27 *23/2/17 +10 BHRAIN 47 *20/9/17 +42 COMQAT 2.875 19 +11 RASGAS 19 Sec +12 BHRAIN 28 +46 QIBKQD 20 (S) +13 QATIQD Sub PERP Nxt C: 13-09-2022 *13/3/17 +30 QATAR 23 (S) +87 COMQAT 7.5 19 +22 KHDRWY 25 (S) SINK 90 60 30 0-30 -60-90 120 90 60 30 0-30 -60-90 -120-150 -180 200 150 50 0-50 - -150-200 -250 Notes: (1) We have used a list of GCC public debt which have maturity one year or more on the analysis date and for which FAB trading desk provides market price; (2) If the instrument is a "Sukuk", the ticker contains "(S)"; (3) All bonds/sukuks are $ denominated unless any other currency is highlighted in the ticker. (3) All bonds/sukuks are senior unsecured debt of the issuer unless an abbreviation for the debt type is highlighted in the ticker e.g. Unsec = Unsecured debt junior to Senior Unsecured debt; ; Sub = Subordinated; Sr Sub = Senior Subordinated; Jr Sub = Junior Subordinated; Perp = Perpetual; Callable, Puttable and Sinkable is highlighted by using Call, Puta, & Sink respectively; (4) * highlights spread change from the 1st settlement date of the bond as it was issued in 2017; Source: FAB/Bloomberg 11

ADGB 19 ADWA 20 SINK z-spread (bps) ADGB 21 ADGB 22 *11/10/17 ADGB 26 ADGB 27 *11/10/17 ADGB 47 *11/10/17 Sovereigns spread performance Abu Dhabi 180 165 150-7 135 120 105 90 75-24 +1 60 45 30-4 15-37 0-15 Short -17-21 Maturity 30-Dec-16 06-Oct-17 Curve on 30-Dec-16 Curve on 06-Oct-17 Long Source: FAB/Bloomberg 12

QATAR 19 QATAR 20 QATAR 21 z-spread (bps) QATAR 22 QATAR 18 (S) QATDIA 20 QATAR 23 (S) QATAR 26 QATAR 30 QATAR 40 QATAR 42 QATAR 46 Sovereigns spread performance Qatar 220 200 180 160-25 -25-22 140-38 120-19 80-5 -7 +3 60 40 +43-12 +30 20-21 0 Short 30-Dec-16 06-Oct-17 Maturity Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: (1) If the instrument is a "Sukuk", the ticker contains "(S)" next to the maturity year; (2) ** Included QATDIA in Qatar Sov curve as it is explicitly Govt guaranteed; Source: FAB/Bloomberg 13

z-spread (bps) KUWIB 22 *20/3/17 KUWIB 27 *20/3/17 Sovereigns spread performance Kuwait 125 115 105 95 85-32 75 65 55 45-32 35 25 Short Maturity 30-Dec-16 06-Oct-17 Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: * Highlights spread change from the 1st settlement date of the bond as it was issued in 2017; Source: FAB/Bloomberg 14

KSA 21 KSA 22 (S) *20/4/17 KSA 23 *4/10/17 z-spread (bps) KSA 26 KSA 27 (S) *20/4/17 KSA 28 *4/10/17 KSA 46 KSA 47 *4/10/17 Sovereigns spread performance Saudi Arabia 230 210 190-22 -12 170 150 130-13 110-40 -35 90 70-27 -23-12 50 Short Maturity 30-Dec-16 06-Oct-17 Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: * Highlights spread change from the 1st settlement date of the bond as it was issued in 2017; If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 15

DUGB 20 DUGB 22 (S) DUGB 21 PUTA DUGB 23 (S) z-spread (bps) DUGB 29 (S) DUGB 43 Sovereigns spread performance Dubai 350 325 300 275 250-85 225 200 175-15 150 125-13 -39-25 75 50-36 25 Short 30-Dec-16 06-Oct-17 Maturity Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 16

z-spread (bps) SHARSK 21 (S) SHARSK 24 (S) Sovereigns spread performance Sharjah 125 120 115 110 105-6 95 90 85 80-15 75 Short Maturity 30-Dec-16 06-Oct-17 Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 17

z-spread (bps) RAKS 18 (S) RAKS 25 (S) Sovereigns spread performance Ras Al Khaimah 130 120 110-16 90 80 70 60-22 50 Short Maturity 30-Dec-16 06-Oct-17 Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 18

OMAN 21 OMAN 22 *8/3/17 z-spread (bps) OMAN 26 OMAN 27 *8/3/17 OMAN 47 *8/3/17 Sovereigns spread performance Oman 400 375 350-15 325 300 275 250-16 -28 225 200 175 150-16 125-26 Short 30-Dec-16 06-Oct-17 Maturity Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: * Highlights spread change from the 1st settlement date of the bond as it was issued in 2017; If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 19

BHRAIN 18 (S) Unsec BHRAIN 20 z-spread (bps) BHRAIN 21 BHRAIN 22 BHRAIN 23 BHRAIN 24 (S) BHRAIN 25 (S) *20/9/17 BHRAIN 26 BHRAIN 28 BHRAIN 29 *20/9/17 BHRAIN 47 *20/9/17 BHRAIN 44 Sovereigns spread performance Bahrain 525 500 +10 475 450 425 +12 unch -31 400 375-22 350 325 300 275-39 -29-10 -19 250 225-39 200 175-30 150 125-19 75 Short 30-Dec-16 06-Oct-17 Maturity Curve on 30-Dec-16 Curve on 06-Oct-17 Long Notes: If "Sukuk" the ticker contains "(S)" next to the maturity year; Source: FAB/Bloomberg 20

Appendix As mentioned in above slides, we have used composite ratings for the credit quality analysis i.e. the average of the ratings assigned by three leading rating agencies Moody s, S&P and Fitch in order to provide a more representative view of the credit strength of each bank. The composite rating is calculated as follows: A score is assigned to the rating from each rating agency: AAA or equivalent being the best with a score of 1, followed by AA+ or equivalent as 2, AA or equivalent as 3, AA- or equivalent as 4 and so on; For example FAB is rated Aa3/AA-/AA- by Moody s/s&p/fitch. So the scores are 4/4/4; Hence the average of the scores is 4 which indicates a composite rating of AA- for FAB; In case the average score is not an absolute number e.g. 4.33 (average of 4, 5, & 4 ) the final score is derived by rounding off the average score to the nearest whole number. In this case 4. Source: Bloomberg/FAB 21

Contact: Chavan Bhogaita / Rakesh Sahu Market Insights & Strategy Global Markets First Abu Dhabi Bank Tel: +971 2 6110 127 Chavan.Bhogaita@nbad.com Market Insights & Strategy, FAB Global Markets Please click here to view our recent publications on MENA and Global Markets Thank You