Al Rajhi Sukuk: Everything You Need to Know About Al Rajhi Sukuk

Al Rajhi Sukuk are Islamic debt instruments issued by Al Rajhi Bank to provide the necessary financing to enhance capital and meet regulatory requirements, especially the capital adequacy standard (Basel). Sukuk differ from traditional bonds in terms of Sharia structure, as they represent a share in an asset or investment project, rather than a loan with interest. Al Rajhi Sukuk are often issued under the first tier (AT1) to support permanent core capital or under the second tier for lower capital requirements. All issuances are subject to review by the bank's Sharia committee and comply with local regulations and the Saudi Capital Market Authority. Al Rajhi Sukuk are available for trading in the sukuk and bond market and can be issued in Saudi Riyals or US Dollars depending on the nature of the offering and the bank's needs.

The years 2024 and 2025 witnessed significant issuances of Al Rajhi Bank Sukuk. In January 2025, the bank completed the issuance of first-tier sukuk in dollars worth $1.5 billion as part of an international program to enhance core capital. This was preceded in January 2024 by a permanent issuance exceeding $3.5 billion, forming a solid base for the bank in facing international and local requirements. The bank also issued sukuk in Saudi Riyals in previous years worth 10 billion Riyals as part of capital support programs. These sukuk are classified as sustainable, guaranteed, and aim to enhance the bank's financial position in the long term. The sukuk trade at prices close to par value (100 Riyals or its equivalent), with slight fluctuations related to market movements.

The yield on Al Rajhi Sukuk is calculated according to a Sharia-compliant structure that does not include fixed interest, but rather reflects the actual results of the bank's activities or the assets financed by the proceeds of the sukuk. In the latest issuances (2024-2025), the annual yield rate for dollar-denominated sukuk ranged between approximately 6% and 7% (according to market reports), and is determined at issuance based on market conditions and investor demand. Sukuk often include an early call option after a grace period (5-10 years), giving the bank flexibility in restructuring its capital in the future. Profit distribution to sukuk holders depends on the bank's results and the Sharia committee's approval, and can change annually based on financial performance.

Sukuk are distinguished by their compliance with Islamic Sharia, representing a share in a specific asset or project, unlike bonds which represent a loan with fixed interest. Al Rajhi Sukuk do not provide a fixed return but depend on the results of the financed assets or activities. Financially, sukuk are less exposed to interest rate risks but may be affected by the bank's performance and operational revenues. Additionally, sukuk are often permanent (especially the AT1 tier) and have a lower priority in liquidation compared to traditional bonds. Each sukuk issuance is subject to review by a Sharia committee to ensure compliance with Islamic law.

Al Rajhi Sukuk are listed on the Saudi sukuk and bond market (Tadawul) and are traded through licensed brokers for qualified investors. Prices are determined based on supply and demand, and often move around par value (100 Riyals or its equivalent), with the possibility of slight price differences. The trading mechanism differs from stocks, as trading volume is lower and liquidity is relatively limited, with the minimum investment in some issuances being high (up to $200,000 in international issuances). Profit distributions are calculated based on the bank's results and are added to the accounts of registered investors. Sukuk performance and prices can be monitored through the official Tadawul platform.

All Al Rajhi Sukuk issuances are subject to the supervision of the Saudi Capital Market Authority (CMA), which sets clear controls for transparency and disclosure. A detailed issuance prospectus must be published for each sukuk offering, including information about the Sharia structure, expected yield, uses of the issuance proceeds, potential risks, and credit ratings. The authority also imposes updates on periodic disclosures and trading data to ensure investor protection. Al Rajhi Sukuk fully comply with these regulations and are often issued after review by the bank's Sharia committee and CMA approval. This regulatory framework is a key factor in enhancing investor confidence in the Saudi sukuk market.

Al Rajhi Bank enjoys high credit ratings from global agencies such as Moody’s and S&P, having recorded a rating of 'Aa3' or equivalent before 2024, supporting the reliability of sukuk issuances. No specific reports on the credit rating of Al Rajhi Sukuk have been issued for 2024-2025, but the bank's strong rating positively reflects on the attractiveness of sukuk for local and international investors. The high rating reduces financing costs and increases the chances of covering new issuances. It also limits bankruptcy risks, making sukuk a preferred option within investment portfolios seeking a balance between yield and security.

Al Rajhi Sukuk are primarily issued to enhance the bank's capital, especially the first tier (AT1) which is counted as part of the permanent core capital. These issuances enable the bank to meet Basel III regulatory requirements and improve its capital adequacy ratio, enhancing its ability to expand and offer diverse financial services. Sukuk also support the bank's trends towards sustainability and social projects, with some issuances directed to support housing and community initiatives. This positively reflects on the bank's ability to face financial crises and market fluctuations while maintaining its Sharia-compliant approach.

Al Rajhi Bank recorded strong financial performance in 2024-2025. The stock price reached approximately 100 Saudi Riyals by the end of 2025, while the market capitalization approached 302 billion Riyals. The price-to-earnings (P/E) ratio ranged between 9 and 11 times based on the past 12 months' earnings. The bank announced a distribution of 1.60 Riyals per share as annual dividends, with a dividend yield of approximately 1.6%. In the third quarter of 2024, the bank achieved a net profit of around 2.4 billion Riyals, and operating revenues continued to grow in the fourth quarter. Annual profits recorded growth between 10-12% compared to 2023, supported by increased interest income and expansion in Islamic and digital financing.

The banking and financial services sector is one of the largest sectors in the Saudi market, characterized by sustainable growth driven by Vision 2030 projects and increased government spending. Al Rajhi Bank leads Islamic banks but faces strong competition from Saudi National Bank, Alinma Bank, Riyad Bank, SABB, and Arab National Bank. The sector focuses on digital transformation and the development of Islamic products, with an increasing commitment to Basel standards and capital liquidity. Regulatory authorities emphasize disclosure and governance requirements, while banks benefit from rising interest rates and increased demand for real estate and consumer financing.

Al Rajhi Bank faces direct competition from several Saudi banks in the sukuk and Islamic banking products sector. Key competitors include Saudi National Bank (SNB), which ranks first in terms of assets, Alinma Bank (noted for rapid growth and digital services), Riyad Bank (focused on corporate and commercial loans), SABB (a British-origin bank offering Islamic products), and Arab National Bank. There are also mid-sized Islamic banks like Bank Albilad and Bank Aljazira, in addition to emerging digital banks. Al Rajhi's advantage lies in its full commitment to Islamic financing and its large size.

Recently, significant developments have occurred for Al Rajhi Sukuk, most notably the successful issuance of $1.5 billion in January 2025, with plans to launch a second social tranche in dollars as part of a $10 billion program. The bank focuses on issuing sustainable sukuk to support environmental and social projects, and has launched new digital services to enhance customer experience and expand the investor base. Regulatory updates from the Capital Market Authority have improved disclosure and transparency, boosting investor confidence. The bank has also recorded growth in real estate and retail financing, continuing to support capital requirements through further international issuances.

The main risks associated with Al Rajhi Sukuk include: bankruptcy risk (in case of the bank's weak financial position), market risk (price fluctuations with changes in interest rates), currency risk (for dollar-denominated issuances), and regulatory or legislative risks. First-tier sukuk have a lower priority in liquidation compared to ordinary bonds, which increases risks relatively. However, the bank's high credit rating and its commitment to governance mitigate these risks. Investors are required to review issuance prospectuses and official disclosures and assess the suitability of sukuk for their investment goals.

To monitor prices and trading of Al Rajhi Sukuk, it is advisable to refer to the Saudi Tadawul platform (sukuk and bond market), where prices and indicators are displayed daily. Issuance prospectuses and financial reports can be accessed through Al Rajhi Bank's official website, in addition to reports from the Saudi Capital Market Authority. Local financial platforms such as 'Argaam' and 'Mubasher' also provide comprehensive coverage of sukuk and bank news, with periodic updates on performance and financial results. Relying on these official sources ensures accurate and reliable data about Al Rajhi Sukuk.