Saudi National Bank to Redeem $1.25B AT1 Sukuk

Saudi National Bank (SNB) will redeem its $1.25 billion Additional Tier 1 sukuk on July 26, 2026. The bank notified holders of its intention to call the notes at par.

AT1 sukuk are designed to absorb losses when a bank's capital falls below a threshold. They sit between equity and senior debt in the capital structure. Because of that loss-absorption feature, AT1 instruments carry higher coupons than comparable senior bonds. Retiring this layer reduces SNB's annual interest expense.

The redemption comes on the sukuk's first call date. That is standard for AT1 instruments. Issuers typically redeem at the first opportunity if their capital position allows. SNB's move suggests its capital ratios are comfortable enough to operate without the additional cushion.

For the Saudi banking sector, the redemption carries a readthrough. Other lenders may face pressure to follow. If SNB can retire its AT1, peers with similar instruments might need to explain why they haven't done the same. The Saudi banking system overall has strong capital levels, helped by high oil revenue and limited loan losses.

Holders of the sukuk will get par value on July 26. They will need to find new homes for the cash. Many will rotate into other bank capital notes, potentially tightening spreads on remaining Saudi AT1 paper.

SNB was created in 2021 through the merger of National Commercial Bank and Samba Financial Group. The sukuk was issued after the combination as part of the new entity's capital planning. The bank is Saudi Arabia's largest by assets.

The redemption is scheduled for July 26, 2026.