* Five-year sukuk carries profit rate of 2.5 pct
* Strong demand for deal; order books over $6 billion
* First sukuk issue from QIB in two years (Adds final pricing, comment)
By Rachna Uppal
DUBAI, Oct 3 Qatar Islamic Bank, the Gulf Arab state's largest sharia-compliant lender, returned to global debt markets after two years with a $750 million Islamic bond sale on Wednesday, tapping into strong liquidity for regional issuers.
The lender priced the five-year sukuk at a profit rate of 2.5 percent, and a spread of 175 basis points over midswaps, tighter than the earlier guidance after strong investor interest.
While banks in Qatar are very liquid, much of this cash is held in local riyals. With a number of infrastructure projects in the pipeline ahead of the country hosting 2022 football World Cup, lenders are keen for longer-term dollar funding.
Order books for the issue were reportedly over $6 billion ahead of launch, according to lead arrangers. Much of this was likely to have come from cash-rich Islamic investors held back by limited sukuk supply in the market.
"This ($6 bln order book) demonstrates the pent-up demand in the market for sukuk and should act as a stimulus for further issuance for the rest of 2012 and well into 2013," said Jason Kabel, head of fixed income at Bank of London and The Middle East.
Ernst & Young estimates global outstanding demand for sukuk to total about $300 billion, while new issuance this year may not be much over $100 billion with growing appetite from banks.
QIB, whose biggest shareholder is the country's sovereign wealth fund, the Qatar Investment Authority, received approval for a new $1.5 billion sukuk programme last month, and this issue will be the first sale under it.
QIB only has one outstanding sukuk, its $750 million deal completed in 2010, which was issued at a profit rate of 3.856 percent.
That sukuk, which came under selling pressure this week to make room for the new issue, was bid at a yield of about 2.18 percent on Wednesday afternoon, according to Thomson Reuters data.
QIB completed investor meetings earlier this week in London. HSBC Holdings, Standard Chartered, Deutsche Bank and Qinvest, part-owned by QIB, were joint lead managers on the deal.
Earlier this week, another regional lender, First Gulf Bank , reopened Gulf primary issuance with a $650 million five-year bond which was also substantially oversubscribed. (Reporting by Rachna Uppal; Editing by David French and Dinesh Nair)