Abu Dhabi's First Gulf Bank (FGB) has set up a new $3.5 billion Islamic bond programme, a London Stock Exchange filing showed, paving the way for the lender's first sukuk sale.

FGB, 67-percent owned by Abu Dhabi's ruling family, picked Citi, Standard Chartered  and HSBC to arrange the programme, a prospectus from the lender, dated July 11 showed.

The UAE's second largest lender by market value said in March that the bank was considering an Islamic bond as it planned to tap debt markets this year. Sukuk yields in the Gulf have narrowed significantly in recent months, a sign of returning confidence and demand for regional Islamic paper.

'There is still a lot of pent up demand in the sukuk space and very few places to invest in currently,' said one Dubai-based trader, adding that recent sukuk issues were oversubscribed even though the pricing was not overly attractive.   

The lender has a separate $3.5 billion euro medium term notes programme (EMTN) under which it raised $500 million in November 2009.
   
FGB issued a five-year 200 million Swiss franc ($206 million) bond, carrying a coupon of 3 percent in January. The bond was the first  from the Gulf region in 2011.

The political uprisings in the region had virtually halted the sukuk market in the Gulf but the sector has seen a revival buoyed by high-profile issuances such as HSBC Middle East's benchmark sukuk.   

Sharjah Islamic Bank's $400 million issuance was also oversubscribed and indicated that demand was on the rise for Islamic paper in the Gulf. - Reuters