Riyad Bank, Saudi Arabia's fourth-largest lender by assets, has issued capital-boosting sukuk worth SR4 billion ($1.07 billion), banking sources said on Monday.

The deal, which will enhance the bank's Tier 2 or supplementary capital, was priced at the end of last week at 115 basis points over the Saudi interbank offered rate, the sources said, speaking on condition of anonymity as the information isn't public.

Riyad Bank had announced the privately-placed sukuk on May 5, with a tenor of 10 years although it allows the issuer to redeem the security after five years.

The bank didn't respond to a request for comment.

Banking sources said the transaction had initially struggled to gain traction with investors because of the pricing that was on offer.

One sources said that the deal had been earmarked to price at 105 bps, but the yield had to be increased to attract sufficient demand for the whole issue.

After a period of strong lending growth, banks in Saudi Arabia have sought to replenish their capital reserves in the last couple of years, including the issuance of capital-boosting bonds and bonus shares.

Saudi British Bank (SABB) sold a 1.5 billion riyal sukuk with the same tenor as Riyad Bank's issue with a profit rate of 130 bps over Saibor, the kingdom's fifth-largest bank by assets said last month.

At the end of March, Riyad Bank had a total capital adequacy ratio, which includes both Tier 1 core capital and Tier 2 capital of 17.5 percent, according to its financial statements.

The kingdom's conservative regulator requires Saudi banks to have high capital reserves by Western standards.-Reuters