Banque Saudi Fransi (BSF) plans to issue a five-year benchmark-sized Islamic bond, or sukuk, arranging banks said, after the lender completed investor meetings last week.

An issue would be the Saudi bank's first sukuk under a recently-established $ 2 billion program.

Initial guidance for the sukuk was at 200 basis points over midswaps. Benchmark is usually understood to be at least $ 500 million.

Market sources expect healthy demand for the deal, propped up by a strong regional bid, despite the euro zone uncertainty which is currently weighing on global markets.

"(Pricing) is better than rumored last week but still relatively tight versus peers," said one regional trader, adding earlier market chatter had indicated guidance in late 100s over midswaps area. "We still anticipate a decent-sized book and expect pricing to tighten further before launch."

Dollar-denominated bonds from Saudi Arabia, the world's top oil exporter, come to market relatively infrequently, and attract substantial demand when they do. Saudi Electricity's $ 1.75 billion sukuk earlier this year received orders in excess of $ 15 billion.

"They (Banque Saudi Fransi) should have big books since there is scarcity of Saudi paper," said another regional trader.

Banque Saudi Fransi's existing $ 650 million 4.5 percent conventional bond, maturing 2015 was bid at just over 104 on Monday, to yield about 2.79 percent, Thomson Reuters data showed.

It was trading at a zero-volatility spread (z-spread) of about 212 basis points. The z-spread is a pricing tool which calculates the number of basis points that need to be added to a zero-coupon yield curve to make the bond's discounted cash flows equal the bond's present value.

Roadshows in Saudi Arabia, the United Arab Emirates, Singapore, Kuala Lumpur and in London, ended on May 11.

Citigroup, Credit Agricole and Deutsche Bank are bookrunners on the deal.