Fitch Ratings has today downgraded the Long-term Issuer Default Ratings (IDRs) of Dubai Bank (to 'BBB-' from 'BBB+'), Tamweel PJSC (to 'BB' from 'BBB') and TAIB Bank (to 'BB' from 'BBB-'). The Outlooks on Dubai Bank and TAIB Bank are Negative.
Tamweel remains on Rating Watch Evolving.
This follows the announcement by Dubai World, wholly-owned by the government of Dubai, that it is requesting to postpone debt repayments until at least May 2010. This request has implications for the creditworthiness of the government of Dubai, as it demonstrates that the government of Dubai's ability to support its wholly-owned subsidiaries is increasingly constrained and the government is making a clearer distinction between its own direct obligations and the indebtedness of its subsidiaries.
Fitch believes there is a distinction between the probabilities of support for UAE banks depending on the sources of support (See "Fitch Downgrades 7 UAE Banks," 24 September 2009.). Fitch believes that UAE banks would be supported by the UAE authorities. In early 2009, Abu Dhabi-based banks received direct capital injections from the government of Abu Dhabi, and Fitch believes that a few institutions, with close links to the government of Dubai, would look primarily to the government of Dubai for support. The request for a standstill agreement in respect of Dubai World and its property development subsidiary, Nakheel PJSC, and possibly other subsidiaries, implies a further weakening of the government of Dubai's ability to provide such support.
Fitch is also reviewing the potential effect of the debt standstill request on the financial position and Individual ratings of any banks with large exposures to Dubai World and its subsidiaries.
Dubai Bank is a small bank wholly-owned by Dubai Banking Group which in turn is 70% owned by Dubai Holding (ultimately the ruler of Dubai) and 30% owned by the property developer, Emaar (32% owned by the government of Dubai). Fitch expects that potential support would flow primarily from the Dubai authorities. However, as a bank regulated by the UAE Central Bank, support could ultimately also be forthcoming from the UAE authorities. Fitch has placed the Individual rating on Rating Watch Negative to reflect Dubai Bank's high exposure to Dubai corporate entities and the government.
Tamweel is a Shari'ah-compliant residential mortgage company operating in the UAE. Core shareholders are Dubai Holding (owned by the ruler of Dubai), Istithmar (owned by Dubai World) and Dubai Islamic Bank (part owned by the government of Dubai). The UAE authorities have established a steering committee to propose a new ownership structure and remedies for its funding requirements. As its future ownership and role in the UAE economy are unclear, the company's IDRs remain on Rating Watch Evolving, but currently reflect potential support from the Dubai authorities.
TAIB Bank is a Bahrain-based financial institution that repositioned itself as a private bank in 2004. TAIB Bank is focused on wealth management, providing real estate investment, asset management, private equity investment, as well as brokerage and trust services. TAIB's main (60%) shareholder is Dubai Financial Group, the financial institutions holding company of Dubai Holding, which is effectively wholly-owned by the ruler of Dubai. The Long-term IDR now reflects TAIB Bank's stand-alone financial position. Uncertainty regarding the bank's future strategy is reflected in the Negative Outlook.
Long-term IDR: downgraded to 'BBB-' from 'BBB+'; Outlook Negative
Senior unsecured debt: downgraded to 'BBB-' from 'BBB+'
Short-term IDR: downgraded to 'F3' from 'F2'
Individual rating: 'C/D' placed on Rating Watch Negative
Support rating: affirmed at '2'
Support Rating Floor: downgraded to 'BBB-' from 'BBB+' Tamweel:
Long-term IDR: downgraded to 'BB' from 'BBB'; remains on Rating Watch Evolving (RWE)
Senior unsecured debt: downgraded to 'BB' from 'BBB'; remains on RWE
Short-term IDR: downgraded to 'B' from 'F3'; remains on RWE
Individual rating: affirmed at 'E'
Support rating: downgraded to '3' from '2'; remains on RWE
Support Rating Floor: downgraded to 'BB' from 'BBB'; remains on RWE
Long-term IDR: downgraded to 'BB' from 'BBB-', Outlook Negative
Short-term IDR: downgraded to 'B' from 'F3'
Individual Rating: affirmed at 'C/D'
Support Rating: downgraded to '4' from '2'Global Arab Network