Global Arab Network | Fitch Affirms National Bank of Abu Dhabi at 'AA-' with Stable Outlook

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Fitch Affirms National Bank of Abu Dhabi at 'AA-' with Stable Outlook

Global Arab Network - - Mohammed Almasri

Tuesday, 09 March 2010 17:56

Fitch Ratings has today affirmed the National Bank of Abu Dhabi's (NBAD) Long-term Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook. Fitch has affirmed NBAD's Short-term IDR at 'F1+', Support Rating at '1' and Support Rating Floor at 'AA-'. The Individual Rating is affirmed at 'B/C'.

The affirmation of NBAD's IDRs and Support Rating reflect the extremely high probability of support from the government of Abu Dhabi ('AA'/Stable Outlook/'F1+'), and the UAE authorities in case of need. The Individual Rating reflects the bank's strong domestic franchise, consistent profitability, relatively conservative risk profile and low funding costs, and its close links to the Abu Dhabi government which benefits its lending and funding profile. It also reflects concentrations in loans and deposits and risks inherent in the UAE operating environment.

Net profit for 2009 was flat y-o-y, as stronger core earnings absorbed the impact of rising impairment charges. Costs remain well controlled. Profit generation is boosted by NBAD's low funding costs and a conservative risk profile, which translated into a lower increase in impairment charges than the bank's peers. NBAD's asset quality weakened only marginally during 2009, although there are indications that asset quality could weaken further. The 2009 non-performing loan ratio was 1.3% and reserve coverage strengthened to a satisfactory 158%.

Government and public sector deposits accounted for just over a third of end-2009 funding. The bank also has significant wholesale funding, both from the interbank and international capital markets. Liquidity is tightening, but remains adequate. Both the bank's funding structure and liquidity are well monitored and controlled. Capitalisation strengthened in 2009 and is satisfactory. The bank's capital adequacy ratio under Basel 2 reached 17.4% at end-2009, with a Fitch eligible capital ratio of 15.4%. Capital was boosted by the AED4bn Tier-I capital notes injected by the Abu Dhabi government as part of its recapitalisation of Abu Dhabi-based banks in 2009.

NBAD is the largest bank in Abu Dhabi and the second-largest in the UAE, accounting for around 12% of system assets. It is one of the primary bankers to the Abu Dhabi government and public sector companies in the Emirate. The Abu Dhabi government owns 70.5% of NBAD's shares through its domestic investment arm, the Abu Dhabi Investment Council (ADIC). NBAD is listed on the Abu Dhabi Exchange and the balance of its shares is widely held.

A credit report on the entity will shortly be available on the agency's website, www.fitchratings.com, under Financial Institutions/Banks/Full Rating Reports.

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.

Global Arab Network

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