RAM Ratings reaffirms National Bank of Abu Dhabi's AAA/P1 financial institution ratings with a stable outlook

Published on 10 August 2011
RAM Ratings has reaffirmed the respective long- and short-term financial institution ratings of National Bank of Abu Dhabi PJSC (NBAD or the Bank), at AAA and P1.



Concurrently, the AAA rating of the Bank’s up to RM3 billion Senior Unsecured Islamic/Conventional Medium-Term Notes (2010/2030) has also been reaffirmed. Both long-term ratings have a stable outlook. The ratings reflect the strong support from the Bank’s majority shareholder, i.e. the Government of Abu Dhabi (GoAD), its solid domestic market position and healthy credit fundamentals. NBAD, the second-largest bank in the United Arab Emirates (UAE), is 70.5%-owned by the GoAD.

RAM Ratings still considers NBAD’s asset quality to be satisfactory despite a rise in the Bank’s gross impaired loans (GILs) during the year, mainly because of its still-ailing domestic real-estate sector. The Bank’s GIL ratio increased from 1.3% as at end-December 2009 to 2.7% as at end-June 2011. We note that NBAD’s asset quality is much better than its counterparts’ given that the Bank has limited exposure to the beleaguered Dubai World and its related entities. We expect the Bank’s GIL ratio to peak at about 4% this year given the subdued UAE real-estate market. In terms of its funding profile, NBAD’s loans-to-deposits ratio of 103.9% as at end-June 2011 was higher than those of RAM Ratings’ universe of financial institutions. However, we believe that support will be forthcoming from the GoAD in the event of any liquidity crunch. On a more positive note, the Bank maintains a relatively liquid balance sheet, with a liquid-asset ratio of 43.3% as at end-June 2011.

In FY Dec 2010, NBAD chalked up a respectable pre-tax profit of AED3.8 billion despite hefty credit costs. We expect the Bank to record a marginal growth in its pre-tax profit in fiscal 2011. Its still-strong pre-provision profit-generating ability puts it in a better position to cushion elevated credit costs. Meanwhile, NBAD’s capitalisation level remained robust as at end-June 2011, with respective tier-1 and overall risk-weighted capital-adequacy ratios of about 15% and 21%.

Media contact
Shireen Ng
(603) 7628 1021
shireen@ram.com.my