RAM Ratings reaffirms National Bank of Abu Dhabi’s AAA financial institution rating, assigns AA1 rating to proposed Subordinated Notes

Published on 24 October 2012

RAM Ratings has reaffirmed National Bank of Abu Dhabi PJSC’s (“NBAD” or “the Group”) respective long- and short-term financial institution ratings, at AAA and P1. The AAA rating of the Group’s Senior Medium-Term Notes (“MTN”), issued under its existing Islamic/Conventional MTN Programme of up to RM3 billion (2010/2030) (“MTN Programme”), has also been reaffirmed. Concurrently, RAM Ratings has assigned an AA1 rating to the Group’s proposed Subordinated MTN, to be issued under the MTN Programme. All the long-term ratings have a stable outlook. The MTN programme, which had previously consisted of only Senior MTN, has been amended to incorporate the issuance of Subordinated MTN.

NBAD is the flagship bank of Abu Dhabi, and the second-largest bank in the United Arab Emirates (“UAE”). The Group is 70.5%-owned by the Government of Abu Dhabi (“GoAD”); their close relationship allows NBAD to enjoy considerable government-related business and public-sector deposits. Given the Group’s favourable shareholding structure and systemic importance to the UAE, we envisage a very high likelihood of extraordinary support from the GoAD in the event of any financial distress.

The Group’s asset quality is still deemed healthy despite some weakness in the last few years. Problem loans are still being originated from the fragile real-estate and consumer sectors, leading to a slightly higher gross impaired-loan (“GIL”) ratio of 3.2% as at end-June 2012 (end-December 2011: 2.9%). This is, however, balanced by the Group’s strong GIL coverage ratio of 95.5% and robust capitalisation. At the same time, NBAD’s annualised credit-cost ratio had eased to 0.7% following less collective provisions and strong recoveries.

NBAD’s borrower- and depositor-concentration risks have remained among the highest within RAM Ratings’ rated portfolio. Its top 20 borrowers, the majority of which are related to the government/public sector, accounted for almost half of its loan books as at end-March 2012. This was somewhat moderated by its relatively low counterparty risk given the GoAD’s strong fiscal position. NBAD’s sturdy capitalisation is among the strongest in our rated universe. Its tier-1 and overall risk-weighted capital-adequacy ratios stood at a robust 16.3% and 21.0% as at end-June 2012. 

Media contact

Chan Yin Huei

(603) 7628 1180

yinhuei@ram.com.my