RAM Ratings reaffirms National Bank of Abu Dhabi’s AAA financial institution rating

Published on 01 August 2013

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. We have also reaffirmed the AAA and AA1 ratings of the Group’s respective Senior and Subordinated Medium-Term Notes (“MTN”), issued under its existing Islamic/Conventional MTN Programme of up to RM3 billion (2010/2030) (“MTN Programme”). All the long-term ratings have a stable outlook.

The ratings reflect the strong support from both the Government of Abu Dhabi (“GoAD”) and the United Arab Emirates (“UAE”) government, its solid domestic market position and healthy credit fundamentals. NBAD, the largest bank in the UAE, is 70.2%-owned by the GoAD. NBAD’s close relationship with the GoAD allows it to enjoy considerable government-related businesses and public-sector deposits. On the flip side, the Group’s borrower- and depositor-concentration risks are also among the highest in RAM’s portfolio and a key moderating factor. Nonetheless, we acknowledge its relatively low counterparty risk given the GoAD’s strong fiscal position.

RAM still considers NBAD’s asset quality to be satisfactory despite a rise in the Bank’s gross impaired loans (“GILs”). Problem loans and the relapse of restructured loans to impaired status from the real-estate and personal/retail sectors had weakened its GIL ratio to 3.4% as at end-June 2013. Although its annualised credit-cost ratios of 0.8% as at end-FY Dec 2012 and 0.7% as at end-1H FY Dec 2013 have eased to pre-crisis levels, they are still considered relatively high compared to its peers in our portfolio. Nonetheless, NBAD’s asset quality is still one of the best in the UAE banking system. Meanwhile, NBAD remains predominantly funded by deposits. Its liquidity position is manifested by a sound loans-to-deposits ratio of 79% and a strong liquid-asset ratio of 54.2% as at end-June 2013. This favourable liquidity position moderates its significant depositor-concentration risk. NBAD’s capitalisation position is among the strongest in RAM’s portfolio. Its tier-1 and overall risk-weighted capital-adequacy ratios stood robust at a respective 16.8% and 18.5% as at end-June 2013.

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Chan Yin Huei

(603) 7628 1180

yinhuei@ram.com.my