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

Published on 17 October 2014

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of National Bank of Abu Dhabi PJSC (the Bank). Concurrently, the AAA/Stable and AA1/Stable 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) have also been reaffirmed.
As one of the largest banks in the UAE, NBAD commands a sizeable share of the banking system’s deposits. This underpins its systemic importance to the UAE banking system and our view that backing from the Government of Abu Dhabi (GoAD) and the UAE federal government - as demonstrated through capital injections in the past - would be provided if needed. NBAD, as the main banker to the GoAD, has substantial dealings with government-related businesses and the public sector. While this supports its solid market position, it also gives rise to the Bank’s high borrower and deposit concentration.
NBAD’s asset quality indicators compare well among UAE banks. Its gross impaired-loan ratio came in at 3.3% as at end-June 2014, while its credit-cost ratio eased to an annualised 0.5% for 1H FY Dec 2014 (FY Dec 2013: 0.7%). Amid an improving economy and recent uptrend in property prices in the UAE, the risk of asset quality deterioration in its loan book has decreased. The Bank’s capital buffer to cushion against credit losses remains robust; its tier-1 and total capital ratios as at end-June 2014 were a respective, 14.7% and 16.2%.
NBAD’s net interest margin has been declining, chiefly crimped by yield compression in corporate loans. Nevertheless, its bottom line continued to improve, thanks to its strong growth momentum in non-interest income coupled with easing credit-costs. Meanwhile, the Bank’s funding profile is expected to stay healthy. NBAD’s loans-to-deposits ratio – which compares favourably among its UAE bank peers – improved to 76.5% as at end-June 2014 (end-December 2013: 87.1%).

Media contact
Peter Kong
(603) 7628 1029
peterkong@ram.com.my