FW: RAM Ratings reaffirms First Abu Dhabi Bank's AAA/Stable/P1 ratings

 

Published on 04 Jan 2018.

 

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of First Abu Dhabi Bank PJSC’s (FAB or the Group, formerly known as National Bank of Abu Dhabi PJSC or NBAD). Concurrently, the AAA/Stable and AA1/Stable ratings of the Group’s respective Senior and Subordinated MTN, issued under its Islamic/Conventional MTN Programme of up to RM3 billion (2010/2030), have also been reaffirmed. 

The reaffirmation of FAB’s ratings is driven by our expectation of strong support from the Government of Abu Dhabi (GoAD) and the UAE federal government, underpinned by its systemic importance in the banking sector. The ratings also take into consideration the Group’s post-merger performance, which has stayed largely within our expectations. 

With a AED644 billion asset base as at end-September 2017, FAB – a result of the merger of NBAD and First Gulf Bank PJSC (FGB) on 2 April 2017 - is the largest bank in the United Arab Emirates, capturing more than a quarter of the system’s deposits and loans. The Group combines the key strengths of the merged entities. The former NBAD had enjoyed a commendable franchise in corporate and wholesale banking, and had topped international sukuk league tables. On the other hand, the former FGB had a leading retail-banking franchise, with one of the strongest credit-card brands in the UAE and the exclusive right to administer the GoAD’s national housing loan programme.

Subsequent to the merger, FAB’s gross impaired-loan (including more than 90 days past due but not impaired) and credit-cost ratios crept up to 4.2% as at end-September 2017 (NBAD’s standalone end-December 2016: 3.7%) and 71 bps (annualised) in 9M FY Dec 2017 (NBAD’s standalone 2016: 57 bps), respectively. The Group’s loan book also remains concentrated, with its top 10 borrowers’ funded and unfunded exposures representing about one-third of its gross loans. Furthermore, it has a significant exposure to the real-estate sector (24% of its gross loans as at end-September 2017), which has been facing lackluster demand in the last few years. 

In view of the UAE’s subdued economic growth, the Group may be vulnerable to challenges emitting from its large exposures or the real-estate industry. Nonetheless, FAB’s stronger pre-provisioning earnings and capitalisation should provide a sufficient buffer against potential credit losses. As at end-September 2017, the Group’s common-equity tier-1 capital ratio as per the UAE central bank’s adoption of Basel II guidelines stood at a strong 14.6%.  

 

Analytical contact
Chew Wei Li 
(603) 7628 1025
weili@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my