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

Published on 19 August 2015

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of the National Bank of Abu Dhabi PJSC (the Group). 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.
As one of the top 3 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 by capital injections in the past – can be counted on if needed. NBAD, as the main banker to the GoAD, has substantial dealings with government-related businesses and the public sector. While this supports the Group’s solid market position, it also gives rise to high borrower and deposit concentration.
As at end-March 2015, NBAD’s gross impaired loan (GIL) ratio improved to 2.9% – one of the lowest amongst its UAE peers. However, adjusting for loans that were more than 90 days past due but not impaired, this ratio would still come in at 4% (end-December 2014: 4.3%). While we do not rule out the possibility of asset-quality pressure in the near term in view of the overall weak sentiment resulting from falling oil prices, it is likely to be contained. Furthermore, the Group has maintained a strong capital position, with its respective core tier-1 (excluding tier-1 capital notes) and total capital ratios standing at 12.7% and 15.5% as at end-March 2015.
In FY Dec 2014, NBAD chartered a pre-tax profit of AED5.8 billion, which translated into a higher return on assets of 1.7%. The Group’s pre-tax profit has been trending upwards, although its net interest margin has slipped on continued yield compression in wholesale lending and larger holdings of liquid assets. This had been offset by NBAD’s growing non-interest income and easing credit costs. While the Group’s cost-to-income ratio continued to rise amid retail expansion, it is still within the norms of some large banks in the UAE. Moving forward, the Group expects to remain focused on trade- and flow-related businesses as well as private banking, as part of its strategy of sustaining healthy earnings growth.

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