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Capital Intelligence (CI), the international credit rating agency, announced that it has maintained the National Bank of Abu Dhabi’s (NBAD) Financial Strength Rating at ’A+’, with the Bank’s solid capital adequacy ratio and good profitability being major supporting factors.
A ’Stable’ Outlook is assigned to this rating; while impaired loans could rise this year. The growth rate is expected to slow and the Bank should be able to comfortably absorb any additional provision charges. The continuing investments in the Bank’s major businesses augur well for top-line growth over the coming quarters. NBAD’s Long-Term and Short-Term Foreign Currency Ratings are affirmed at ’AA-’ and ’A1+’, respectively, with a ’Stable’ Outlook; the ratings are the same as those assigned to the sovereign. The Bank’s large size, its flagship status and its systemic importance are major factors underpinning its Foreign Currency Ratings. The Support Rating is maintained at ’1’, reflecting the strength of the Bank’s ownership and the extremely high likelihood that official support would be forthcoming in case of need.
The Bank remains profitable but key ratios have reduced in recent periods. This was due primarily to narrowing net interest margins attributed to increased levels of liquid assets and short-dated lending. Higher operating costs have also contributed to the fall in profitability ratios; the increase in costs reflected the implementation of the Bank’s growth oriented strategy.
NBAD’s key asset quality ratios had weakened in 2009 following a substantial increase in impaired loans and past due loans over 90 days that the Bank does not consider impaired. However, the situation has improved slightly in recent periods and the coverage ratio has risen. Renegotiated loans have been on the whole fairly low. NBAD’s large capital base provides additional safeguards and the Bank is profitable enough to make further provisions if required. Moreover, the loan book is also growing at a fair pace, reflecting increased activity in the infrastructure and energy sectors.
The Bank continued to be solidly capitalised, owing to the retention of earnings. However, the capital adequacy ratio had declined slightly last year due to lower Tier II capital. Liquidity ratios are adequate and are substantially underpinned by the Bank’s access to government and public-sector deposits, which continue to be a high proportion of its total customer deposit base. In fact, key ratios strengthened substantially in the first quarter of 2012 owing to a substantial increase in deposits placed by the government and public-sector entities. The Bank also has access to international markets for medium/long-term funding, and it was able to raise new funds fairly comfortably last year, despite the subdued market conditions.
NBAD was established in 1968. It is effectively government-owned, with the Abu Dhabi Investment Council holding 70.48% of shares. This is the second largest bank in the country, with total assets of the equivalent of $79bn at end 2011. NBAD is the primary banker to the government of Abu Dhabi and to public-sector and private-sector companies in the emirate. It is also a major retail bank. The Bank’s current network of more than 120 branches and over 500 ATMs is the second largest in the country. The Bank’s overseas presence consists of more than 50 foreign branches and other offices in a number of countries.
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