Fitch Affirms National Bank of Abu Dhabi at 'AA-'; Outlook Stable

04/05/2013 14:14 AST

Fitch Ratings has affirmed National Bank of Abu Dhabi's (NBAD) Long-term Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook. The Viability Rating (VR) has been affirmed at 'a-'. A full list of rating actions is at the end of this comment.

KEY RATING DRIVERS - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR

NBAD's IDRs, Support Rating and Support Rating Floor reflect Fitch's belief that there is an extremely high probability of support from the government of Abu Dhabi ('AA'/Stable/'F1+') in the first instance, and also from the UAE authorities, if required. This is based on NBAD's importance to Abu Dhabi and to the UAE banking system, the bank's majority (70.3%) ownership by - and close ties to - the Abu Dhabi government, and the UAE authorities' long record of support for domestic banks.

Liquidity support and term funding have been provided by the UAE authorities to all the local banks in the system. In 2013 NBAD completed repayment of the AED5.6bn it received as support from the UAE Ministry of Finance, which was due in 2016. In addition, the Abu Dhabi authorities separately injected perpetual hybrid Tier 1 capital into the leading Abu Dhabi banks in 2009 - NBAD received AED4bn - to further support capital, which we consider a strong statement of support.

RATING SENSITIVITIES - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR

The IDRs, Support Rating and Support Rating Floor are sensitive to Fitch's view of the creditworthiness of the UAE and Abu Dhabi authorities, and to Fitch's view of their continuing propensity to support the banking system in general and NBAD in particular. The Stable Outlook indicates Fitch does not consider it likely there will be any change in either ability or propensity to support NBAD.

RATING DRIVERS -VR

The Viability Rating reflects the bank's strong franchise, especially in Abu Dhabi; the strength of its management, its close links to the Abu Dhabi government, which benefit both its lending and its funding profile; its consistently sound profitability; and its relatively sound asset quality, despite some deterioration. The main constraint on the rating is NBAD's significant level of concentration, both in loans and deposits (despite the fact that these concentrations are largely to Abu Dhabi government related entities) in addition to risks inherent in the UAE operating environment.

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