National Bank of Umm Al Qaiwain’s ratings affirmed

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmedthe National Bank of Umm Al Qaiwain’s (NBQ) Foreign Currency ratings at BBB+ long-term and A2short-term with a Support rating of 2. The Bank’s access to federal government support as well as itsownership by the government of Umm Al Qaiwain underpins its foreign currency ratings. The FinancialStrength rating is maintained at BBB. Although asset quality ratios weakened last year, NBQ’s solidcapital adequacy ratio, continuing strong profitability and high collateral cover are major mitigatingfactors. Moreover, the Bank has taken measures to consolidate its business and ensure good liquidity.NBQ’s moderately high exposures to the real estate and construction sectors and the currentuncertainties in the slowing domestic economy are major constraining factors. In view of the Bank’sgood operating profitability and ROAA in Q1 2010, a ‘Stable’ outlook is appended to all the ratings.NBQ’s asset quality ratios weakened as a result of the recent economic downturn and non-performingloans (NPLs) increased substantially (albeit from a low level) in the Bank’s corporate and retail loanportfolios. The coverage ratio fell sharply with the increase in NPLs. The Bank states that it holdsample collateral against unprovided NPLs and that many of the NPLs related to delayed payments byproject sponsors in the construction sector and are therefore likely to be recovered subsequently. TheBank’s large capital and strong profitability are mitigating factors. The ratio of unprovided NPLs to freecapital was low at end 2009.The Bank’s good profitability is a major strength. NBQ enjoys wide interest differentials and itsoperating cost base is reasonably low, resulting in better than industry average profitability ratios.Despite a significant increase in provision charges, the Bank’s net profit enjoyed a healthy rise last year.NBQ’s capital adequacy ratio strengthened significantly at end 2009 following the conversion into Tier 2capital of fixed deposits placed by the UAE Ministry of Finance. NBQ’s liquidity ratios also improvedlast year on the back of good customer deposit growth and higher liquid assets.NBQ, with total assets of the equivalent of USD3.6 billion at end 2009, was ranked thirteenth in CapitalIntelligence’s (CI’s) peer group table of 18 banks in the UAE. The Bank provides a range of corporate,commercial and retail banking activities. Its activities are primarily UAE-based and the Bank has nophysical presence outside the country.Contact:Karti Inamdar karti.inamdar@ciratings.com [2] Tel: 91 124 4012142Tom Kenzik tom.kenzik@ciratings.com [3] Tel: 357 2534 2300