Moody's Investors Service has upgraded to D+ with stable outlook, from D with positive outlook, the financial strength rating (FSR) of Abu Dhabi Commercial Bank (ADCB). The bank's foreign currency deposit ratings remain unchanged at A1/Prime-1, the UAE country ceiling for foreign currency deposits, with a stable outlook.
In upgrading ADCB's FSR to D+ from D, Moody's has taken into account the significant improvement in the bank's financial fundamentals, as well as the further strengthening of its franchise and brand image in its domestic banking system. Moody's notes that a number of major changes, initiated by the bank's management team, are strengthening ADCB's franchise. The bank has broadened and improved its range of offered products and services, and strengthened its overall risk management framework, enabling it to compete more effectively in the increasingly competitive United Arab Emirates banking sector. Furthermore, the FSR upgrade recognises the bank's improving asset quality and better provisioning coverage of non-performing loans, more diverse funding mix and increasing core earnings and profitability.
Going forward, ADCB's D+ FSR could benefit from: (i) sustained strong financial performance; (ii) reduced funding and credit concentrations; and (iii) more diversified income-generating streams. On the other hand, the bank's FSR could come under pressure in the case of (i) a significant deterioration in financial performance resulting from its recent rapid growth; (ii) a material elevation in risk profile; and (iii) a severe deterioration in the operating environment, in light of the overheating property and equity markets.
Headquartered in Abu Dhabi, United Arab Emirates, Abu Dhabi Commercial Bank is the second-largest bank in the country with total assets of AED57.5 billion (US$15.7 billion) as of December 2005.
