RAM Ratings reaffirms First Abu Dhabi Bank’s AAA/Stable/P1 ratings

Published on 20 Jan 2020.

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RAM Ratings has reaffirmed First Abu Dhabi Bank PJSC’s (FAB or the Group) AAA/Stable/P1 financial institution ratings. Concurrently, we have reaffirmed the AAA/Stable and AA1/Stable ratings of the respective Senior and Subordinated MTN issued under the Group’s Islamic/Conventional MTN Programme of up to RM3 billion (2010/2030). 

The reaffirmation of FAB’s ratings incorporates our expectation of ready support from the Government of Abu Dhabi (GoAD) and the United Arab Emirates (UAE) federal government, underpinned by the Group’s systemic importance as the largest bank in the UAE – FAB commands a substantial 26% of the banking system’s deposits. Given its close ties with the GoAD, the Group has substantial dealings with government and public sector entities. While having been the main growth drivers of FAB’s loan book and funding profile, they have also given rise to high borrower and depositor concentration. Nonetheless, FAB has strengthened its liquidity over the years – the Group’s liquidity coverage ratio averaged 136% in 1H fiscal 2019. 

FAB’s gross impaired loan (GIL) ratio had eased to 3.1% as at end-September 2019 (end-December 2018: 3.2%). However, including loans that are more than 90 days in arrears but not impaired, the Group’s GIL ratio stood at a 4.8% as at end-June 2019 (end-June 2018: 4.7%). The Group’s asset quality was still affected by its higher-risk unsecured personal financing and credit card loans as well as its real estate exposure, although we note the Group’s proactive efforts to de-risk its unsecured portfolios after its merger with First Gulf Bank PJSC. Thus, its credit cost ratio fell in tandem to an annualised 44 bps in 9M fiscal 2019 (fiscal 2018: 57 bps). While FAB may stay vulnerable to challenges stemming from its real estate exposure given the still-soft property and rental prices, we highlight the Group’s smaller exposure to the Dubai property sector compared to its peers. 

Anchored by a well-diversified business mix, the Group’s pre-tax profit (adjusted for integration costs) ascended to AED9.8 bil in 9M fiscal 2019 (9M fiscal 2018: AED9.6 bil). This translated into a healthy return on risk-weighted assets of 2.6% (annualised). Notably, FAB’s cost-to-income ratio (adjusted for integration costs) was an industry-low 26.5% in the same period. FAB’s capitalisation remained sound, with common equity tier-1 and total capital ratios standing at a respective 14.2% and 17.5% as at end-September 2019. Strong pre-provisions earnings and capitalisation should provide a sufficient buffer against potentially higher impairment charges amid the uncertain economic landscape.  


Analytical contact
Liang Huey Jean, CFA
(603) 3385 2495

Media contact
Padthma Subbiah
(603) 3385 2577

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad


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Ratings on First Abu Dhabi Bank PJSC