Moody’s confirms ratings of 5 UAE banks, assigns negative outlooks
Credit rating firm Moody’s Investors Service has confirmed the long-term ratings of five banks in the UAE.
The ratings of National Bank of Abu Dhabi (NBAD), Abu Dhabi Commercial Bank (ADCB), Union National Bank PJSC (UNB), Al Hilal Bank PJSC (AHB) and Abu Dhabi Islamic Bank (ADIB) have also been placed on negative outlook by Moody’s.
The agency also confirmed the short-term issuer ratings of ADIB (P-1).
The ratings of the banks follow Moody’s confirmation of the UAE government sovereign bond rating at Aa2, with a negative outlook, on May 14. This negative outlook reflects the ongoing negative pressure of lower oil prices on the UAE’s fiscal position and economic strength.
Moody’s said the decision to confirm the ratings of five UAE banks is underpinned by the continued capacity and willingness of the government to provide support to the banks in times of stress, as indicated by the confirmation of the Aa2 rating.
“The negative outlook mirrors the negative outlook on the sovereign rating and captures UAE’s fiscal pressures, which may weaken its capacity to provide support over time,” it added.
Moody’s stated that it assigned a negative outlook to the ratings of NBAD (Aa3), ADCB (A1), UNB (A1), AHB (A1) and ADIB (A2) because these banks are closer to the government’s own rating level and benefit from a higher degree of support as compared to other banks in the system that carry stable outlooks. Moody’s view on the willingness of government support remains unchanged at ‘very high’ for the five banks.
The agency said upwards pressure on the banks’ deposit and issuer ratings is limited, given the negative outlook on the ratings. However, the outlook on the ratings may change to stable as the UAE government’s rating outlook also stabilise.
The banks’ supported ratings may come under downward pressure if the government’s capacity or willingness to provide support to the lenders wane in future.