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Press Release
06 Feb | Tuesday
RAM Ratings reaffirms Abu Dhabi Islamic Bank's AAA/Stable/P1 ratings

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of Abu Dhabi Islamic Bank (ADIB or the Bank). The ratings are premised on our expectation of ready support from the Government of Abu Dhabi (GoAD) and the UAE Federal Government, given the Bank's ownership structure and the track record of government support. Concurrently, we have reaffirmed the respective preliminary AAA(s) and AA1(s) ratings of the Senior and Subordinated Sukuk to be issued under ADIB Sukuk Company II Ltd’s proposed Islamic MTN Programme (Proposed Sukuk). ADIB Sukuk Company II is a trust-owned entity that acts as the Bank’s funding conduit. The issue ratings reflect ADIB’s credit strength as it is the obligor of the Proposed Sukuk.

Established under an Emiri decree, ADIB stands among the largest 5 Islamic banks globally (by assets) and commands a commendable domestic retail franchise. The Bank is majority-owned by members of the Abu Dhabi ruling family (50%) and the Abu Dhabi Investment Council (8%), an investment arm of the GoAD. We believe that support from the GoAD and the UAE government will be forthcoming in times of distress, as exhibited during the global financial crisis by way of a tier-1 capital injection and conversion of deposits into subordinated debt.

The credit quality of ADIB's financing portfolio continues to be plagued by the spillover effects of lower oil prices. The Bank's gross impaired financing (GIF) ratio escalated to 4.8% as at end-September 2017 (end-December 2016: 4.0%) on the back of pockets of weakness in its corporate and real estate financing portfolios. Adjusting for financing which was more than 90 days past due but not impaired, the ratio would be a weaker 5.1% (end-December 2016: 4.5%). While we remain cognisant of further asset quality pressures owing to the still-challenging economic landscape, the Bank's strong pre-provision profits and AED400 million credit-risk reserve provide a sound buffer.

ADIB's favourable funding profile is underscored by its expansive base of retail customer deposits. As at end-September 2017, individuals and SMEs collectively contributed 64% of its customer deposits, thus providing diversity and stability to its funding profile. The Bank had also maintained a comfortable financing-to-deposits ratio of 77.5% as at the same date, while its liquidity position remained solid with a liquidity coverage ratio of 175%. While ADIB's capitalisation stood relatively weaker compared to peers, support from shareholders is likely to be forthcoming in the event of any capital-raising initiatives.

Analytical contact
Choong Andrea
(603) 7628 1162
andrea@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

Date of release: 6 February 2018

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 2018 by RAM Rating Services Berhad’s

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