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Press Release
10 Feb | Tuesday
RAM Ratings assigns preliminary AAA(s) and AA1(s) ratings to Abu Dhabi Islamic Bank’s Proposed Senior and Subordinated Sukuk

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of Abu Dhabi Islamic Bank PJSC (ADIB or the Bank). The ratings are underpinned by a strong likelihood of government support given the Bank’s ownership structure, established retail franchise and role of spearheading Islamic banking in Abu Dhabi. Concurrently, we have assigned respective preliminary AAA(s) and AA1(s) ratings to the Senior and Subordinated Sukuk to be issued under the Proposed Islamic MTN Programme (Proposed Sukuk) to be issued by ADIB Sukuk II Ltd. ADIB Sukuk II is a trust-owned entity that acts as ADIB’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 is the largest Islamic bank in Abu Dhabi and has a strong domestic retail franchise. The Bank is majority-owned by members of the Abu Dhabi ruling family (49%) and the Abu Dhabi Investment Council (8%). During the global financial crisis, the Government of Abu Dhabi and the UAE Federal Government had clearly demonstrated their support for the Bank through pre-emptive capital infusions. We believe that such support will be readily extended again if needed.

ADIB’s asset quality remains weighed down by its legacy financing and exposure to the real-estate sector. As at end-September 2014, ADIB registered a significantly lower gross impaired-financing (GIF) ratio of 4.8%, although we note that this was due to write-offs as well as an enlarged financing base. The Bank’s GIF ratio would increase to 6.2% if financing that is 90 days past due but not impaired were to be added (end-December 2013: 8.3%). While the quantum of impaired financing has been falling, the Bank’s strong financing growth of late may push its GIF ratio up again as its financing book seasons. However, the Bank’s healthy profit-generating aptitude is expected to provide sufficient cushion against potential credit losses.

ADIB’s favourable funding profile – characterised by a high proportion of stable retail deposits with a comfortable financing-to-deposits ratio – is also a credit positive. Cheap funding in the form of current- and savings-account deposits formed a signification portion of its total deposits (59%) as at end-September 2014 while its financing-to-deposits ratio stood at a comfortable 86.4%.

Media contact:
Chan Yin Huei
(603) 7628 1180
yinhuei@ram.com.my

source: RAM Rating Services Berhad
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