The Banking Executive, Issue 155, November 2021

Abu Dhabi Commercial Bank FITCH AFFIRMS Abu Dhabi Commercial Bank AT A+ WITH STABLE OUTLOOK Global rating agency Fitch has af- firmed Abu Dhabi Commercial Bank's (ADCB) long-term Issuer De- fault Rating (IDR) at 'A+' with stable outlook. The IDR reflects the ex- tremely high probability of support available to the bank - 60 percent owned by Mubadala Investment Company - from the government. "Fitch's assessment of potential state support, in case of need, factors in the sovereign's strong ability to sup- port the banking system, under- pinned by its solid net external asset position, still-strong fiscal metrics and recurring hydrocarbon revenue," the global rating agency said in a re- port. "It also reflects the authorities' very strong, timely and predictable record of supporting its domestic banks and strategic ownership of a number of banks, including ADCB," the report said. The ratings of the bank's unsecured debt (programmes and notes), in- cluding that issued by ADCB's spe- cial purpose vehicles (SPVs) ADCB Finance (Cayman) Limited and AHB Sukuk Company Ltd, are in line with the bank's Long- and Short-Term IDRs, reflecting Fitch's view that the likelihood of default of these obliga- tions is the same as the likelihood of default of the bank. ADCB's asset quality is weaker than peers, Fitch noted. Reported Stage 3 loans (excluding interest in suspense) accounted for 6.1 percent of gross loans (excluding loans to banks) at end-Q3 2021, down from 6.3 per- cent at end-2020, due primarily to large write-offs (equivalent to 1.5 percent of end-Q3 2021 loans). The bank's impaired loans are mate- rially higher than at end-2019 (4.7 percent) mostly due to large corpo- rate defaults including NMC Health- care in 2020. Its reported Stage 2 loans fell to 7.7 percent at end of Q3 2021, reflecting the more benign economic outlook. "The recently announced restructur- ing agreement for NMC could also yield recoveries, but we believe this will take time," Fitch said. "Nevertheless, we expect loan qual- ity to remain broadly stable in 2022 given the improving economic out- look and only modest level of re- maining deferred payments," it said. the BANKING EXECUTIVE 32 ISSUE 155 NOVEMBER 2021