28 May 2006
S&P Raises Abu Dhabi Commercial Bank To 'A/A-1'
ADCB announced the recent positive ratings by Standard & Poor's Ratings Services who raised its long and short term counterparty credit ratings on Abu Dhabi Commercial Bank (ADCB) to 'A/A-1' from 'A-/A-2'. The outlook is stable.
The upgrade reflects the bank's strengthening financial profile, partly driven by the very robust domestic economic environment, and successful commercial developments. The analysts commented on several positive developments at ADCB. Among them were;
a very supportive economic environment, an aggressive commercial strategy, and strengthened management teams that have helped enhance ADCB's financial performance in the past couple of years. The bank's ROE was 29.6% in 2005, boosted by exceptional gains from IPO transactions. ADCB's asset-quality indicators also improved dramatically due to an aggressive write-off policy and significant recoveries. The bank's ratio of NPLs to total loans stood at 2.2% at Dec. 31, 2005, down from 18% in 2003.
ADCB's funding and liquidity are adequate. The bank has good access to a substantial base of customer deposits and benefits from large deposits from the Abu Dhabi government and public entities.
Also, ADCB's strong capitalisation was recognised as a positive indicator by Standard & Poor's. The capital increase from the rights issue in 2005 and the decision to not distribute a cash dividend further strengthened ADCB's balance sheet and provided added support for an improvement in the credit rating.
'For many investors, ratings are a critical element in pricing securities and are often used as a benchmark for setting investment guidelines. Thus by providing dependable, globally comparable opinions on credit risk, S&P ratings help to open investment horizons to a wider variety of market segments. This wider market access typically translates into reduced funding cost, particularly for higher rated issuers', said Eirvin Knox, CEO, ADCB.
The stable outlook balances Standard & Poor's expectation that the bank will retain its good financial profile
'A short term obligation rated A-1 is the highest category by Standard & Poor's. The obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial obligations is extremely strong', added the CEO.
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