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Non-Abu Dhabi based Banks More Vulnerable: Fitch Ratings
DUBAI - Non-Abu Dhabi based banks were looking relatively under-capitalised and potentially more vulnerable to any future deterioration in the economy, Fitch Ratings said in its latest report on Monday.
Rasing concerns on liquidity and the property sector, the rating agency said the outlook of UAE banks in 2009 was challenging with 2008 levels of net income unlikely to be repeated.
“The tough global economic environment had a negative impact on the Q408 profits of UAE banks, although the severity of the impact was varied across the sector. The main banks that have reported headline figures to date all remain profitable for the full year, although Q4 2008 figures show a significant decline in net income compared to the previous three quarters in 2008,” the report said.
It said long-term ratings remain driven by the probability of support from the UAE authorities. It said its view of support for the non-Abu Dhabi based banks has not changed in light of the recent announcement by the Abu Dhabi government of the proposed capital injections totalling Dh16 billion into five institutions in Abu Dhabi, with the agency believing that there is an extremely high probability of support for the vast majority of banks it rates in the UAE. The rating agency noted that the performance of most banks remained satisfactory in Q408, with the exceptions of Abu Dhabi Commercial Bank (net loss of Dh260 million), Emirates NBD (net profit of Dh14 million) and Union National Bank (net profit of Dh66 million). “Although most banks have reported headline numbers, Fitch has yet to review the banks’ full audited financial statements and will reserve judgement on whether any further rating changes are necessary until it has done so over the next couple of months,” said Robert Thursfield, Director in Fitch’s Banks team.
Fitch’s expectation of a more challenging environment and likely reduced profitability for banks in the region resulted in a number of Individual rating downgrades for UAE based banks in December 2008.
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