First Abu Dhabi Bank P.J.S.C.

The stable outlook reflects our expectation that, over the next 12-24 months, the bank will contain further credit losses and problem loan accumulation while recovering profitability, thereby supporting strong capitalization, and bolstering its ability to absorb losses. Should FAB's ability to cover unexpected losses diminish materially, for example, through weaker earnings metrics or higher growth in riskier sectors, we could take a negative rating action over the next 12-24 months. A positive rating action on FAB over the next 12-24 months is remote since it requires a two-notch improvement in the bank's intrinsic creditworthiness. We use our Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an

...First Abu Dhabi Bank P.J.S.C.'s (FAB's) strong public-sector links and increased focus on noninterest income should support earnings. A tactical focus on foreign exchange and investment income, which increased some 135% year on year in first-half 2021, will likely continue to augment a gradual recovery in loan growth. Excluding the impact of acquiring Bank Audi Egypt, loan growth was just 2% in the first half. Increased investment banking activity may introduce elements of revenue volatility, however, FAB's access to anticipated public sector projects should support stable earnings while economic sentiment picks up over the rest of 2021 and into 2022. We believe FAB's ability to absorb losses will remain among the strongest in the market. As the UAE's economy recovers, pockets of weakness will remain. Notably, FAB's deferrals under the UAE Central Bank's (CBUAE's) Targeted Economic Support Scheme (TESS)¡-which accounted for 5.5% of gross loans at June 30, 2021--expire at year-end. We expect...

Full Report