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) increased dependence on trading income could introduce some revenue volatility in tighter than expected monetary settings. Over the first nine months of 2021, operating revenue was some 18% higher than the same period in 2020. However, traditionally more stable net interest income was 6% lower, and growth was significantly driven by unrealized trading gains. These results show the bank's capacity to quickly generate alternative income streams and S&P Global Ratings expects some of the gains to be realized before interest rate hikes (see Related Research) could negatively impact valuations. The results also indicate weaker than expected underlying loan growth, which we now forecast at 5% per year over 2021-2023--half the average growth rate between 2018 and 2019--and points to increased reliance on market sensitive revenue. Still, overall, we expect that business confidence will improve in 2022 and 2023 and FAB's access to anticipated public sector...

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