Update: First Abu Dhabi Bank PJSC

The stable outlook reflects our expectation that, over the next 12-24 months, FAB will contain further credit losses and problem loan accumulation while improving its profitability, thereby supporting strong capitalization, and bolstering its ability to absorb losses. A negative rating action on FAB over the next 12-24 months is remote since it would require a three-notch deterioration of the bank's intrinsic creditworthiness, which assumes a simultaneous and significant weakening of asset-quality indicators, capitalization, and profitability. We could also lower the rating in the unlikely scenario that we were to downgrade Abu Dhabi or if we viewed the support of the Abu Dhabi authorities as weakening. A positive rating action on FAB over the next 12-24 months is unlikely since it

...S&P Global Ratings expects First Abu Dhabi Bank's (FAB) growth will slow in 2023, following material balance sheet expansion over 2022. By year-end 2022, we expect FAB's loan book will have expanded about 15% compared with about 2%-3% for the UAE system, highlighting a structural advantage of FAB's proximity to the Abu Dhabi government. FAB is benefiting from a build-up of public-sector related demand and an increase in public-sector revenue as a result of high oil prices. Deposit growth has been very material (21% year to date); non-interest-bearing deposit growth as well as oil price-driven liquidity mean FAB accounted for about 40% of systemwide deposit growth through the year (with a 20% share of system liabilities). However, another outcome of these trends is lower net interest margin (NIM) growth than we had expected, since lower public-sector loan rates and the redeployment of liquidity to less risky instruments and jurisdictions has offset the increase in interest rates. In 2023,...

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