The four banks affected are Emirates Bank International and National Bank of Dubai (currently merging into Emirated NBDEmirated NBD), MashreqBankMashreqBank and Dubai Islamic Bank. In all cases, their bank financial strength ratings (BFSRs) and long-term debt and deposit ratings were placed on review for possible downgrade and short-term ratings affirmed. See details of ratings affected below.

Moody's anticipates that the pressures facing the UAE banking system will result in rising corporate defaults as well as an increase in delinquencies from retail lending -- especially among unsecured credits.

However, the rating agency acknowledges that the rated banks have responded to the expected deterioration in asset quality by increasing their provisioning levels and improving their Tier 1 capital ratios during the first two quarters of 2009.

The UAE banking system is largely government-owned or controlled and much of the capital improvement has been through the provision of external support (i.e. government injections of Tier 1 capital notes) aimed at ensuring the banks are better prepared for both expected and unexpected levels of loan losses.

"Moody's stress tests of the rated UAE banks' portfolios -- under both a base-case and a more adverse (or stressed) scenario -- have indicated that the Abu Dhabi-based banks are more resilient. This primarily reflects two factors: their high Tier 1 capital ratios and (ii) lower concentrations of loans and deposits to the more volatile economic conditions prevailing in the Emirate of Dubai," explains John Tofarides, lead analyst at Moody's for the UAE banks.

More details of the stress-testing exercise -- including Moody's assumptions for estimated losses for each asset class -- will be presented in a Special Comment to be published shortly.

For all the banks, the review is expected to be completed in the next few months. Based on its stress-test results, Moody's does not, at this stage, anticipate that a multi-notch downgrade will be warranted for any of the rated entities.

Moody's notes that today's rating actions reflect a forward-looking approach based on anticipated loss estimates and that it will continue to monitor the ratings, in particular for any significant changes from the currently anticipated scenarios over the next 12 to 18 months.

The following ratings were placed on review for possible downgrade:

Emirates Bank International PJSC (EBI):

- C- BFSR (which maps to a Baseline Credit Assessment (BCA) of Baa2)

- A1 long-term local and foreign currency deposit ratings

- A1 senior debt ratings

- A2 subordinated debt rating

- Emirates Islamic Bank Sukuk Certificates of A1, guaranteed by EBI

National Bank of Dubai (NBD):

- C- BFSR (mapping to a BCA of Baa2)

- A1 long-term local and foreign currency deposit ratings

- A1 senior debt ratings

- A2 subordinated debt ratings

MashreqBankMashreqBank psc:

- C- BFSR (mapping to a BCA of Baa1)

- A2 long-term local and foreign currency deposit ratings

- A2 senior unsecured debt rating

- A3 subordinated debt rating

Dubai Islamic Bank:

- D+ BFSR (mapping to a BCA of Baa3)

- A1 long-term local and foreign currency issuer ratings

- A1 senior foreign currency debt rating

PREVIOUS RATING ACTIONS & PRINCIPAL METHODOLOGIES

Moody's last rating action on Emirates Bank International was on 24 December 2004, when it upgraded the foreign currency deposit ratings to A1/Prime-1 from A2/Prime-2 and its Euro Medium-Term Programme ratings for senior debt and subordinated debt upgraded to A1/A2 from A2/A3, respectively.

Moody's last rating action on National Bank of Dubai (NBD) was on 24 April 2007, when its BFSR was changed to C- from D+ following the implementation of the new BFSR methodology.

Moody's last rating action on Mashreqbank was on 24 December 2004, when it upgraded the foreign currency deposit ratings to A2/Prime-1 from A3/Prime-2 and its Euro Medium-Term Programme ratings for senior debt and subordinated debt to A2/A3 from A3/Baa1, respectively.

Moody's last rating action on Dubai Islamic Bank was on 15 December 2008, when it changed the outlook on its foreign and local currency issuer ratings to negative.

Emirates NBDEmirates NBD PJSC (holding company of EBI and NBD) is headquartered in Dubai and reported AED281.9 billion (US$76.6 billion) total assets as of 30 June 2009.

Masreqbank is headquartered in Dubai and reported AED96.7 billion (US$26.3 billion) total assets as of 30 June 2009.

Dubai Islamic Bank is headquartered in Dubai and reported AED87.8 billion (US$23.9) total assets as of 30 June 2009.

The principal methodologies used in rating the banks were "Bank Financial Strength Ratings: Global Methodology" (February 2007) and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology" (March 2007), which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies sub-directory. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory.

-Ends-

Limassol
Mardig Haladjian
General Manager
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

DIFC
John Tofarides
Analyst
Financial Institutions Group
Moody's Middle East Ltd.
Telephone: +971-44-01-9536

© Press Release 2009

 

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