Fitch affirms Adib IDR at A+; outlook stable

Fitch Ratings has affirmed Abu Dhabi Islamic Bank's  (Adib) Long-term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook, Short-term IDR at 'F1', Individual Rating at 'C/D', Support Rating at '1' and Support Rating Floor at 'A+'.  The affirmation of Adib's Long- and Short-term IDRs and Support Rating reflects the extremely high probability of support from the UAE authorities, if needed. Fitch's opinion of likely support is based on the long history of support for banks in the UAE, the bank's franchise and its prominent Abu Dhabi shareholders. The affirmation of the Individual Rating reflects the bank's sound liquidity and funding, its good franchise and adequate capitalisation. It also reflects high concentrations in financing and rapid growth.

The bank's 9M10 net income increased to AED909m (9M09: AED701m) as a result of higher financing volumes, repricing and the introduction of new fee and commission charges. The net impairment charge increased to AED405m in 9M10 (9M09: AED386m), representing a moderate 31% of pre-impairment operating profit (FYE09: 95%).

ADIB's impaired financing represented 5.9% of gross financing at end-9M10 (end-2009: 6%). The slight fall was due to rapid growth of the financing book, which outpaced the increasing impaired loan figure. Rapid growth in financing may lead to future asset quality problems as the financing book seasons. Reserve coverage of impaired financing improved to 71% at end-9M10 (end-2009: 69%). Liquidity was sound, with a gross financing/customer deposits ratio of 91% at end-9M10 (2009: 84%), one of the lowest in the UAE banking sector. The bank recently further extended its funding profile by issuing AED2.9bn five-year sukuk. The Tier 1 ratio at end-9M10 was adequate at 13.2%, (2009: 13.5%) while the total capital adequacy ratio was 17.0%.

ADIB's main shareholders are Emirates International Investment Company (41%), which is owned by members of the Abu Dhabi ruling family, the Abu Dhabi Investment Council with 8% and the UAE pension fund (2.3%). ADIB is one of the largest Islamic banks in the UAE and serves clients in the retail and corporate segments.

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