Noor Bank says not facing asset-liability mismatch

Dubai-based Noor Bank has denied that the Shariah-compliant bank is facing asset and liability mismatches, claiming that its asset-liability position is in line with that prevailing in the market.

The international ratings agency Fitch said in its report that “as part of its three-year strategy, the bank aims to gradually improve its liquidity profile, by potentially accessing capital markets to improve asset and liability mismatches.”

Saadaat Yaqub, Head of Wholesale Banking at Noor Bank, said: “Noor Bank is not facing any liability-asset mismatch… (Bank’s) asset-liability position is in line with that prevailing in the market.”

Fitch rated the Shariah-compliant bank ‘A-’ with stable outlook. It said:

“At end-H1 2014, the Fitch core capital ratio stood at 12.6 per cent, which is lower than the UAE banks’ average, and is considered weak given the asset quality problems and high borrower concentrations. Noor has never distributed dividends and Fitch believes that this should continue to strengthen capital.”

Noor Bank’s total assets reached Dh25.2 billion while customer financing increased to Dh16.3 billion at the end of Q1 2014, the bank said in its first-quarter results. Customer deposits reached Dh20.7 billion.

The bank, however, said it doesn’t see any need to access capital market to raise funds in the immediate future.

“There is no immediate need to raise funds. However, whenever the bank decides to raise funding, it will be dependent on the prevailing market conditions of the time. Like any other bank, Noor also has the option to diversify its funding sources and amongst various options, capital markets can be a source as well. Having said that, there are no immediate plans on this,” Yaqub told Emirates 24l7.

Highest restructured loan book in the UAE

The ratings agency said the bank has highest restructured loan book in the UAE due to its high concentration to government-related entities (GREs).

The bank’s rating, it said, could be raised after improvements in asset quality, particularly repayment of the large GRE exposures, and in capital. But the rating can go down on material deterioration in asset quality impacting the bank's profitability and capitalization.

“As is common at UAE banks, the deposit base is highly concentrated, with the 20-largest depositors accounting for a significant portion of the total, mainly sourced from UAE government/GREs. Noor aims to grow the contribution of current and savings accounts to its deposit base to reduce concentrations and lower funding costs. A large portion of Noor’s deposit base has a contractual maturity of three months or less, but large deposit balances are typically rolled over and have proven stable,” Fitch said.

At end of H1 2014, the non-performing loan (NPL) ratio was 6.7 per cent, down from 9.5 per cent at end-2013, due to loan growth and loan restructuring, but still one of the highest of the Fitch-rated UAE banks. It expects NPLs to gradually decrease, supported by the improving domestic operating environment.

Fitch said net income increased to Dh217 million in H1 2014 from Dh100 million in same period last year, driven by growth in retail, SME and wholesale financing.


 

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