UAE banks’ asset quality to stay fairly stable in 2016: Fitch

Fitch Ratings on Thursday said asset quality metrics were stable of the UAE banks rated by it in 2015 and will stay fairly stable this year, with some deterioration possible given lower expected economic activity.

All banks remain profitable, although some have started to feel margin pressures due to a modest tightening of liquidity in Q3 2015, which appears to have stabilized, it said, adding that it views funding and liquidity as strong for all six banks. The market is very liquid and banks do not have trouble increasing customer deposits if they are willing to pay for them.

“All six banks have adequate capital ratios, although in some cases risk weighted assets are low due to significant zero-weighted government exposures, which may overestimate capital ratios. High lending concentrations also pose a potential risk for the banks' capitalisation. Buffers can nevertheless absorb moderate unexpected credit losses, supported by high levels of pre-impairment operating profit, which results in strong internal capital generation,” the ratings agency said in a statement.

It currently rates National Bank of Abu Dhabi (NBAD), First Gulf Bank (FGB), Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB), Emirates NBD (ENBD) and HSBC Bank Middle East Limited (HBME). Fitch affirmed ratings of all six UAE banks.

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