Tuesday, December 16, 2008

Moody's revises rating outlooks for four UAE banks

16 December 2008

Global ratings agency Moody's Investors Service yesterday said it had revised the outlooks on the ratings of four UAE banks.

The rating outlooks for Abu Dhabi Commercial Bank (ADCB), First Gulf Bank (FGB), and Dubai Islamic Bank (DIB) have been changed from "stable" to "negative" while the rating outlook on Dubai Bank has been changed from "positive" to "stable." Concurrently, the outlooks on the ratings for all senior unsecured debt issued by these banks have also been revised accordingly.

The ratings were revised downward due to the mounting liquidity pressures in the short to medium term, the growing downward pressures on asset prices (mainly stocks and properties) and the anticipated profitability pressures from rising funding costs derived from increasingly scarce liquidity and loss of confidence, said John Tofarides, Analyst in Moody's Financial Institutions Group.

Moody's said that liquidity conditions in the UAE weakened during the third quarter this year. The flight of speculative deposits from the country created substantial short-term liquidity pressures, which prompted the UAE Government to offer emergency liquidity support facilities.

"Moody's recognises the excellent asset quality and profitability levels reported by all UAE banks - as a result of the benign credit environment - may be negatively affected going forward," he said. Moody's will continue to monitor the ratings of all UAE banks.