National Bank of Umm Al Qaiwain’s ratings affirmed

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed
the National Bank of Umm Al Qaiwain’s (NBQ) Foreign Currency ratings at BBB+ long-term and A2
short-term with a Support rating of 2. The Bank’s access to federal government support as well as its
ownership by the government of Umm Al Qaiwain underpins its foreign currency ratings. The Financial
Strength rating is maintained at BBB. Although asset quality ratios weakened last year, NBQ’s solid
capital adequacy ratio, continuing strong profitability and high collateral cover are major mitigating
factors. Moreover, the Bank has taken measures to consolidate its business and ensure good liquidity.
NBQ’s moderately high exposures to the real estate and construction sectors and the current
uncertainties in the slowing domestic economy are major constraining factors. In view of the Bank’s
good operating profitability and ROAA in Q1 2010, a ‘Stable’ outlook is appended to all the ratings.
NBQ’s asset quality ratios weakened as a result of the recent economic downturn and non-performing
loans (NPLs) increased substantially (albeit from a low level) in the Bank’s corporate and retail loan
portfolios. The coverage ratio fell sharply with the increase in NPLs. The Bank states that it holds
ample collateral against unprovided NPLs and that many of the NPLs related to delayed payments by
project sponsors in the construction sector and are therefore likely to be recovered subsequently. The
Bank’s large capital and strong profitability are mitigating factors. The ratio of unprovided NPLs to free
capital was low at end 2009.
The Bank’s good profitability is a major strength. NBQ enjoys wide interest differentials and its
operating cost base is reasonably low, resulting in better than industry average profitability ratios.
Despite a significant increase in provision charges, the Bank’s net profit enjoyed a healthy rise last year.
NBQ’s capital adequacy ratio strengthened significantly at end 2009 following the conversion into Tier 2
capital of fixed deposits placed by the UAE Ministry of Finance. NBQ’s liquidity ratios also improved
last year on the back of good customer deposit growth and higher liquid assets.
NBQ, with total assets of the equivalent of USD3.6 billion at end 2009, was ranked thirteenth in Capital
Intelligence’s (CI’s) peer group table of 18 banks in the UAE. The Bank provides a range of corporate,
commercial and retail banking activities. Its activities are primarily UAE-based and the Bank has no
physical presence outside the country.
Contact:
Karti Inamdar [email protected] Tel: 91 124 4012142
Tom Kenzik [email protected] Tel: 357 2534 2300