DIFC, December 15, 2009 -- Moody's Investors Service has today placed on review for possible downgrade
the ratings of four UAE banks:
- Abu Dhabi Commercial Bank and its subsidiary ADCB Finance (Cayman)
Limited,
- Commercial Bank of Dubai,
- Dubai Bank and
- HSBC Bank Middle East Limited, HSBC Bank Middle East Limited
(UAE Branch) and HBME Sukuk Company Ltd.
The purpose of Moody's rating review is to assess the resilience of these
banks' ratings to the potential continued deterioration in Dubai's operating
environment, including their exposure to the ongoing restructuring
of Dubai World companies' debt. (Moody's recently downgraded
three other UAE banks -- Emirates NBD, Mashreqbank PSC and
Dubai Islamic Bank PJSC -- which had been on review since August
2009. Please refer to Moody's rating action press release
dated 10 December 2009.)
Moody's views positively the emergency support extended by the Government
of Abu Dhabi to Dubai on 14 December to enable Dubai to meet the immediate
obligations of some entities within the troubled Dubai World group.
However, Moody's believes that despite the timely settlement of
obligations falling due this week, the final form of the on-going
restructuring of the remaining debt owed by Dubai World has yet to be
defined. It is also not clear at this time whether this restructuring
process will be confined to Dubai World entities. Finally,
uncertainty still surrounds the implementation process of the promised
comprehensive reorganization framework and its impact on the ultimate
level of debt recovery. According to Moody's, the Dubai
World incident will have further repercussions on the already weakened
corporate scene in Dubai.
Moody's also expects the prevailing difficult economic conditions
in Dubai to lead to a further rise in distressed loans over the foreseeable
future, thus testing the resilience of the ratings of the four named
banks. Although Moody's stress-testing scenarios suggest
that these banks have adequate capital buffers to absorb an increased
level of bad debt, their earning power could be dented.
Moody's rating reviews will focus on assessing the impact of the potential
continued weakening in credit quality on the banks' asset quality
and earnings metrics.
The current ratings of the affected banks are now as follows:
Abu Dhabi Commercial Bank PJSC
- BFSR: C- on review for downgrade
- Long-term deposit ratings: Aa3 on review for downgrade
- Senior unsecured debt ratings: Aa3 on review for downgrade
- Subordinated debt ratings: A1 on review for downgrade
- Short-term debt and deposit ratings: Prime-1
ADCB Finance (Cayman) Limited
- Senior unsecured debt ratings: Aa3 on review for downgrade
- Subordinated debt ratings: A1 on review for downgrade
Commercial Bank of Dubai PJSC
- BFSR: D+ on review for downgrade
- Long-term deposit ratings: A2 on review for downgrade
- Short-term deposit ratings: Prime-1 on review
for downgrade
Dubai Bank
- BFSR: D on review for downgrade
- Long-term deposit ratings: A3 on review for downgrade
- Short-term deposit ratings: Prime-2
DB Sukuk Company Limited
- Senior unsecured trust certificates: A3 on review for downgrade
- Short term ratings: Prime-2
HSBC Bank Middle East Limited
- BFSR: C on review for downgrade
- Long-term deposit ratings: Aa3 on review for downgrade
- Senior unsecured MTN (foreign): Aa3 on review for downgrade
- Subordinated MTN (foreign): A1 on review for downgrade
- Short-term deposit ratings: Prime-1
HSBC Bank Middle East Limited (UAE Branch)
- GLC deposit ratings: Aa3 on review for downgrade
- FC deposit ratings: Aa3 on review for downgrade
HBME Sukuk Company Ltd
- Senior unsecured trust certificates: Aa3 on review for
downgrade
The previous rating action on ADCB was on 15 December 2008, when
Moody's revised downwards the outlook on ADCB to negative from stable.
The previous rating action on CBD was on 22 July 2008, when Moody's
initially assigned its ratings.
The previous rating action on DB was on 15 December 2008, when Moody's
revised downwards the outlook to stable from positive.
The previous rating action on HBME was on 24 August 2009, when Moody's
downgraded HSBC Bank Middle East Ltd long-term ratings to Aa3 from
Aa2.
Headquartered in Abu Dhabi, UAE, Abu Dhabi Commercial Bank
reported total assets of AED158.63 billion (US$43.1
billion) as at 30 September 2009.
Headquartered in Dubai, UAE, Commercial Bank of Dubai reported
total assets of AED37.03 billion (US$10.07 billion)
as at 30 September 2009.
Headquartered in Dubai, UAE, Dubai Bank reported total assets
of AED18.49 billion (US$5.03 billion) as at year-end
2008.
Incorporated in Jersey, HSBC Bank Middle East reported total assets
of US$41.528 billion as at year-end 2008.
The principal methodologies used in rating these banks are the "Revised
Methodology for Government Related Non-Bank Financial Institutions",
and "Bank Financial Strength Rating: Revised Methodology",
which can be found at www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating these issuers can also be found in the Rating Methodologies
sub-directory on Moody's website.
Limassol
Mardig Haladjian
General Manager
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
DIFC
John Tofarides
Analyst
Financial Institutions Group
Moody's Middle East Ltd.
Telephone: +971-44-01-9536
Moody's places four UAE banks on review for possible downgrade