NBF
NBF
NBF
Capital Intelligence (CI) has raised the Financial Strength Rating (FSR) of the UAE's National Bank of Fujairah (NBF) to 'BBB+' from 'BBB' in view of the Bank's strengthened asset quality ratios, the increased Tier 1 Capital base and overall good profitability and liquidity, according to CPI Financial.
The major constraining factors are customer concentrations in the deposit base, a high level of restructured performing loans, the Bank's small market share and ongoing elevated credit risks in an otherwise improving operating environment. The Outlook for the FSR reverts to 'Stable' from 'Positive'. NBF's Long-Term and Short-Term Foreign Currency Ratings (FCR) are affirmed at 'A-' and 'A2', with a Support Rating of '2'. The ratings are strongly underscored by the high likelihood of support from the UAE government in case of need. The Outlook for the FCR is 'Stable'.
The Bank has grown at a faster pace than the sector average over the last few years, but it still ranks among the smaller banks in the country. It has built a good reputation in niche areas in the corporate, commercial, trade finance and treasury segments. Although primarily a corporate bank, NBF is also expanding its commercial banking and retail banking services. The quality of the loan portfolio strengthened in 2013 due to recoveries, write-offs and the revival of the local economy. Although there was an increase in non-performing loans (NPLs) in H1 2014, key ratios were only slightly changed. NPLs are presently fully covered by loan-loss reserves (LLRs); the Bank's free capital base provides further cover. The loan book has some sector concentration in trade finance, but exposures are well spread out, and loans with short tenors accounted for a large portion of the credit book. The investment portfolio is small and mainly consists of government and bank risk.
NBF continues to maintain its capital adequacy ratio (CAR) at a strong level, notwithstanding the decline in recent years. High earnings, a low dividend payout ratio and new Tier 1 perpetual notes issued last year contributed to the substantial increase in capital and the improvement in the Tier 1 ratio last year. The Bank's Tier 2 Capital has been significantly reduced with the repayment of subordinated debt, several years before maturity. The capital to total assets ratio is also at a good level.
Improving liquidity ratios have been a key feature of the Bank's balance sheet in recent years. Strong growth in customer deposits and an increased capital base have helped to strengthen the net loans to customer deposits and net loans to stable funds ratios. Liquid assets are at a good level. The Bank has good access to capital markets and is able to successfully refinance maturing medium-term liabilities; however, medium-term liabilities are not a major source of funds and remain at a moderately low level. NBF's balance sheet maturity mismatches are low compared with many peer banks. A negative observation is that customer concentrations in the deposit base continue to be high, in large part due to funds received from the Bank's major related parties including the Fujairah government.
The major constraining factors are customer concentrations in the deposit base, a high level of restructured performing loans, the Bank's small market share and ongoing elevated credit risks in an otherwise improving operating environment. The Outlook for the FSR reverts to 'Stable' from 'Positive'. NBF's Long-Term and Short-Term Foreign Currency Ratings (FCR) are affirmed at 'A-' and 'A2', with a Support Rating of '2'. The ratings are strongly underscored by the high likelihood of support from the UAE government in case of need. The Outlook for the FCR is 'Stable'.
The Bank has grown at a faster pace than the sector average over the last few years, but it still ranks among the smaller banks in the country. It has built a good reputation in niche areas in the corporate, commercial, trade finance and treasury segments. Although primarily a corporate bank, NBF is also expanding its commercial banking and retail banking services. The quality of the loan portfolio strengthened in 2013 due to recoveries, write-offs and the revival of the local economy. Although there was an increase in non-performing loans (NPLs) in H1 2014, key ratios were only slightly changed. NPLs are presently fully covered by loan-loss reserves (LLRs); the Bank's free capital base provides further cover. The loan book has some sector concentration in trade finance, but exposures are well spread out, and loans with short tenors accounted for a large portion of the credit book. The investment portfolio is small and mainly consists of government and bank risk.
NBF continues to maintain its capital adequacy ratio (CAR) at a strong level, notwithstanding the decline in recent years. High earnings, a low dividend payout ratio and new Tier 1 perpetual notes issued last year contributed to the substantial increase in capital and the improvement in the Tier 1 ratio last year. The Bank's Tier 2 Capital has been significantly reduced with the repayment of subordinated debt, several years before maturity. The capital to total assets ratio is also at a good level.
Improving liquidity ratios have been a key feature of the Bank's balance sheet in recent years. Strong growth in customer deposits and an increased capital base have helped to strengthen the net loans to customer deposits and net loans to stable funds ratios. Liquid assets are at a good level. The Bank has good access to capital markets and is able to successfully refinance maturing medium-term liabilities; however, medium-term liabilities are not a major source of funds and remain at a moderately low level. NBF's balance sheet maturity mismatches are low compared with many peer banks. A negative observation is that customer concentrations in the deposit base continue to be high, in large part due to funds received from the Bank's major related parties including the Fujairah government.
Source:
Mubasher
