Moody's Investors Service downgraded its ratings on Abu Dhabi Commercial Bank PJSC (ADCB.AD), saying its standalone financial strength has weakened from increasing loan delinquencies and impairments of investments.
The rating agency also said it expects the weakening operating environment in Dubai and the recent restructuring of Dubai World (DWORLD.YY) will continue to weigh on the bank's loan quality and likely profitability in the foreseeable future.
Dubai World shocked investors last month by seeking a six-month moratorium on its $26 billion debt payments although Abu Dhabi later offered a bailout of the company, once a crown jewel in the business empire of Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum.
Abu Dhabi, the oil-rich capital of the seven-member United Arab Emirates, pumped $10 billion into Dubai's financial-support fund two weeks ago by buying its bonds.
Moody's put Abu Dhabi Commercial Bank's ratings on review earlier this month because of potential deterioration in Dubai's operating environment, including the bank's exposure to the ongoing restructuring of Dubai World companies' debt. Standard & Poor's Ratings Services also put the bank's ratings on review for downgrade after the Dubai World request for a delay in repaying its debt last month.
The bank's asset quality, which had been weakening since the beginning of 2008 because of subprime exposures, continued to deteriorate this year, especially because of its high loan concentrations to defaulting Saudi corporate bonds, Moody's said.
The firm noted that the bank has received a series of capital injections this year, boosting its capital levels, and the bank's parent, Abu Dhabi Investment Council, is able and willing to support the bank.
Moody's cut its long-term deposit ratings one notch to A1, four steps below the top rating of AAA, and lowered its bank financial strength rating to D+ from C-. The outlook on all ratings is negative.END
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