(MENAFN Press) National Bank of Umm Al Qaiwain's Foreign Currency and Financial Strength Ratings Affirmed with 'Stable' Outlooks
Capital Intelligence (CI), the international credit rating agency, today announced that it has maintained the Foreign Currency ratings of the National Bank of Umm Al Qaiwain (NBQ) at 'BBB' Long-term and 'A2' Short-term. The Support rating of '2', which reflects the Bank's access to federal government support and its ownership by the government of Umm Al Qaiwain, underpins its foreign currency ratings. The Financial Strength rating is affirmed at 'BBB', reflecting the Bank's strong capital adequacy ratio, continuing good profitability and satisfactory liquidity. NBQ's moderately high exposures to Dubai and the continuing uncertainties in the domestic economy are constraining factors. In view of the Bank's good operating profitability and ROAA in H1 2011, a 'Stable' outlook is appended to all the ratings.
NBQ financials continue to show the impact of the economic downturn. The balance sheet has contracted over the last few years owing to lower credit demand and management's reduced risk appetite as well as its increased focus on remedial activities. Asset quality ratios have weakened over the last few years, with the increase in non-performing loans (NPLs) and the contraction of the loan book. The provision coverage ratio is now much lower than it used to be prior to the financial crisis, however, the Bank's large capital base and strong capital adequacy ratio are mitigating factors. The Bank also holds substantial collateral against its bad loans and has a good record of enforcing its security. Profitability ratios remain high despite declines in net interest and non-interest income in 2010 and in the first half of 2011, which are mainly attributed to lower business volumes. Both the operating profit to average total assets and the return on average assets (ROAA) ratios have been strong, reflecting the Bank's wide net interest spreads. NBQ's liquidity ratios remain more than satisfactory; the Bank has smaller maturity gaps than many of its peers owing to the availability of medium-term customer deposits, which is unusual among local banks, and customer concentrations in the deposit base are also low.
NBQ, with total assets of AED12 billion at end June 2011 is one of UAE's smaller commercial banks. NBQ's principal markets within the UAE are in the emirates of Dubai, Abu Dhabi and Sharjah. The Bank provides working capital loans, trade finance, project finance and syndicated loans. Corporate and commercial banking activities make a major contribution to NBQ's asset book. The Bank is owned 30% by the government of Umm al Qaiwain.