Dubai: Leading credit rating agencies have confirmed that the three-way merger of three Abu Dhabi banks, Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Al Hilal Bank will be neutral on the merged entity.
Moody’s has affirmed the local and foreign currency long-term and short-term deposit ratings of ADCB (ADCB) at A1/P-1, UNB at A1/P-1 and Al Hilal Bank PJSC (AHB) long-term and short-term issuer ratings at A2/P-1. Despite the integration challenges that Moody’s expects ADCB, the surviving entity from the merger of ADCB and UNB to face, the rating agency considers that the merger is credit neutral given the similar and complementary credit profiles of ADCB and UNB. The outlook on all banks’ long-term ratings is maintained at stable.
Likewise, Moody’s expects the acquisition of AHB by the merged entity to be broadly credit neutral for AHB as the expected, improvement in its credit profile, very high parental support and very high government support all balance the loss of direct shareholding from the Abu Dhabi government through the Abu Dhabi Investment Council (ADIC).
Fitch Ratings has affirmed UAE-based Abu Dhabi Commercial Bank’s (ADCB) Long-Term Issuer Default Rating at ‘A+’ with a Stable Outlook and Viability Rating at ‘bb+’ following the recent announcement the merger.
Fitch’s view of support factors in the sovereign’s strong capacity to support the banking system, sustained by sovereign wealth funds and ongoing revenue mostly from hydrocarbon production, despite lower oil prices. Fitch also expects high willingness from the authorities to support the banking sector. This has been demonstrated by the UAE authorities’ long track record of supporting domestic banks, as well as by the authorities’ close ties with and part-government ownership links to a number of banks.