Fitch affirms National Bank of Ras Al-Khaimah at 'A-'/'F2'; outlook stable

The Outlook for the Long-term IDR is Stable.

RAKBANK's IDRs and Support rating reflect the extremely high probability of support from the UAE authorities, based on the government of Ras Al-Khaimah's majority stake in RAKBANK and the strong history of support being provided by the authorities to banks in the UAE.

The Individual rating reflects the bank's wide spreads, consistent performance and satisfactory asset quality and capitalisation. It also reflects a high cost base, limited franchise and retail focus.

Profitability remains consistent and the macroeconomic conditions are set for this trend to continue in 2008 and beyond.

Income growth is being driven by higher loan volumes and product spreads and fee income, although loan growth of 20% in 2007 was lower than the majority of UAE banks.

RAKBANK's net interest margin (2007: 6.2%) remains stronger than all of its peers, reflecting the wider spreads that can be charged in the retail sector.

Costs remain relatively high (cost/income ratio: 47%) due to branch network expansion, rising staff costs and investment in IT and direct banking channels.

Asset quality ratios continue to improve with impaired loans 2.3% of gross loans and impairment reserves coverage of 113% at end-2007.

The vast majority of impaired loans are within credit cards and personal loans, while delinquencies in the rapidly growing mortgage portfolio are virtually non-existent due to a lack of seasoning.

The mortgage portfolio is concentrated in Dubai and gives the bank a large exposure to a potential bubble.

Retail lending made up 83% of the portfolio at end-2007. Capital is sound, with an eligible capital ratio of 17.8% at end-2007.

RAKBANK was established in 1976 with the government of Ras Al-Khaimah as the majority shareholder (52.75%). The bank has 20 branches and 51 ATMs located throughout the UAE.

With a focus on retail banking, it provides personal loans, mortgages, current and savings accounts and credit cards. It is also active in commercial banking and trade finance.