Fitch affirms Abu Dhabi Islamic Bank at 'A+'; Outlook Stable

The IDRs reflect the extremely high probability of support from ADIB's shareholders and the UAE authorities, should the need arise. Fitch's opinion of likely support is based on the long history of support for banks in the UAE, ADIB's prominent shareholders and the bank's domestic Islamic franchise. The Individual rating reflects good profitability, sound asset quality ratios and satisfactory liquidity and capitalisation. It also reflects the risks of rapid financing growth and increased operational risks from the bank's acquisition in Egypt in 2007 (National Bank for Development) and the departure of members of senior management in recent months. Fitch currently sees little upside in the Individual rating.

ADIB has been consistently profitable over the last three years due to rapid asset growth, mainly in retail financing at a stable margin and from strong core business fee growth. In addition, earnings have benefited from stock market-related profits and investment gains. The bank reported an operating profit of Dhs769m and an operating return on average equity of 24.8% in 2007.

Asset quality ratios remain sound with a low 0.7% of the portfolio being deemed impaired at end-2007 with reserve coverage in excess of 200%. Capital has been used up rapidly in the last two years, but the bank benefited from the mandatory conversion of Dhs2bn sukuk in 2008. The regulatory total capital ratio was a reasonable 17% at end-2007 (including the convertible).

ADIB was created in 1997. Its main shareholders are an investment company controlled by members of the Abu Dhabi ruling family, which owns 37%, and the Abu Dhabi Investment Council with 10%. ADIB is one of the largest Islamic banks in the UAE and serves upper and middle-tier clients in the retail and corporate segments.