Abu Dhabi Commercial Bank’s (ADCB) long-term issuer credit rating has been upgraded to A+ from A with a stable outlook by S&P Global Ratings. This upgrade was driven by the bank’s strong financial position and high asset quality, placing ADCB among the top three highest-rated banks by S&P in the MENA region.
ADCB’s high investment grade ratings support a favorable cost of capital as the bank implements a new strategy to sustain its velocity of growth, with a target of doubling net profit to AED20 billion within five years.
“Sound earnings generation and high capital retention still underpin ADCB’s capitalization, which we view as a key rating strength. We believe the bank’s asset quality will continue to benefit from the strengthening of its risk management culture and control framework over the past four years,” stated S&P.
ADCB lowers exposure to high-risk sectors
ADCB has lowered its exposure to high-risk sectors, especially real estate and construction, to 14 percent of total exposures as of year-end 2024, from 29 percent at year-end 2020. Simultaneously, its lending to more creditworthy government and public sector entities has increased to 27 percent of total lending, up from 21 percent.
As a major financial institution linked to the UAE’s dynamic growth, ADCB has transformed in terms of scale and profitability since the launch of its previous strategy in 2020. Since then, ADCB has increased profit before tax at a compound annual growth rate (CAGR) of 28 percent to exceed AED10 billion in 2024, a year ahead of target.
“We view these improvements, along with a more contained risk appetite, as enduring and therefore positioning the bank to better navigate economic cycles,” added S&P.
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Assets grow 59 percent to over AED650 billion
ADCB’s strong market position has also driven significant balance sheet expansion, with assets increasing 59 percent since the end of 2020 to surpass AED650 billion in 2024. Net loans have expanded at 10 percent CAGR, accompanied by a strategic rebalancing of the loan book, which has seen exposure to government-related entities (GREs) increase to 27 percent of gross loans from 21 percent in 2020.
Meanwhile, ADCB’s strong franchise has attracted significant deposit inflows at 14 percent CAGR since 2020.
S&P’s stable outlook for ADCB reflects its expectation that any unexpected increase in credit losses will be absorbed by its strong pre-provision earnings over the next 12-24 months. The stable outlook also assumes that ADCB will maintain its strong capital buffers.
“We could take a negative rating action if faster-than-expected credit growth or increased risk appetite were to erode ADCB’s currently solid capitalization. We could also lower the ratings if the bank’s asset quality indicators weakened, or it increased its exposure to riskier sectors or counterparties,” added the rating agency.
