UAE: Dubai-Based Banks EBI and NBD Affirmed Negative Outlook

EmiratesNBD-LogoIt was today specified by Standard & Poor's Ratings Services that its 'BBB/A-2' long- and short-term counterparty credit ratings have been affirmed by it on Dubai-based Emirates Bank International PJSC (EBI) and National Bank of Dubai (NBD), which have been united into Emirates NBD PJSC.

The outlooks have come out negative. The ratings by S&P from Credit Watch have been removed by it. S&P was originally placed on Nov. 26, 2009, with negative implications in Credit Watch. The counterparty credit and debt ratings on both banks were finally removed by S&P, at their plea.

The ratings on EBI and NBD are based by S&P on its analysis of ENBD, created from the merger of EBI and NBD.

Standard & Poor's credit analyst Paul-Henri Pruvost said, "At the time of withdrawal, the ratings reflected S&P view of ENBD's weakening financial profile owing to the depressed economic environment in Dubai and its high exposure to weakened Dubai government-related entities."

As per S&P, these two factors will put heavy pressure on ENBD's asset quality and earnings, while enormously raising hurdles for ENBD to refinance UAE dirham 7.0 billion of wholesale debt coming due in 2010.

S&P feels that capital would be weakened by these developments instead. So overall, the negative outlooks indicate the possible downward pressure it sees on the banks' stand-alone credit profiles (SACPs).

ENBD's leading commercial position and its adequate pre-provision earnings capacity are included in the positive rating. S&P also factors into the ratings strong ongoing funding support coming from the UAE authorities.

The three notches of uplift above the SACPs of EBI and NBD helped the long-term ratings at the time of the withdrawal, indicating S&P expectation of strong likelihood of extraordinary support to the merged entity, ENBD, from the UAE authorities in case of need.