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Fitch Upgrades FGB and Withdraws Ratings; Affirms NBAD on Merger Completion.

Moscow/London: Fitch Ratings has upgraded First Gulf Bank's (FGB) Long-Term Issuer Default Rating (IDR) to 'AA-' from 'A+' and Viability Rating (VR) to 'a-' from 'bbb' aligning them with National Bank of Abu Dhabi's (NBAD) IDR and VR of 'AA-' and 'a-'. The agency has simultaneously withdrawn all of FGB's ratings. A full list of rating actions is at the end of this commentary.


The merger of the two banks has been executed in the form of a share swap with FGB shareholders receiving 1.254 NBAD shares for each FGB share. After the merger became effective (at close of trading on 30 March 2017) the former FGB shareholders now own approximately 52% of the combined bank. The government of Abu Dhabi and related entities own approximately 37%. The combined bank retains NBAD's legal registrations and brand, while FGB is to be liquidated as a legal entity. As a result of the merger, NBAD's balance sheet has increased to approximately AED670bn (including AED14bn goodwill) and is the largest bank in the UAE, accounting for around 27% of the banking system assets.

The affirmation of NBAD's IDR and Support Rating Floor (SRF) at 'AA-', which is one notch above Abu Dhabi domestic systemically important banks' SRF of 'A+', reflects the bank's flagship status and high systemic importance in the UAE and Abu Dhabi in particular and Fitch's view that NBAD retains its importance and status after the merger.

NBAD's 'a-' VR reflects the bank's leading franchise and flagship status, especially in Abu Dhabi, its close links to the Abu Dhabi government benefiting both the bank's lending and funding profile. NBAD's consistently sound profitability, good asset quality and conservative risk appetite further support the VR. The removal of NBAD's VR from RWN reflects Fitch's view that NBAD will retain its flagship status after the merger and this will continue to benefit NBAD's funding and lending franchise.

NBAD and FGB's business models are complementary, and Fitch will assess the extent to which the strategy of the new bank and management team materially alter targeted businesses and customer segments.

The upgrade of FGB's IDRs and VR reflects FGB's merger with a higher-rated bank. FGB's ratings have been withdrawn as the bank is to be liquidated, while its assets and liabilities have been assumed by NBAD.


NBAD's existing senior unsecured programmes and notes issued under these programmes have been affirmed in line with NBAD's Long-Term IDR of 'AA-'. The ratings of FGB's programmes, notes and the trust certificate issuance of FGB Sukuk Company Ltd have been upgraded to 'AA-' as they were assumed by NBAD after the merger and are now NBAD's liabilities, ranking pari passu with NBAD's senior unsecured debt.



NBAD's Support Rating, SRFs and IDRs are sensitive to a reduction in the perceived ability or willingness of the authorities to provide support for the banking sector and NBAD in particular, or a change in Fitch's view of support in the UAE. Given the still robust fiscal position of Abu Dhabi, and by extension the UAE, the authorities' strong track record of support for local banks and no plans for resolution legislation at this stage, downward pressure is currently low.

NBAD's VR could be downgraded if the bank's risk appetite, strategy and/or business model post-merger places greater emphasis on higher-risk customer segments or the bank experiences difficulties with integrating FGB. Given constraints of the operating environment, an upgrade of the VR is highly unlikely.


A change in the bank's IDRs would ultimately lead to a change in the ratings of the unsecured bond and sukuk issuance programmes, the senior and subordinated notes rated under these programmes, as well as other senior or subordinated debt.

The rating actions are as follows:

National Bank of Abu Dhabi:

Long-Term IDR: affirmed at 'AA-'; Stable Outlook

Short-Term IDR: affirmed at 'F1+'

Viability Rating: affirmed at ' a-'; off RWN

Support Rating: affirmed at '1'

Support Rating Floor: affirmed at 'AA-'

EMTN programme: affirmed at 'AA-'/'F1+'

ECP programme: affirmed at 'F1+'

Senior unsecured debt: affirmed at 'AA-'/'F1+'

First Gulf Bank:

Long-Term IDR: upgraded to 'AA-' from 'A+', off RWP and withdrawn

Short-Term IDR: upgraded to 'F1+' from ' F1', off RWP and withdrawn

Viability Rating: upgraded to ' a-' from 'bbb', off RWP and withdrawn

Support Rating: affirmed at '1' and withdrawn

Support Rating Floor: upgraded to 'AA-' from ' A+', off RWP and withdrawn

EMTN programme: upgraded to ' AA-'/'F1+' from 'A+'/'F1', off RWP

ECP programme: upgraded to ' F1+' from 'F1', off RWP

Negotiable certificate of deposit programme: upgraded to 'AA-'/'F1+' from 'A+'/'F1', off RWP

Senior unsecured notes: upgraded to ' AA-' from 'A+', off RWP

Senior unsecured programme: upgraded to 'AA-' from ' A+', off RWP

FGB Sukuk Company Limited:

Trust certificate issuance programme: upgraded to ' AA-'/'F1+' from 'A+'/'F1', off RWP
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Geographic Code:7UNIT
Date:Apr 26, 2017
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