Moody’s affirms deposit ratings of NBAD, FGB

Moody's Investors Service on Monday affirmed the deposit ratings of National Bank of Abu Dhabi (NBAD) at Aa3/P-1 and First Gulf Bank (FGB) at A2/P-1.

The outlook on FGB's long-term ratings was changed to “positive” from “stable”. The outlook on NBAD's remains “negative”, in line with the negative outlook assigned to Abu Dhabi’s government.

Moody's also affirmed the banks’ baseline credit assessment (BCA) at a3 and baa2, respectively.

The two lenders announced on July 3 that their boards of directors had approved a plan to merge by first quarter of 2017, subject to regulatory and shareholders’ approval. The merger would create the largest bank in the GCC with an estimated $170 billion worth of assets.

“NBAD's a3 BCA affirmation reflects Moody's view that this merger upon completion will: deliver high quality retail diversification to the bank's wholesale-focused loan book; improve core profitability; improve the capital base, and reduce both loan and deposit concentrations,” the ratings agency explained.

The positive outlook on FGB's long-term ratings is based on Moody's view that the merger will be beneficial for FGB's depositors and senior creditors as they will be transferred to NBAD, a fundamentally stronger entity.