Post by dracon on Sept 25, 2009 22:56:38 GMT 4
Fitch downgrades 7 UAE banks, 3 firms
Sep 24, 2009
Fitch Ratings on Thursday downgraded the ratings of seven UAE banks, some among the top, and three government linked companies, saying the country’s credit profile had weakened during a period of economic stress.
Fitch cut the long-term issuer default ratings of Emirates Bank International, part of Emirates NBD, the country’s largest lender by assets, Mashreqbank, the largest bank by market value in Dubai, Islamic home finance firm Tamweel, Commercial bank of Dubai, Dubai Bank, National Bank of Sharjah and the National Bank of Ras al-Khaimah (Rakbank).
It lowered Dubai Holding Commercial Operations Group (DHCOG), a unit of Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum’s sprawling Dubai Holding enterprise, Dubai Electricity and Water Authority (DEWA) and placed the ratings of the country’s largest telecoms firm Etisalat on watch with a negative outlook.
DHCOG and DEWA were downgraded to A- from A+.
“The ability, as reflected by the creditworthiness, of the UAE federal authorities and the emirate of Dubai to provide support has weakened, prompting today's negative rating actions on the banks,” Fitch said in a statement.
Of the three companies, which have ties to Dubai and the UAE government, “the actions reflect Fitch's view that the credit profiles of the sovereign entities have weakened and lower certainty as to how any government support may be provided”.
The ratings company said its “revised” view on the banks reflected increasing demands on the relatively small fiscal resources of the country during an economic crisis.
“The increased risk that contingent liabilities arise from the exercise of the UAE sovereign's responsibility to ensure financial stability across the UAE, combined with the federal government's limited fiscal and financial flexibility, has weakened the UAE sovereign credit profile,” Fitch said in a statement.
While the fundamental strengths of the UAE economy and Abu Dhabi, in particular, remain strong, “the lack of clarity on the process for non-budgetary financial transfers between the UAE federal government, central bank and individual emirates, is a source of weakness in Fitch's assessment of the UAE sovereign credit profile”.
Fitch said Dubai’s creditworthiness is weakening. By the end of 2009, the ratings agency estimates Dubai’s government debt to have tripled to $30 billion compared to a year ago, approaching 40 percent of gross domestic product.
The source and timing of Dubai’s second $10-billion tranche of a $20-billion bond programme to help government linked companies repay their debt remains “uncertain”, Fitch said.