Moody's affirms NBAD, FGB deposit ratings

MOODY'S

Moody's Investors Service has affirmed the deposit ratings of National Bank of Abu Dhabi (NBAD) at Aa3/P-1 and those of First Gulf Bank (FGB) at A2/P-1.
At the same time, Moody's has also affirmed their baseline credit assessment (BCA) at a3 and baa2, respectively.
In addition, the outlook on FGB's long-term ratings was changed to positive from stable.
The outlook on NBAD’s long-term ratings remains negative, in line with the negative outlook assigned to the government of Abu Dhabi.
The latest rating action follows the official public announcement on July 3 that the banks have entered into a merger agreement.
The merger remains subject to regulatory and shareholder approval and is expected to complete by Q1, 2017.
Upon completion, NBAD will remain and acquire all of FGB's liabilities and assets in exchange for new NBAD shares issued to FGB's shareholders.
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, reduce both loan and deposit concentrations, and create the largest bank in the GCC by asset (approximately around $ 170 billion assets), which should support further organic expansion of the business.
FGB's baa2 BCA affirmation reflects Moody's view that the bank's operations and standalone profile are not expected to change significantly until the merger is completed.
The change of outlook to positive on FGB's long-term ratings is driven by 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.
Upon completion of merger, when all liabilities are transferred to NBAD, it is expected that the ratings on FGB will be withdrawn.