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Bond Market News
ADCB Upgraded to A+ on Stronger Risk Management, Asset Quality
March 17, 2025
Abu Dhabi Commercial Bank (ADCB) was upgraded to A+ from A by S&P, reflecting the bank’s strengthened risk management, improved asset quality, and robust capitalization. ADCB significantly reduced exposure to high-risk sectors like real estate and construction, from 29% in 2020 to 14% in 2024, while increasing lending to government entities. Stage 3 loans decreased to 3.6% in 2024 from 4.6% in 2023, and Stage 2 loans also reduced, indicating improved underwriting standards and debt collection. ADCB’s cost of risk remains around 100bp since 2021 but is expected to stabilize, reflecting a completion of its loan book cleanup. Also, ADCB benefits from a high likelihood of support from the Abu Dhabi government, contributing to the upgrade. Despite potential interest margin tightening, projected loan growth of 12-15% and increasing non-interest income are expected to drive overall revenue growth.
ADCB’s dollar bonds traded stable with its 8% Perp at 106.82, yielding 5.91%.
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