A. SREENIVASA REDDY (ABU DHABI)
Fitch Ratings has affirmed Abu Dhabi Islamic Bank’s (ADIB) Long-Term Issuer Default Rating (IDR) at “A+” with a Stable Outlook and its Viability Rating (VR) at ‘bb+’, reflecting the bank’s strong domestic franchise, healthy profitability, and expectations of government support if required.
An Issuer Default Rating measures the likelihood of a financial institution defaulting on its financial obligations. An ‘A+’ rating indicates strong credit quality and a low expectation of default risk.
Fitch said ADIB’s IDR is primarily driven by the potential support available from the UAE and Abu Dhabi governments, if needed. The UAE holds a sovereign rating of ‘AA-’ with Stable Outlook from Fitch, while Abu Dhabi is rated slightly higher at ‘AA’ with Stable Outlook, reflecting their strong fiscal positions, substantial sovereign wealth and ability to support the banking sector.
The rating agency also affirmed ADIB’s Government Support Rating (GSR) at ‘a+’. The GSR reflects Fitch’s assessment of the likelihood that UAE and Abu Dhabi authorities would support the bank during financial stress. Fitch said the rating reflects the governments’ strong capacity and long track record of supporting domestic banks.
Fitch noted that the GSR is directly linked to ADIB’s IDR, as expectations of sovereign support form the key basis for the bank’s high long-term rating.
The Viability Rating, meanwhile, measures the bank’s standalone financial strength without assuming external sovereign support. A ‘bb+’ VR indicates moderate intrinsic financial strength with some vulnerability to adverse conditions. Fitch said ADIB’s VR reflects its improved asset quality metrics, strong UAE-wide franchise, solid profitability, and entrenched funding profile, although the bank has relatively high related-party financing concentrations.
Fitch said operating conditions for UAE banks are expected to remain generally stable in 2026 despite potential spillover effects from the Iran war.
ADIB is the second-largest Islamic bank in the UAE, accounting for 5% of total banking system assets at the end of the first quarter of 2026. The bank has a strong domestic retail franchise and close ties to the Abu Dhabi government. Its international operations account for 12% of total assets, mainly in Egypt and other Middle Eastern countries.
Fitch said ADIB’s non-performing financing ratio improved to 2.6% at the end of the first quarter of 2026 from 2.8% at the end of 2025 and 4% at the end of 2024, supported by recoveries, fewer fresh bad loans and strong financing growth of 7% during the quarter. The ratio is now broadly in line with the UAE banking sector average.
The agency added that specific reserve coverage of impaired financing stood at 52%, which it described as moderate and reflective of reliance on collateral. Fitch expects the non-performing financing ratio to remain around 3% during 2026.
ADIB’s annualised operating profit to risk-weighted assets ratio remained stable at 4.4% at the end of the first quarter of 2026, supported by a high proportion of low-cost current and savings accounts and moderate impairment charges. Fees and commissions contributed 16% of operating income during the quarter.
Fitch said competition for liquidity could put some pressure on financing margins, but it expects the bank’s profitability metrics to remain strong, with operating profit to RWAs staying around 4% in 2026.
The bank’s Common Equity Tier 1 (CET1) ratio remained stable at 12% at the end of the first quarter, supported by internal capital generation. CET1 is a key measure of a bank’s core capital strength relative to its risk-weighted assets.
Fitch described ADIB’s funding and liquidity profile as a key rating strength.
Customer deposits accounted for 94% of total non-equity funding, while current and savings accounts represented 67% of customer deposits. The bank’s gross financing-to-customer deposits ratio stood at 83%, indicating a strong liquidity position.