Ajman’s Long- and Short-Term IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect a high probability of support being available to the bank from the UAE authorities if needed.
Fitch’s view of support factors in the sovereign’s strong ability to support the banking system, sustained by sovereign wealth funds and recurring revenue, mostly from hydrocarbon production, notwithstanding lower oil prices. Fitch also expects a high willingness of the UAE authorities to support the banking sector, which has been demonstrated by their long track record of supporting domestic banks, and is also suggested by close ties with and partial government ownership of some banks.
Ajman’s SRF is two notches below the UAE domestic systemically important banks’ (D-SIB) SRF of ‘A’ due to Fitch’s view that Ajman is of moderate systemic importance as it is a relatively small bank with less than a 1% market share of total UAE banking system assets.
Fitch assigns Short-Term IDRs according to the mapping correspondence described in our rating criteria. A ‘BBB+’ Long-Term IDR can correspond to a Short-Term IDR of either ‘F2’ or ‘F1’. In the case of Ajman, Fitch opted for ‘F2′, the lower of the two Short-Term IDR options. This is because a significant proportion of the UAE banking sector’s funding is related to the government and a stress scenario for banks is likely to come at a time when the sovereign itself is experiencing some form of stress. Fitch judges this “wrong-way” risk to be high in the UAE, and this is reflected in the Short-Term IDR, which primarily reflects issuers’ liquidity and funding profiles.
Source: Fitch Ratings