Emirates NBD’s Long-Term Foreign Currency Rating Raised to ‘A+’ and Financial Strength Rating Raised to ‘A-’

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1. Credit Rating Announcement AE03115PRS00-1 th 12 October 2016 Emirates NBD ’s Long-Term Foreign Currency Rating Raised to ‘A+’ and Financial Strength Rating Raised to ‘A-’ Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today announced that it has raised the Financial Strength Rating (FSR) of the UAE’s Emirates NBD Bank PJSC (ENBD) to ‘A-’ from ‘BBB+’. The upgrade is underpinned by the Bank’s improving asset quality, particularly the growing loan-loss coverage ratio, which reflects continuing strong recoveries and low non-performing loan (NPL) accretions. A high capital adequacy ratio, sound liquidity metrics, good profitability, and a large and diversified business base generating multiple revenue streams are other major supporting factors. The principal constraining factor is related to the Bank’s large and rising exposure to the Dubai sovereign, which has led to substantial customer concentrations in the loan portfolio and a very high related party exposure to total capital ratio. ENBD is presently working towards compliance with the UAE central bank’s regulations on large exposures within the specified timeframe. The still high NPL ratio and elevated credit risks in the UAE economy are other constraining factors for the rating. In light of the upgrade, the Outlook for the FSR is revised to ‘Stable’ from ‘Positive’. In view of the Bank’s improving asset quality and overall sound financial fundamentals, ENBD’s LongTerm Foreign Currency Rating (FCR) is raised to ‘A+’ from ‘A’. The Short-Term FCR is maintained at ‘A1’ with the Support Rating at ‘1’. These ratings are underpinned by the Bank’s large size and systemic importance, as well as the extremely high likelihood that the government of the UAE would provide support in case of need. The Dubai government and the UAE government have demonstrated support over the last few years through Tier 1 and Tier 2 capital injections. The Outlook for the FCR is ‘Stable’. Asset quality ratios continued to improve in H1 2016 partly due to sizeable recoveries and write-backs. The Bank also has a low level of renegotiated loans and past due loans less than 90 days old. Moreover, the problems in the SME segment in the country have not had a significant impact on its asset quality and the Bank expects further improvement in its NPL ratio in the coming quarters. All the other financial metrics continue to be good. ENBD’s consistently high capital adequacy ratio is a major supporting factor. Capital increases (from higher retained earnings) have adequately supported the growth in risk-weighted assets over the years. Low dividend payouts and good earnings have helped to strengthen the internal capital generation rate. Despite tighter liquidity in the banking system, the Bank has maintained its key liquidity ratios at good levels thanks to the growth in customer deposits and access to medium-term funds via debt and sukuk issuances. Customer concentration levels in the deposit base remain much better than many large banks and asset/liability maturity mismatches are also low. ENBD’s good profitability ratios continue to underpin its high FSR. However, both the operating profit to average total assets ratio and the return on average assets were impacted in 2015 and H1 2016 by narrowing margins. While rising funding costs continue to be a concern in the UAE banking sector, ENBD’s large low-cost deposit base is a major competitive advantage. A high non-interest income base, a good cost to income ratio, and reduced provisioning expenses are other favourable factors along with the Bank’s diversified business base and large market share in Dubai. With total assets of AED426 billion (USD116 billion) at end H1 2016, ENBD is one of the largest banking groups in the Middle East and North Africa region. The government of Dubai, through the Investment Corporation of Dubai, is the single largest shareholder of ENBD with a 55.6% stake. ENBD’s major business units are Wholesale Banking, Retail Banking and Wealth Management, Global Markets and Treasury, and Emirates Islamic Bank. These, together with subsidiaries and associate companies, provide an exhaustive range of financial products and services. With a sizeable share of the banking business in Dubai, ENDB remains an important player in the domestic market. Capital Intelligence Ratings Ltd. Oasis Complex, Block E, Gladstone Street, P.O. Box 53585, 3303 Limassol, Cyprus Telephone: +357 25 342300 Facsimile: +357 25 817750 E-mail: capital@ciratings.com Web site: http://www.ciratings.com
2. CREDIT RATINGS Foreign Currency LT ST A + A1 Financial Strength Support A- 1 Outlook FC FSR Stable Stable CONTACT Primary Analyst Karti Inamdar Senior Credit Analyst Tel: +91 124 401 2142 E-mail: karti.inamdar@ciratings.com Secondary Analyst Tom Kenzik Senior Credit Analyst E-mail: tom.kenzik@ciratings.com Rating Committee Chairman Morris Helal Senior Credit Analyst The information sources used to prepare the credit ratings are the rated entity and public information. CI considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process. The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in November 2009. The ratings were last updated in October 2015. The principal methodology used in determining the ratings is the Bank Rating Methodology. The methodology, the meaning of each rating category, the time horizon of rating outlooks and the definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com. Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at http://cerep.esma.europa.eu. 2