x Abu Dhabi, UAEFriday 19 January 2018

NBAD looks Down Under to help prop up funds

The Australian or New Zealand dollar is the latest target for National Bank of Abu Dhabi which has announced it is considering a new medium-term bond issue in either of the currencies.

National Bank of Abu Dhabi (NBAD) is considering raising funds in Australian or New Zealand dollars in a new bond sale.

NBAD said in a statement to the Abu Dhabi Securities Exchange yesterday that it would discuss issuing medium-term notes denominated in either Australian or New Zealand dollars at a board meeting this month. The bank refused to comment on the size or details of the proposed issuance.

Last week, the Australian dollar hit parity with the US dollar, which trades at a fixed rate with the UAE dirham, for the first time in 28 years.

Mahin Dissanayake, an associate director of Middle East financial institutions at Fitch Ratings, said the move could be an attempt to protect NBAD's sources of funding from weakness in the dirham.

"For most UAE banks liquidity has been tighter over the crisis," Mr Dissanayake said. "The central bank has pumped in a lot of cash but we don't believe that NBAD had any problems - it's the strongest in the system, highly rated, government-backed. What they're doing is diversifying their fund sources. The bank has the ability to do that for the reasons I've mentioned."

NBAD has this year sought to raise funds in a number of currencies, including a €5 billion (Dh25.67bn) bond issue in June.

Later that month the bank launched a sukuk worth 500 million Malaysian ringgit (Dh572.5m).

Some analysts said attempts to take advantage of currency movements showed the strength of NBAD's position among UAE banks.

"If I look to just the state of play right now, it shouldn't be difficult for them to raise funds," said one analyst, who asked not to be identified.

"These guys are pretty much active in the wholesale markets. With strong credit and a premium balance sheet, they can come back to the market again and again.

But raising money through Australian or New Zealand dollar-denominated issuances may be more expensive because of the high interest rates at their respective central banks.