JPMorgan Raises Abu Dhabi Commercial Bank Rating

The 3rd biggest lender by assets in the United Arab Emirates, Abu Dhabi Commercial Bank PJSC was raised to overweight by the JPMorgan Chase & Co. as the lender cut exposure to the comparatively low quality assets.

In a research report which was developed by numerous analysts of JPMorgan, it was stated that the management team of Abu Dhabi Commercial Bank PJSC has commendably turned around the franchise in the last 2-3 years as it decided to clean up the asset book in a proper way. Apart from that, the management team has also managed liquidity prudently while conserving the spreads better in comparison to the regional peers; thereby strengthening the capital base by disposal of the non-core assets. Such decisions, according to the JPMorgan analysts, have made the business model way simpler. The bank investors under the current regulatory scenario, consider simplicity to be a positive factor and that’s where Abu Dhabi Commercial Bank PJSC excels.

On last week, Abu Dhabi Commercial Bank announced that it has settled the lawsuit against Standard & Poor’s, Morgan Stanley, Moody’s Investors Service and others over the takeover of Cheyne SIV notes. The bank also reported that the 1st quarter profit of the same has increased by 4% to 830 million Dirhams, thereby exceeding the forecasts set by analysts.

The recommendation was raised from neutral and the price estimate was also increased to 5.50 Dirhams, from its earlier value of 5 Dirhams. Incidentally, the stock closed at 4.61 Dirhams in last week. In 2013 till date, the stock has jumped up by 55%, thereby performing better than the 30% increase that the ADX Banks Index of Abu Dhabi has experienced in 2013.

Apart from Abu Dhabi Commercial Bank, the price estimate of First Gulf Bank was also increased by JPMorgan to 18 Dirhams from its earlier value of 13.50 Dirhams. JPMorgan selected Abu Dhabi Commercial Bank as the top pick among the banks in the Middle East and North Africa; the overweight recommendation was maintained as well. The stock, in 2013, has increased by 25% and each share is currently priced at 14.55 Dirhams.

However, the biggest bank in UAE by assets, National Bank of Abu Dhabi was cut to neutral from its earlier value of overweight by JPMorgan. The stock has gained 31% in 2013 and each share is priced at 12.25 Dirhams now.