The bank's management intend to maintain current capital levels through lower growth and a more flexible dividend pay-out policy
Fitch ratings’ view of support factors in the sovereign's strong capacity to support the banking system, sustained by sovereign wealth funds and on-going revenues from hydrocarbon production and the moderate size of the UAE banking sector relative to the country's GDP.
Commercial Bank of Dubai(CBD)'s shared resources fund is one notch below the UAE Domestic Systemically Important Banks' (D-SIB) share resourced fund of 'A' due to Fitch's view that bank is less systemically important and is based on its small market share.
The bank’s concentrations on both sides of the balance sheet make its capital sensitive to local event risk and CBD capital metrics have steadily declined due to high balance sheet growth, falling profitability relative to equity and the payment of a regular dividend resulting in the bank's capital ratios going below from being than its local peers.
Fitch said, CBD's total regulatory capital ratio was 15 per cent at end 2017, compared with the UAE banking sector average of 18.7 per cent.
Despite funding concentrations, the deposit base is slightly weighted towards term deposits and provides a generally stable funding base for the short to medium term. The bank complements its deposit funding with an issue under its EMTN programme, demonstrating good access to capital markets when required.
CBD has a large stock of liquid assets equivalent to 28 per cent of customer deposits, providing a good liquidity cushion and its gross loans to deposits ratio remains above peers, indicative of the bank's relatively more diversified funding profile, said Fitch.