Abu Dhabi’s second-largest bank, Abu Dhabi Commercial Bank PJSC (ADCB), is considering a new sale of troubled loans to streamline its balance sheet and improve financial stability amid a regional trend toward portfolio cleanup, Bloomberg has reported. The bank is in the early stages of evaluating a potential deal that could close in late 2025, the people said.
The new debt sale is expected to be comparable in scale to the bank’s previous deals, including a $357 million deal with Grant Thornton. ADCB has already sold $1.1 billion of its non-performing loans to US hedge fund Davidson Kempner Capital Management in 2023, one of the first of its kind in the region, paving the way for more such deals in the sector.
S&P upgrades bank as risks ease
S&P Global Ratings recently upgraded the bank’s credit rating, highlighting the bank’s strategic risk reduction over the past four years, which analysts said has strengthened the bank’s ability to withstand economic fluctuations and external stresses. In international banking, selling distressed assets is a common tool to free up capital and reduce the burden on balance sheets, and this trend is increasingly taking hold in the Gulf region.
Leading banks in the region are already taking such steps. In particular, Deutsche Bank AG this year bought back an $800 million portfolio of non-performing loans from the UAE’s largest bank, First Abu Dhabi Bank PJSC, cementing a trend toward restructuring debt assets through external transactions.
Saudi banks prepare for large-scale securitizations
Amid this transformation, Saudi Arabian lending institutions have also begun to evaluate options for offloading their balance sheets. According to Bloomberg sources, the Saudi National Bank is preparing a deal to transfer non-performing assets, which is expected to be completed by the end of the year. It is assumed that the kingdom’s banks may use securitization mechanisms to ensure the efficient removal of overdue loans from the books.
Such actions are motivated in part by the desire to free up resources for participation in large-scale infrastructure projects, known as “gigaprojects”, which are central to Saudi Arabia’s long-term economic strategy. It is expected that the first major sale of non-performing loans in the kingdom could take place as early as 2024 – which will be another signal of the growing role of financial rehabilitation in the future structure of the region’s banking sector.
In this context, the steps taken by Abu Dhabi Commercial Bank appear to be part of a broader regional strategy to increase the resilience and mobility of capital amid economic transformations.