Abu Dhabi Commercial Bank (ADCB) profit to remain strong but growth will slow down this year due to cut-throat competition in the UAE banking sector. Fitch Ratings said on Thursday it expects profitability of ADCB to remain robust but to grow at a slower pace in 2012 due to strong competition, low loan growth and an increase in funding costs. ADCB\'s pre-impairment operating profit has steadily increased by 13 per cent per annum for the past three years. Lower loan impairment charges and a large one-off gain from the sale of its Malaysian associate additionally boosted ADCB\'s net income in 2011. Abu Dhabi Commercial Bank earlier this week reported a net profit of Dh802 million in Q1 2012, compared to Dh583 million in Q1 2011, an increase of 38 per cent year on year and an increase of 56 per cent quarter on quarter. Fitch believes that further loan book diversification, demonstrated recovery on rescheduled loans and an improvement in the operating environment could lead to an upgrade of the Viability Rating (VR). Further deterioration in asset quality affecting the bank\'s capitalisation and profitability could lead to a downgrade of the VR. The bank’s non-performing loans (NPLs) ratio decreased to an acceptable 4.6 per cent at end-2011 from a high 11.1 per cent at end-2010 mainly due to the reclassification of its exposure to Dubai World as performing. However, similar to most banks in the UAE, there was a significant increase in renegotiated loans in 2011, some of which could become problematic in the future. The bank has also aggressively written off Dh2.5bn (2 per cent of gross loans) during 2011. Fitch expects the Abu Dhabi slowdown and the troubled real estate sector to continue to add pressure on asset quality in the short term. Liquidity has improved significantly over the past three years with the loans/deposits ratio decreasing to 113 per cent in Q1 2012 from 145 per cent at end-2009, although this remains high compared to peers. More positively, the bank\'s highly liquid assets provide an adequate buffer against deposit outflows. ADCB is primarily funded by customer deposits and has diverse wholesale funding sources. The bank continues to improve its funding base by increasing customer deposits, which Fitch views as essential to reduce concentration and achieve healthy loan growth in the future. ADCB\'s capital position strengthened after the conversion of its mandatory convertible bonds and the sale of its Malaysian associate. The Fitch core capital ratio increased to 13 per cent at end-2011 from 8 per cent at end-2010. In Fitch\'s opinion, the bank\'s adequate capital buffer and sustainable pre-impairment operating profit mitigate the high loan book concentration risk. Fitch today affirmed ADCB’s Long-term Issuer Default Rating (IDR) at \'A+\' and Viability Rating (VR) at \'bb+\'. The Outlook on the Long-term IDR is Stable. A full list of rating actions is at the end of this release.