Moody’s downgrades five major banks

Moody’s Investors Service has downgraded the credit rating of five major banks operating in Pakistan in the wake of weakening government’s capacity to support them.

Moody’s, the global credit rating agency, downgraded the long-term deposit ratings to Caa1 from B3 of five Pakistani banks namely Allied Bank Limited (ABL), Habib Bank Limited (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Limited (UBL), according to an announcement on Tuesday.

The rating agency also downgraded the long-term foreign currency Counterparty Risk Ratings (CRRs) of the five banks to Caa1 from B3.

As part of the rating action, Moody’s lowered the Baseline Credit Assessments (BCAs) of ABL, MCB and UBL to Caa1 from B3, and resultantly lowered their local-currency long-term CRRs to B3 from B2 and their long-term Counterparty Risk Assessments to B3(cr) from B2(cr). BCAs of NBP and HBL were affirmed at Caa1.

“The outlook on all banks’ deposit ratings remains negative,” Moody’s said.

Earlier on Thursday, the rating agency downgraded Pakistan’s credit rating to Caa1 from B3 with the outlook remaining negative, as the country’s requirement for dollars seemed to be remaining higher to finance the current account deficit. Consequently, this may increase the risk of sustaining foreign debt for the country.

Responding to the report, the government strongly opposed the Moody’s for its unmerited action, saying that the rating agency’s unilateral decision was based on incomplete information.

Published in The Express Tribune, October 12^th, 2022.

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