Banking sector: Moody’s downgrades big five

Government lending drags down ratings of ABL, HBL, MCB, NBP and UBL.

KARACHI: Moody’s Investors Service downgraded the global local currency (GLC) deposit ratings and standalone bank financial strength ratings (BFSR) of the country’s largest banks on Friday by one notch each.

The five banks include Allied Bank (ABL), Habib Bank (HBL), MCB Bank (MCB), National Bank of Pakistan (NBP) and United Bank (UBL).

The international ratings agency has also set a ‘negative’ outlook for the future ratings of these banks. In its last review, Moody’s had downgraded its outlook for each of these institutions from ‘stable’ to ‘negative’.

Meanwhile, the foreign currency deposit ratings assigned to these banks at ‘B3/Not prime’ with a ‘stable’ outlook remained unchanged.

The ratings downgrade is primarily driven by growing exposure to government securities and government-related lending (B3-rated), said the agency, explaining the rationale behind the relegation.

It added that the total exposure to ‘sovereign-related risk assets’ of these banks has reached 38 per cent of total assets. Moody’s said that the banks have adequate levels of capitalisation, however, it has shown concern over “the high, and growing exposure concentration to the B3-rated sovereign” securities.

The announcement also cited that recent floods in the country have adversely affected the repayment capacity of the private sector.

Published in The Express Tribune, December 11^th, 2010.