ISLAMABAD – Five top Pakistani Banks face Review threat from Moody’sInvestor Services.
Moody’s Investors Service (Moody’s) has placed five Pakistani banks’ratings under review for a downgrade.
The company has placed the following banks on review for downgrading theirB3 long-term local-currency deposit ratings:
– Allied Bank Limited (ABL) – Habib Bank Ltd. (HBL) – MCB Bank Limited (MCB) – National Bank of Pakistan (NBP) – United Bank Ltd. (UBL).
The banks’ foreign currency deposit ratings and baseline credit assessmentswere also placed on review for downgrade.
Moody’s stated that rating actions follow its decision to place thegovernment of Pakistan’s B3 issuer and senior unsecured ratings on reviewfor downgrade on 14 May 2020.
The sovereign action is driven by Moody’s expectation that the Pakistanigovernment will request bilateral official sector debt service relief underthe recently announced G20 initiative, and the rating agency’s need toassess whether Pakistan’s participation in the initiative would entail adefault on private sector debt.
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The bank rating actions reflect:
– Moody’s view that the government’s potentially weakening creditworthiness will weigh on the stand-alone credit profile of the banks given the high credit linkages between their balance sheets and sovereign credit risk; – The risk of a further weakening in the government’s capacity to support the banks in case of need.
During the review period for the bank ratings, Moody’s will assess twofactors.
The first is the impact of the government’s potentially weakeningcreditworthiness on the standalone credit profile of the banks given thehigh credit linkages between their balance sheets and sovereign credit risk.
