Moody’s: Pakistan banking outlook changes to stable

December 5, 2019 (MLN): Moody’s investor service changed the outlook of five Pakistani Banks yesterday from negative to stable, affirming the B3 long term local currency deposit ratings owing to the banks' high exposures to government securities.

The banks which Moody’s changed the outlook include; Allied Bank Limited (ABL), Habib Bank Limited (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Limited (UBL).

Pursuant to affirming the banks’ ratings, the Moody’s decision reflects banks’ stable deposit-based funding structures, high liquidity buffers and good earnings-generating capacity, as well as Pakistan's high growth potential. These credit strengths balance banks' modest capital buffers and high asset risks, as well as their high exposure to the government, which links their credit profile to that of the government.

The stable outlook assigned to the banks' local currency deposit ratings also reflects Moody's expectation that the government's capacity to support banks in case of need will not deteriorate, which is supported by the stable outlook on Pakistan's sovereign B3 bond rating.

Moreover, the local currency deposit ratings of NBP and HBL incorporate one notch of support uplift from their caa1 baseline credit assessments.

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