Moody’s downgrades ratings for five Pakistani banks

Moody’s downgrades ratings for five Pakistani banks

Lahore (Web Desk): Moody’s Investors Service has downgraded the long-term deposit ratings of five Pakistani banks — Allied Bank Limited (ABL), Habib Bank Ltd (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Ltd (UBL) — to Caa1 from B3.

It also lowered the banks’ long-term foreign currency counterparty risk ratings (CRRs) to Caa1 from B3.

“Moody’s Investors Service ("Moody's") has today downgraded the long-term deposit ratings to Caa1 from B3 of five Pakistani banks: Allied Bank Limited (ABL), Habib Bank Ltd. (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP) and United Bank Ltd. (UBL),” the rating agency said in a statement on their website.

Moody’s has also downgraded the five banks’ long-term foreign currency Counterparty Risk Ratings (CRRs) to Caa1 from B3. As part of the same rating action, Moody's lowered the Baseline Credit Assessments (BCAs) of ABL, MCB and UBL to caa1 from b3, and as a result also downgraded their local-currency long-term CRRs to B3 from B2 and their long-term Counterparty Risk Assessments to B3(cr) from B2(cr). The BCAs of NBP and HBL were affirmed at caa1. The outlook on all banks’ deposit ratings remains negative.

Today’s rating actions follow Moody’s decision to downgrade the Government of Pakistan’s issuer and senior unsecured debt ratings to Caa1 from B3, and maintain a negative outlook.

Today’s rating actions reflect (1) the Government of Pakistan’s reduced capacity to support the banks, which has affected the banks whose ratings benefit from government support (namely NBP and HBL); (2) the high credit linkages between the banks' balance sheets and sovereign credit risk, which constrains the banks' Baseline Credit Assessments at the level of the Caa1 rated government; and (3) the lowering of Pakistan's foreign currency ceiling to Caa1, which has affected the foreign currency CRRs of all rated banks.