Pakistan: Moody's downgrades five banks' long-term deposit ratings

 Pakistan: Moody's downgrades five banks' long-term deposit ratings

Moody's has also reduced the long-term Foreign Currency Counterparty Risk Rating (CRR) of five banks from Caa1 to Caa3 due to the economic crisis in Pakistan.

The economic catastrophe in Pakistan is getting worse every day. Currently, five Pakistani banks' long-term deposit ratings have reportedly been reduced by international rating agency Moody's Investors Service from Caa1 to Caa3. The five banks to have their deposit ratings lowered are Allied Bank Limited (ABL), Habib Bank Limited (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP), and United Bank Limited (ubl), according to Moody's Investors Service.

The global rating agency reduced five banks' long-term foreign currency counterparty risk ratings (CRR) from Caa1 to Caa3, in addition to their long-term deposit ratings.

Also, Moody's has downgraded the Baseline Credit Assessment (BCA) of banks from Caa1 to Caa3, which has caused them to decrease their long-term counterparty risk assessment from Caa2(CR) Is to Caa2(CR) and their local currency long-term CRR from B3 to Caa2 (crore).

According to press reports, the central bank's benchmark policy rate was at a record high of 20% in January and inflation was at an all-time high of 31.5%, which has made it harder for borrowers to repay bank loans. Transportation, food and non-alcoholic beverages, alcoholic beverages and tobacco, and entertainment and culture all saw costs almost halve.
According to the survey, many borrowers at lenders and other financial organisations run the risk of missing payments. If this occurs, non-performing loans (NPLs) and bad loans would also rise, which will have an impact on bank profitability and degrade the quality of their assets.

Higher interest rates, according to Moody's, will undermine consumer confidence and borrower ability to repay. Also, the banks' profitability, asset quality, and capital metrics will be under more pressure, which might affect their financial stability as well.

With 85% of all borrowings, Pakistan's cash-strapped government is the biggest borrower. According to press reports, families and businesses are also borrowers.


This occurs shortly after the Pakistani government's credit rating was lowered from CAA1 to CAA3. Moody's, however, altered the outlook from a negative to stabled earlier in this week.