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In a significant move, Moody’s Investors Service has upgraded the long-term deposit ratings of five leading Pakistani banks, including Allied Bank Limited, Habib Bank Ltd, MCB Bank Limited, National Bank of Pakistan, and United Bank Ltd, from Caa3 to Caa2, reflecting improved credit profiles and reduced default risk.
Upgrade Driven by Sovereign Debt Holdings and Strong Government Linkages
The rating upgrade is attributed to the banks’ substantial holdings of sovereign debt securities and strong linkages to the government’s credit profile, which has been bolstered by Pakistan’s enhanced creditworthiness, better macroeconomic conditions, and moderately improved government liquidity and external positions.
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Positive Outlook for Pakistani Banks Reflects Improved Operating Environment
The outlook for the banks’ long-term deposit ratings has been revised from stable to positive, indicating potential further upgrades if Pakistan’s operating environment continues to improve, leading to higher Baseline Credit Assessments (BCAs) and an improved macro profile.
Moody’s Affirms NBP’s BCA and Upgrades Long-Term Deposit Ratings
Moody’s has affirmed National Bank of Pakistan’s (NBP) BCA and Adjusted BCA at caa3, while upgrading its long-term deposit ratings to Caa2 from Caa3, reflecting NBP’s strong funding and liquidity profile, adequate earnings generation capacity, and the government’s enhanced ability to provide support when needed.
HBL, UBL, MCB, and ABL Receive Upgrades Amid Improved Financial Performance
Habib Bank Ltd (HBL), United Bank Ltd (UBL), MCB Bank Limited (MCB), and Allied Bank Limited (ABL) have also received upgrades, reflecting their strong liquidity buffers, deposit-funded profiles, earnings capacity, and stable deposit bases, although some banks face challenges such as elevated nonperforming loans and modest adjusted capital buffers.