Moody’s has downgraded the credit rating of five major Pakistani banks

Karachi: Moody’s Investors Service has downgraded the credit ratings of five major banks in Pakistan.

According to Express News, the effects of the ongoing crisis in the country continue to show, Moody’s, the global credit rating agency, today reduced the long-term deposit rating of five major banks from Caa1 to Caa3. These banks include HBL, National Bank of Pakistan, UBL, Allied Bank Limited and MCB Bank.

Moody’s has also downgraded the long-term foreign currency counterparty risk ratings (CRRs) of five banks to Caa3 from Caa1. Baseline credit assessment ratings of banks were also downgraded, long-term local currency counterparty risk rating and counterparty risk assessment of all five banks were also downgraded from B3 to Caa2.

Moody’s had earlier also downgraded Pakistan’s Assured and Senior Unsecured Debt Ratings from Caa1 to Caa3, taking into account default concerns due to the poor condition of capital availability, external debt and liabilities. A decrease in indicates a weak environment for banking in Pakistan due to the economic crisis.

According to experts, Pakistan’s five major banks hold a large share of government-guaranteed external loans, and the balance sheets of banks are also likely to be affected by economic deterioration and a reduction in Pakistan’s external payment capacity.

Read this: Moody’s downgrades Pakistan’s rating, outlook stable

Experts say that the lack of capital with the government, the increase in external threats to the economy, the alarming decrease in foreign exchange reserves and the inflation that is increasing at a stormy pace, which will be exacerbated by the increase in the cost of electricity and the end of subsidies. There is fear.

Due to these factors, public expenditure has increased rapidly and the ability of bank borrowers to repay their loans is being affected to a great extent due to all these factors.

Moody’s also cites declining borrowers’ ability to repay loans as the main justification for downgrading banks, which affects banks’ asset quality and earnings, posing a threat to capital conditions and potentially financial stability. May be.

Due to these factors, the macro profile of a country also changes from Very Weak Plus (Very Weak+) to Very Weak (Very Weak).