Moody's puts Pak banks un­der re­view for rating downgrade

The Pak Banker - - FRONT PAGE - KARACHI -APP

Moody's linked any downgrade in ratings of Pak­istan's five big banks with risks to their credit pro­files em­a­nat­ing from the gov­ern­ment's po­ten­tially weak­en­ing cred­it­wor­thi­ness in case of de­fault on its pri­vate debts. Credit rating agency Moody's said it placed on re­view for downgrade the B3 long-term lo­cal-cur­rency de­posit ratings of Al­lied Bank Limited (ABL), Habib Bank Ltd. (HBL), MCB Bank Limited (MCB), Na­tional Bank of Pak­istan (NBP) and United Bank Ltd. (UBL).

"The bank rating ac­tions re­flect Moody's view that the gov­ern­ment's po­ten­tially weak­en­ing cred­it­wor­thi­ness will weigh on the stand­alone credit pro­file of the banks given the high credit link­ages be­tween their balance sheets and sov­er­eign credit risk and the risk of a fur­ther weak­en­ing in the gov­ern­ment's ca­pac­ity to support the banks in case of need," Moody's said in a state­ment.

The banks' for­eign cur­rency de­posit ratings and base­line credit as­sess­ments were also placed on re­view for downgrade.

The rating ac­tions fol­lowed the agency's de­ci­sion last week to place the Pak­istan's B3 is­suer and se­nior un­se­cured ratings on re­view for downgrade on an ex­pec­ta­tion that the gov­ern­ment would re­quest bi­lat­eral of­fi­cial sec­tor debt ser­vice re­lief un­der the re­cently an­nounced G20 ini­tia­tive. Moody's said it would as­sess the im­pact of the gov­ern­ment's po­ten­tially weak­en­ing cred­it­wor­thi­ness on the stand­alone credit pro­file of the banks given the high credit link­ages be­tween their balance sheets and sov­er­eign credit risk, dur­ing the re­view pe­riod. Ac­cord­ing to the rated banks' lat­est fi­nan­cial state­ments, their di­rect ex­po­sure to gov­ern­ment se­cu­ri­ties stood at around 7.6x of tier-1 cap­i­tal for ABL, 8.1x for HBL, 6x for MCB, 8.7x for NBP and 6.5x for UBL.

"The high di­rect ex­po­sure to gov­ern­ment credit risk ren­ders the banks sus­cep­ti­ble to event risk at the sov­er­eign level and con­strains their base­line credit as­sess­ments at the gov­ern­ment rating," it added. Moody's would fur­ther as­sess the im­pact of the coronaviru­s pan­demic on eco­nomic and busi­ness ac­tiv­ity and on the fi­nan­cial per­for­mance of the big-five banks, es­pe­cially on their as­set qual­ity and prof­itabil­ity.

"The se­cond fac­tor driv­ing the re­views for downgrade is the po­ten­tial de­te­ri­o­ra­tion of the Pak­istani gov­ern­ment's ca­pac­ity to ex­tend support to banks in case of need," said the rating agency. "The lo­cal-cur­rency de­posit ratings of two rated banks, NBP and HBL, in­cor­po­rate one notch of support up­lift from their caa1 base­line credit as­sess­ments." Moody's said up­ward pres­sure on the banks' ratings is limited, as in­di­cated by the re­view for downgrade.

"How­ever, the ratings would likely be con­firmed if Pak­istan's B3 sov­er­eign rating is con­firmed. This is also con­di­tioned by no ma­te­rial de­te­ri­o­ra­tion in banks' stand­alone fun­da­men­tals through­out this coronaviru­s cri­sis," it added. "Down­ward pres­sure on the base­line credit as­sess­ments of in­di­vid­ual banks could also de­velop from a greater-than-ex­pected de­te­ri­o­ra­tion in op­er­at­ing con­di­tions from the coronaviru­s spread, weak­en­ing their as­set qual­ity, prof­itabil­ity, and cap­i­tal ad­e­quacy."

Mean­while, The King Ab­dul­lah Bin Ab­dul Aziz Pro­gram for Char­ity Works (KAAP), Is­lamic Devel­op­ment Bank (IsDB) has do­nated COVID-19 emer­gency health­care as­sis­tance to the Provin­cial Disas­ter Man­age­ment Author­ity (PDMA), Re­lief, Re­ha­bil­i­ta­tion & Set­tle­ment (RR&S), Depart­ment, Gov­ern­ment of Khy­ber Pakhtunkhw­a (KP) to com­bat spread of COVID-19.

The cer­e­mony was held at Lo­cal Gov­ern­ment Sec­re­tariat, Peshawar, with Ad­vi­sor to Chief Min­is­ter on Lo­cal Gov­ern­ment, Kam­ran Ban­gash as a Chief

Guest. Dr. Fa­rooq Jamil, Spe­cial Sec­re­tary Health, Ms. Tabas­sum, Di­rec­tor Re­lief, Sa­jid Im­ran, Di­rec­tor Re­ha­bil­i­ta­tion, PDMA, IsDB Group Rep­re­sen­ta­tive in Pak­istan, Mr. Ina­mul­lah Khan, Project Man­ager Pak­istan Mo­bile Clinic, Mr. Mu­rat Kavak­dan and rep­re­sen­ta­tives of the KP Health and RR&S De­part­ments and Me­dia rep­re­sen­ta­tives said a press re­lease.

The IsDB Rep­re­sen­ta­tive gives a de­tail pre­sen­ta­tion about their pro­gram. He stated that IsDB is work­ing with Min­istry of Eco­nomic Af­fairs and Na­tional Health Ser­vices to pro­vide them fi­nanc­ing of US$ 70 mil­lion for COVID-19 emer­gency re­sponse. The IsDB Rep­re­sen­ta­tive ex­plained that KAAP, IsDB has al­lo­cated a Grant of US$ 0.42 mil­lion for health emer­gency re­lief pack­age for KP and Sindh Prov­inces.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.