Moody’s changes outlook of five Pakistani banks to stable

KARACHI: The international rating agency Moody’s has changed outlook of five Pakistani banks to stable, ARY News reported on Thursday.

The Moody’s has kept the rating outlook of the banks unchanged to B-3.

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Earlier this week, the Moody’s had also changed Pakistan’s outlook to positive from negative in the light of steps taken by the PTI government to uplift the economy.

It had further said the Pakistani economy is improving and the biggest challenge being faced by the Pakistani economy, the current account deficit, is also shrinking.

Earlier, the Moody’s in a report released in September, said, “Over the next 12-18 months, banks in Pakistan would see their credit profiles challenged by their high exposure to the country’s low-rated sovereign debt and a slowing economy.”

The report had said that the banks’ operating conditions would be difficult, as GDP growth slowing to 4.3% in the fiscal year ending June 2019, down from 5.8% in 2018.

Red more: External pressures continue to weigh on Pakistan’s Forex reserves: Moody’s

The agency had also observed that Pakistan’s banks face the risk of macroeconomic contagion through a range of channels, including their large holdings of government securities, which caps their credit profiles to the sovereign, and from the authorities’ weakening capacity to support the banks in case of need.

The rating agency weighs the five largest banks in Pakistan by assets. These banks together by assets account for 50 pct of the banking system deposits.