Moody's changes outlook of four Pakistani banks

[Naveed Yaseen]

SINGAPORE (September 25 2008): Moody's Investors Service has changed the outlook on the B3 long-term foreign currency deposit ratings of four banks to negative from stable. The following are the banks affected by today's rating action: - National Bank of Pakistan (B3 Neg/NP/D) - Habib Bank Ltd (B3 Neg/NP/D-) - United Bank Ltd (B3 Neg/NP/D-) - MCB Bank Ltd (B3 Neg/NP/D).

This rating action follows the recent announcement by Moody's sovereign risk group that it has changed the outlook on Pakistan's B3 foreign currency bank deposit ceiling to negative from stable, following a substantial erosion in the country's external liquidity position.

All four banks' foreign currency deposit ratings remain constrained by this country ceiling. The outlook on the bank financial strength rating (BFSR) of each of the four Pakistani institutions remains stable despite the challenges they face in the local operating environment.

However, Moody's cautions that, in the event of a possible prolonged economic deterioration combined with heightened political turmoil that erodes business confidence and performance, the BFSRs could also potentially be adversely impacted going forward.

In particular, Moody's will focus on the banks' asset quality trends as well as on the provisioning costs with regard to their loan and investment book and how this will impact both their earnings and solvency positions. For the time being, however, Moody's continues to regard the rated Pakistani banks as displaying satisfactory financial fundamentals and solid franchises.

Although challenging financial market conditions during the second quarter of 2008 had an impact on the equity component for most of the country's banks, their performance remains adequate in terms of both business growth and profitability.

As all four banks' short-term foreign currency ratings are already at Not Prime, the outlook on these ratings remains stable. National Bank of Pakistan had total assets of Rs 798.1 billion (US $11.7 billion) at the end of June 2008.

Habib Bank Ltd had total assets of Rs 735.7 billion (US $10.8 billion) at the end of June 2008. United Bank Ltd had total assets of Rs 592.2 billion (US $8.7 billion) at the end of June 2008. MCB Bank Ltd had total assets of Rs 453.2 billion (US $6.6 billion) at the end of June 2008.

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