Moody's revises four Pakistani banks outlook to negative

[Naveed Yaseen]

SINGAPORE (December 16 2008): Moody's Investors Service on Monday confirmed, with a negative outlook, the B3 long-term foreign currency deposit ratings of four Pakistani banks. The following Pakistani banks are affected by this rating action.

-- National Bank of Pakistan (B3 Neg/Not-Prime/D BFSR)

-- Habib Bank Ltd (B3 Neg/ Not-Prime /D- BFSR)

-- United Bank Ltd (B3 Neg/ Not-Prime /D- BFSR)

-- MCB Bank Ltd (B3 Neg/ Not-Prime /D BFSR)

This concludes the review for possible downgrade for these banks initiated by Moody's on October 29, 2008. "Today's rating action is in response to 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," explains Nondas Nicolaides, Vice President - Senior Analyst in Moody's Financial Institutions Group.

The outlook change for the country ceiling concluded Moody's review for possible downgrade, further to the recent finalisation of a two-year, $7.6 billion standby financing agreement with the IMF, which will avert a near-term sovereign debt default.

The foreign currency deposit ratings of the four above-named banks remain constrained by this country ceiling. The outlook on the bank financial strength rating (BFSR) of each of the four Pakistani institutions remains stable.

However, Moody's cautions that downward rating pressure could develop in the event of a deterioration in Pakistan's economy above current expectations, while security threats could challenge the country's political and economic stability. "For the time being, however, Moody's continues to believe that the rated banks display satisfactory financial fundamentals overall and solid franchises," says Nicolaides.

Despite challenging market conditions and a deterioration in the macro-economic environment, the banks' performance remains adequate for now 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.

Moody's previous rating action on the four Pakistani banks was implemented on 29 October 2008, when the rating agency downgraded the long-term local currency deposit ratings to Ba2 following the downgrade of the country's local currency deposit ceiling to Ba2 from Baa2.

The short-term local currency deposit ratings for National Bank of Pakistan and MCB Bank were also downgraded to Not-Prime from Prime-3. In the same rating action, Moody's also placed the B3 long-term foreign currency deposit ratings of the four banks on review for possible downgrade, in line with a similar rating action on Pakistan's B3 foreign currency deposit ceiling, as this ceiling acts as a constraint on these deposit ratings.

The principal methodologies used in rating the above-named Pakistani banks are "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology".

Headquartered in Karachi, National Bank of Pakistan reported total assets of Rs 740.4 billion ($9.5 billion) at the end of September 2008. Headquartered in Karachi, Habib Bank Ltd reported total assets of Rs 742.7 billion ($9.5 billion) at the end of September 2008. Headquartered in Karachi, United Bank Ltd reported total assets of Rs 618.1 billion ($7.9 billion) at the end of September 2008. Headquartered in Lahore, MCB Bank Ltd reported total assets of Rs 456.3 billion ($5.8 billion) at the end of September 2008.

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