• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Can't read?
Try a new set
Send Cancel
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
OK
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
OK
Rating Action:

Moody's downgrades five Pakistani banks following sovereign action

Global Credit Research - 17 Jul 2012

Limassol, July 17, 2012 -- Moody's Investors Service has today downgraded by one notch the local-currency deposit ratings of five Pakistani banks to B3, with negative outlook, from B2, and lowered their standalone credit assessments to caa1 from b3. The affected banks are Allied Bank Limited, Habib Bank Ltd, MCB Bank Limited, National Bank of Pakistan and United Bank Ltd.

These actions follow the one notch downgrade of Pakistan's government bond ratings to Caa1, with negative outlook, from B3, on 13 July 2012 (see Moody's press release "Moody's downgrades Pakistan government bond ratings to Caa1, outlook negative"), and reflect the significant linkages between the credit profiles of Pakistani banks and sovereign credit risk.

At the same time Moody's downgraded the foreign-currency deposit ratings of the five banks by two notches to Caa2, from B3, to reflect the lowering of the foreign-currency deposit ceiling in Pakistan, which is the highest rating that can be assigned to a foreign-currency deposit obligation of a domestic bank. The short-term ratings have been affirmed.

The full list of affected ratings can be found at the end of this press release.

RATIONALE FOR STANDALONE RATINGS

The one-notch lowering of the banks' standalone credit assessments to caa1 from b3, is driven by the weakening of Pakistan's creditworthiness and the impact this has on the banks' credit-risk profiles. As indicated by the recent downgrade of the government bond rating to Caa1 from B3, Pakistan faces a strained external payments position as a result of a rising trade deficit and a decline in capital inflows, weak government finances, structural inflationary pressures and domestic political uncertainties.

The weakening sovereign credit profile impacts the banks' financial health via (i) their large, and increasing, direct exposures to government debt securities; and (ii) the banks' susceptibility to pressures from the domestic operating environment.

For a more detailed discussion on Moody's view of the impact of sovereign creditworthiness on banks please see Moody's rating implementation guidance "How Sovereign Credit Quality May Affect Other Ratings" published on 13 February 2012, and further detailed in the Special Comment "Banks and Sovereigns: Risk Correlations Constrain Standalone Bank Credit Assessments" published on 30 April 2012.

--Exposures to Government Debt Securities

The five affected banks hold sizable direct and indirect exposures to the Pakistani government, which links the strength of their balance sheets closely to that of Pakistan, whose downgrade to Caa1 implies a greater probability of default over the short term. According to the banks' financial statements, the direct exposures of rated Pakistani banks to government bonds ranged between 252% -430% of Tier 1 capital as of December 2011, making the banks' capital bases vulnerable to sovereign credit developments. Furthermore, according to Moody's estimates based on figures published by the State Bank of Pakistan (SBP), the central bank, the banking system's exposures to government bonds continued to increase in absolute amounts during Q1 2012. This reflects the government's increasing reliance on the domestic banking system to fund it deficits.

In addition, Moody's also acknowledges that the banks' loan books have significant exposures to Public Sector Entities (PSEs), whose performances are largely influenced by the sovereign. The exposures of the five rated banks to such PSEs ranged between 63%-139% of their Tier 1 capital as of December 2011, increasing their vulnerability to sovereign credit risk.

--Operating Environment

Even though the rated Pakistani banks are primarily funded by stable deposit bases, which accounted for 82% of combined total liabilities (excluding equity) as of March 2012, and remain profitable, their risk profiles nevertheless remain exposed to a fragile operating environment that is characterised by a high degree of political instability, security threats, the government's strained fiscal position and weaker economic growth following the global financial crisis. This unfavourable operating environment will continue to weigh on banks' credit and business conditions, in Moody's view.

RATIONALE FOR LOCAL-CURRENCY DEPOSIT RATINGS

The downgrade of the local-currency deposit ratings to B3, with a negative outlook, from B2, directly follows the lowering of their standalone credit assessments. The local-currency ratings continue to benefit from one notch of uplift due to systemic support assumptions. Moody's incorporation of support for Pakistani banks reflects both the importance of the rated banks, given their significant market shares ranging from 7%-15%, and also their significance to the sovereign as an important funding source. The negative outlook on the local-currency deposit ratings reflects the negative outlook on the sovereign rating.

RATIONALE FOR FOREIGN-CURRENCY DEPOSIT RATINGS

The downgrade of the foreign currency deposit ratings of the five Pakistani banks to Caa2 reflects the lowering of the foreign-currency deposit ceiling in Pakistan following the sovereign downgrade. The ceiling is the highest rating that can be assigned to a foreign-currency deposit obligation of a domestic bank.

WHAT COULD MOVE THE RATINGS UP/DOWN

The key driver of today's announcements is mostly structural in nature, and as such, Moody's considers that upwards rating pressure is unlikely over the near term. Beyond the foreseeable future, a combination of an improving operating environment, declining sovereign-risk exposures and increasing cross-border diversification may exert upwards rating pressure. An improvement in the credit-risk profile of the Pakistani government could also positively influence the ratings.

Conversely, deterioration in the banks' operating environment and/or a weakening of their standalone financial fundamentals could exert downwards pressure on the ratings.

LIST OF AFFECTED RATINGS

ALLIED BANK LIMITED

- BFSR downgraded to E (mapping to caa1) from E+ (mapping to b3)

-Local-currency deposit rating downgraded to B3 from B2

-Foreign-currency deposit rating downgraded to Caa2 from B3

-Not Prime short-term ratings affirmed

-The E BFSR has a stable outlook. The long term local-currency deposit rating has a negative outlook

HABIB BANK LTD

- BFSR downgraded to E (mapping to caa1) from E+ (mapping to b3)

-Local-currency deposit rating downgraded to B3 from B2

-Foreign-currency deposit rating downgraded to Caa2 from B3

-Not Prime short-term ratings affirmed

-The E BFSR has a stable outlook. The long term local-currency deposit rating has a negative outlook

MCB BANK LIMITED

-BFSR downgraded to E (mapping to caa1) from E+ (mapping to b3)

-Local-currency deposit rating downgraded to B3 from B2

-Foreign-currency deposit rating downgraded to Caa2 from B3

-Not Prime short-term ratings affirmed

-The E BFSR has a stable outlook. The local-currency deposit rating has a negative outlook

NATIONAL BANK OF PAKISTAN

- BFSR downgraded to E (mapping to caa1) from E+ (mapping to b3)

-Local-currency deposit rating downgraded to B3 from B2

-Foreign-currency deposit rating downgraded to Caa2 from B3

-Not Prime short-term ratings affirmed

-The E BFSR has a stable outlook. The long term local-currency deposit rating has a negative outlook

UNITED BANK LTD

- BFSR downgraded to E (mapping to caa1) from E+ (mapping to b3)

-Local-currency deposit rating downgraded to B3 from B2

-Foreign-currency deposit rating downgraded to Caa2 from B3

-Not Prime short-term ratings affirmed

-The E BFSR has a stable outlook. The long term local-currency deposit rating has a negative outlook

The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings of rated entities Habib Bank Ltd, United Bank Ltd and National Bank of Pakistan were initiated by Moody's and were not requested by these rated entities.

Rated entities Habib Bank Ltd, United Bank Ltd and National Bank of Pakistan or their agent(s) participated in the rating process. These rated entities or their agent(s), if any, provided Moody's access to the books, records and other relevant internal documents of the rated entities.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Melina Skouridou, CFA
Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yves J Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades five Pakistani banks following sovereign action
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable, including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.
© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: