Five leading Pakistani banks see Moody’s ratings upgrade as economic conditions improve and outlook shifts to stable.
Moody’s has upgraded the ratings of five of Pakistan’s largest banks, a move that follows the agency’s recent decision to raise the country’s sovereign rating. Allied Bank (ABL), Habib Bank (HBL), MCB Bank, National Bank of Pakistan (NBP) and United Bank (UBL) all saw their long-term local and foreign currency deposit ratings lifted to Caa1 from Caa2, with the outlook revised to stable.
The agency said the upgrades were driven by a more stable economic backdrop, the government’s stronger ability to support banks if needed, and the sector’s own resilient performance. It also raised the baseline credit assessments for ABL, HBL, MCB and UBL to Caa1, while NBP’s was lifted to Caa2. Moody’s noted that Pakistani banks remain closely tied to the sovereign, holding nearly half of their assets in government securities, but are benefiting from improving conditions.
READ MORE: Voluntary Separation or Silent Closure: What’s Next for USC?
Lower inflation, which fell from 30.8 percent in 2023 to 12.6 percent last year, along with sharp interest rate cuts by the State Bank of Pakistan has helped ease pressure on the sector. These steps are expected to reduce problem loans, cut borrowing costs and lift credit demand, particularly from small businesses and consumers. Banks are also drawing strength from stable deposits, strong liquidity buffers, and steady earnings capacity.
Moody’s cautioned, however, that profitability may narrow as rate cuts squeeze margins, while risks tied to Pakistan’s external vulnerabilities remain. The stable outlook signals improving confidence, but further upgrades will depend on continued economic progress and sustained bank resilience.
