Moody’s lowers banks outlook to negative

KARACHI: Moody’s Investors Service changed its outlook for the Pakistani banking system to negative from stable as reversal in economic growth is expected to bite the government papers-oriented banks.

“The banks’ operating conditions will be difficult, with Pakistan’s real GDP growth slowing to 4.3 percent in the fiscal year ending June 2019, down from 5.8 percent in 2018,” the US-based credit ratings agency said in a report.

“Slower economic growth will contain business opportunities for banks and stall improving trend in problem loans.” Moody’s said banks’ large holdings of government bonds link their credit profiles to the low-rated government.

The negative outlook is based on Moody’s assessment of six drivers, of which operating environment, asset risk and government support are deteriorating, whereas capital, profitability and efficiency .