Moody's: Pakistani banks outlook stable

Moody's Investor Service said the outlook for Pakistan's banking system is stable, reflecting robust credit growth that is benefiting the banks, which are gradually showing signs of revival with stronger financial fundamentals. However, the rating agency said there is still a somewhat challenging operating environment that constrains the banks' ratings.

The efficiency of Pakistan's financial system has improved as a result of privatization, consolidation and restructuring, Moody's said in a new report. In recent years, the rated Pakistani banks and the banking system as a whole, have greatly improved solvency and become financially viable.

Robust credit growth also is helping the banks diversify their loan books, fueled by the relatively favorable operating environment and record levels of loan growth in 2004 followed by moderate growth in 2005 and 2006. However, Moody's said new lending remains untested in a possible economic downturn. The agency said the challenging operating environment still constrains the banks' ratings while the country's shallow and narrow capital markets limit the scope of the banks' operations.

Pakistani banks rated by Moody's include Habib Bank Ltd., MCB Bank Ltd., United Bank Ltd. and the National Bank of Pakistan.

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