{"id":29116,"date":"2026-02-09T17:43:47","date_gmt":"2026-02-09T17:43:47","guid":{"rendered":"https:\/\/gsrra.com\/?p=29116"},"modified":"2026-02-09T17:43:51","modified_gmt":"2026-02-09T17:43:51","slug":"moodys-revises-pakistans-banking-sector-outlook-to-stable-amid-gradual-recovery","status":"publish","type":"post","link":"https:\/\/gsrra.com\/?p=29116","title":{"rendered":"Moody\u2019s revises Pakistan\u2019s banking sector outlook to stable amid gradual recovery"},"content":{"rendered":"\n<ul class=\"wp-block-list\">\n<li>Moody\u2019s forecasts Pakistan\u2019s real GDP growth of around 3.5% for 2026<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/youtube.com\/channel\/UCFWx0mweS7ExXjs3s_wH0CQ\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><a href=\"https:\/\/www.facebook.com\/BusinessRecorder\/\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><a href=\"https:\/\/www.instagram.com\/businessrecorder\/\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><a href=\"https:\/\/twitter.com\/brecordernews\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><a href=\"https:\/\/www.brecorder.com\/feeds\/latest-news\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><strong>In a key development for the country\u2019s banking sector, Moody\u2019s has revised Pakistan\u2019s banking sector outlook to stable from positive, citing a gradual economic recovery and an improving fiscal and external position.<\/strong><\/p>\n\n\n\n<p>\u201cWe have changed our outlook on Pakistan\u2019s banking system to stable from positive,\u201d said the global rating agency on Monday.<\/p>\n\n\n\n<p>Moody\u2019s noted that the operating environment continues to recover, but only gradually, supported by the country\u2019s slowly improving economic and fiscal outlook and strengthening external position.<\/p>\n\n\n\n<p>\u201cHowever, banks\u2019 financial performance will be stable over the next 12-18 months as they continue to face asset quality and profitability challenges.<\/p>\n\n\n\n<p>\u201cThe sector outlook also aligns with that of the Government of Pakistan (Caa1 stable), given banks\u2019 substantial holdings of government securities, which account for around half of total banking assets. Pakistan\u2019s long-term debt sustainability remains uncertain, because of its still weak fiscal position, high liquidity and external vulnerability risk1,\u201d it said.<\/p>\n\n\n\n<p>Moody\u2019s forecasted Pakistan\u2019s real GDP growth of around 3.5% for 2026, up from 3.1% in 2025, supported by ongoing reforms that are improving confidence and gradually strengthening economic activity.<\/p>\n\n\n\n<p>Headline inflation fell to 4.5% in 2025 from 23% during 2024. Moody\u2019s expects inflation to rise to around 7.5% in 2026, in part due to base effects.<\/p>\n\n\n\n<p>It noted that the improving economic outlook and lower inflation have contributed to easing monetary policy rates.<\/p>\n\n\n\n<p>\u201cLower borrowing costs will boost credit demand and keep problem loan ratios broadly unchanged. At the same time, margins will remain steady after a decline following rate cuts, but higher business volumes, non-interest income and stable costs will support profits and safeguard capital buffers.\u201d<\/p>\n\n\n\n<p>Moody\u2019s noted that the recent floods are likely to weigh on agricultural output, but activity in the industrial and services sectors should remain robust.<\/p>\n\n\n\n<p>It shared that sector-wide nonperforming loan ratios spiked at the beginning of 2025 following the removal of the advances-to-deposits ratio (ADR) tax, which led banks to reduce their loan books.<\/p>\n\n\n\n<p>\u201cAlthough loans accounted for only 23% of banks\u2019 total assets as of September 2025, we expect double-digit credit growth in 2026, supported by improving macroeconomic conditions.<\/p>\n\n\n\n<p>\u201cBorrower delinquencies will persist nonetheless, particularly in more vulnerable sectors such as agriculture and energy, but lower borrowing costs and higher credit demand will maintain broadly stable problem loan ratios, measured by Moody\u2019s as Stage 3 loans over gross loans, at around 8% for the Pakistani banks we rate.\u201d<\/p>\n\n\n\n<p>Moody\u2019s shared that as of September 2025, the system\u2019s Tier 1 and total capital to risk-weighted assets (RWAs) ratios stood at 18% and 22.1%, respectively, up from 17% and 21.5% a year earlier and well above the regulatory minimum.<\/p>\n\n\n\n<p>\u201cAlthough financing growth will rise in 2026 on the back of lower rates, Pakistani banks will continue to increase their holdings of government securities, which do not carry any risk-weighting, further supporting capital metrics.<\/p>\n\n\n\n<p>\u201cWe expect banks to maintain high dividend payout ratios, but retained earnings \u2014 despite slight margin compression \u2014 will be sufficient to fund balance sheet growth and maintain capital ratios.\u201d<\/p>\n\n\n\n<p>Reference Link:- <a href=\"https:\/\/www.brecorder.com\/news\/40406326\" target=\"_blank\" rel=\"noopener\">https:\/\/www.brecorder.com\/news\/40406326<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a key development for the country\u2019s banking sector, Moody\u2019s has revised Pakistan\u2019s banking sector outlook to stable from positive, citing a gradual economic recovery and an improving fiscal and external position. \u201cWe have changed our outlook on Pakistan\u2019s banking system to stable from positive,\u201d said the global rating agency on Monday. Moody\u2019s noted that [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":29117,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"aside","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[36,13998,9566,26830,26831,9360,26832],"class_list":["post-29116","post","type-post","status-publish","format-aside","has-post-thumbnail","hentry","category-sample-category","tag-pakistan","tag-positive-signs","tag-banking-sector","tag-moody-rating","tag-pakistans-rating","tag-recovery","tag-stable","post_format-post-format-aside"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/29116","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=29116"}],"version-history":[{"count":1,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/29116\/revisions"}],"predecessor-version":[{"id":29118,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/29116\/revisions\/29118"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/media\/29117"}],"wp:attachment":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=29116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=29116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=29116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}