Pakistan banking, Fitch downgrades UBL
Posted on May 26, 2009
KARACHI: Fitch Rating Agency has downgraded United Bank (UBL) individual rating to ”D/E” from ”D”, and affirmed its support rating at ”5”. Concurrently, the agency has also affirmed the ratings of three Pakistani banks NBP, MCB, HBL. For HBL, individual rating affirmed at ”D/E”, Support affirmed at ”5”; (MCB): Individual rating affirmed at ”D”, Support affirmed at ”5”; and NBP: Individual rating affirmed at ”D”, Support affirmed at ”5”. The downgrade of UBL Individual rating, in the current weak operating environment, reflects the bank”s constrained ability to accommodate the deterioration in its asset quality due to its weak capitalisation (restated total capital adequacy ratio (CAR) of 10.6 percent at end-2008; regulatory minimum of 9 percent – to be increased to 10 percent by end-2009) and lower than peer profitability (ROA of 1.7 percent in the first quarter of 2009). Underlining UBL asset quality risks are its aggressive loan growth (20 percent-35 percent) since 2004, elevated risk of delinquencies in a high interest rate – inflation environment and possible weakening in its Middle East operations amid the global economic downturn.
Tags: capital adequacy ratio, CAR, Fitch downgraded United Bank, Fitch Rating Agency, HBL, MCB, Pakistani banks NBP, UBL, UBL asset quality risks
