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Remittance growth credit positive for Pakistani banks: Moody’s

Remittance growth credit positive for Pakistani banks: Moody’s

ISLAMABAD: Rating agency Moody’s has termed growth in remittances in Pakistan as credit positive for banks, saying foreign inflows improve their access to low-cost and stable deposits.

Moody’s in its latest report on Pakistan has stated that increase in workers’ remittances for 7MFY21 is contrary to their expectation that the pandemic would keep remittances flat and the World Bank’s forecast of a sharp decline in global remittances.

It maintained that the increased remittances support Pakistani households’ disposable income and borrowers’ repayment capacity, reducing the potential for nonperforming loans (NPLs).

“Pakistani banks’ consumer lending has historically outperformed lending to companies, and consumer loan NPLs accounted for 4.9% of gross loans as of 31 December 2020, compared with 9.4% for corporate loans,” it said.

“Increased remittances and resulting higher household incomes are also likely to facilitate increased mortgage, small and midsize enterprise and agricultural lending, which are important components of the government’s financial inclusion targets.”