Pakistan’s banking sector is showing positive signs due to solid funding and liquidity, according to a report shared by the Moody’s Investors Service.
In addition to this, the profitability is expected to come under pressure in 2021. The main reason for this is the 625 basis point interest rate cut last year.
Moody’s also expect the rising asset risk as non-performing loans will rise from a level of 9.9%. Economic slowdown due to COVID-19 also had a negative impact on borrowers repayment capabilities.
Furthermore, the analysts are of the view that the economy will return to growth in the fiscal year 2021 while gaining 1.5% and is expected to accelerate to 4.4% in 2022. In 2021, the private sector lending is to grow between 5% ad 7%.