Fitch Ratings has reported a positive outlook for Pakistani banks as the country’s economy shows signs of recovery. The improved economic conditions are expected to create better business opportunities for banks in Pakistan.
The report highlights that recent reforms and economic stability have strengthened Pakistan’s financial sector. Fitch upgraded Pakistan’s sovereign credit rating to ‘B-’ with a stable outlook in April 2025. This move reflects the country’s improving fiscal health and macroeconomic environment.
Banks in Pakistan have shown resilience despite past challenges. The impaired loan ratio improved to 7.1% by March 2025, down from 7.6% at the end of 2023. This improvement is due to strong loan growth of 26%, even during high inflation.
Fitch expects private credit demand to grow as economic conditions improve. This will support loan and deposit growth for banks. The agency also noted that banks are reducing their dependence on public-sector lending by increasing private-sector loans.
The central bank’s decision to cut policy rates to 11% since May 2024 has helped stabilize the financial market. Lower interest rates will likely improve borrowers’ ability to repay loans, reducing asset-quality risks for banks.
Pakistan’s banking sector remains financially strong. The capital adequacy ratio reached a decade-high of 21% by March 2025, well above the minimum regulatory level of 11.5%. This strong capital base allows banks to manage growth safely.
Liquidity and funding positions are also robust. Customer deposits make up 65% of total funding, and the loan-to-deposit ratio is low at 38%, which helps banks manage financial risks.
Fitch emphasized that banks that diversify revenue streams and maintain strong credit policies will benefit most from Pakistan’s economic recovery. These banks are better positioned to handle future economic challenges.
In summary, Pakistani banks are set to benefit from improving economic conditions, supported by fiscal reforms and stable financial policies. This outlook reflects a brighter future for the banking sector in Pakistan.
In other related news also read Banks Causing Delays in Processing Import Payments
