Moody’s flags banking vulnerabilities, cuts 6 bank ratings

Staff Reporter :

Global ratings agency Moody’s has revised its ratings for six Bangladeshi banks, following a recent downgrade of the country’s sovereign rating.

The affected banks include BRAC Bank, City Bank, Dutch-Bangla Bank, Eastern Bank, Mercantile Bank, and Premier Bank.

BRAC Bank’s long-term (LT) local currency (LC) and foreign currency (FC) deposit ratings have been lowered to B2 from B1, while Mercantile Bank and Premier Bank saw their LT LC and FC deposit ratings downgraded to B3 from B2.

Meanwhile, City Bank, Eastern Bank, and Dutch-Bangla Bank retained their B2 LT LC and FC deposit ratings. However, Moody’s has revised the outlook for all six banks from stable to negative.

Moody’s also adjusted Bangladesh’s GDP growth projections, forecasting a slowdown to 4.5 per cent from the earlier estimate of 6.3 per cent for the current fiscal year. The projection for the next fiscal year was similarly revised downward to 5.8 per cent from 6 per cent.

The adjustments follow Monday’s sovereign rating downgrade, which lowered Bangladesh’s rating to B2 from B1, accompanied by a negative outlook. This places the country deeper into junk territory, alongside nations like Rwanda, Cambodia, and Mongolia.

The downgrade reflects escalating political risks, weaker growth prospects, and increased government liquidity vulnerabilities. Moody’s cited the nation’s reliance on short-term domestic debt to finance deficits, which heightens liquidity risks.

Additionally, Moody’s highlighted concerns over asset quality in the banking sector, citing weak capital and liquidity structures. While remittance flows and disbursements from development partners have improved, the decline in foreign reserve buffers has exacerbated external vulnerabilities.