Fitch says Uzbek state-owned banks “stable”

By bne IntelliNews November 16, 2015

Fitch Ratings says that the creditworthiness of state-owned Uzbek banks remain “stable, reflecting limited impact on Uzbekistan’s operating environment from the oil price shock/slowdown in major CIS trading partners”.

In a report on the Uzbek banking system, Fitch says the reported loan quality metrics of Uzpromstroybank (UzPSB), Asaka Bank (Asaka) and Agrobank have been stable, with non-performing loans at below 3% (fully covered by reserves) at end-2014, while Microcreditbank’s (MCB) rose to 14% at end-2014 from 4% at end-2013 (all unprovisioned, 48% of Fitch core capital) because of financial difficulties in a number of agricultural companies.

Despite low NPLs, Agrobank’s asset quality remains weakened by unreserved problematic receivables (9% of total assets or about 70% of IFRS equity), which were recorded on the balance sheet as a result of the 2010 asset embezzlement by former employees, it said.

Foreign currency lending is significant at about 60% on average in reviewed banks, reflecting high deposit dollarisation. “This poses asset quality risks in case of sharp foreign exchange movements; Uzbekistan has not devalued the currency recently, unlike some other CIS countries.”

Reported profitability is moderate at Asaka (ROAE at 12.2% in 2014), modest at UzPSB (6.4%), weak at Agrobank (1.7%) and MCB (0.2%), reflecting the significant share of state-directed operations and rather weak operating efficiency (particularly at MCB). UzPSB and Asaka benefit from lower funding costs because of  mostly government funding, stronger asset quality/lower impairment charges and greater efficiencies of scale compared with the smaller Agrobank and MCB.

Capitalisation is strong at UzPSB (FCC/ risk-weighted assets ratio of 19.1% at end-2014), moderate at Asaka (16.2%), satisfactory at MCB (12.9%, adjusted for unprovisioned NPLs), and weak at Agrobank (3%, adjusting for unprovisioned problematic receivables).

“Banks are required by recent regulations to grow capital by at least 20% annually until end-2015,” the ratings agency said. “As internal capital generation at the state banks is moderate and lags growth, state banks are getting regular capital contributions from the government in order to comply with regulatory capital requirements.”

Liquidity is comfortable because of solid buffers (liquid assets of over 15% at UzPSB, Asaka and Agrobank and a somewhat tighter 9.2% at MCB at end-1H15), as well as potential state support. “UzPSB is the only bank with meaningful borrowings from international financial institutions (17% of total liabilities), although near-term repayments are small (around 1% of total liabilities in 2H15-2016).”

Foreign currency liquidity was moderate at end-1H15. In Fitch’s view, extraordinary support in foreign currency may be less available given conversion limitations and a rigidly managed foreign-currency exchange rate in Uzbekistan. Because of this reason the banks’ foreign currency Issuer Default Ratings (IDRs) are one notch lower than their local currency IDRs, Fitch said.

Related Articles

Kazakh Kazkommertsbank confirms talks on deal with Halyk Bank

Kazakhstan’s largest bank Kazkommertsbank (KKB), recently rebranded as Qazkom, has entered preliminary negotiations for an unspecified “deal” with Halyk Bank, KKB said in ... more

Slovenian government approves privatisation plan for 2017

Slovenia’s government approved Slovenian Sovereign Holding’s (SSH) 2017 privatisation plan on January 19. The plan includes the sales of two 100% state owned banks, Slovenia’s largest lender ... more

Blow for Russian stocks as Kremlin backs away from higher dividend payouts

Russian stocks are facing a serious setback after it emerged that the Kremlin may be backing out of a decree to force state-owned companies to pay dividends worth 50% of their earnings. The ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss