Fitch Ratings has assigned Uzum Holding a Long-Term Issuer Default Rating (IDR) of ‘B’ with a Positive Outlook, citing strong growth potential in Uzbekistan’s nascent fintech and e-commerce markets and prudent liquidity management across the group.

“The Long-Term IDR reflects Uzum’s consolidated credit profile, underpinned by full operational control of all subsidiaries, including Kapitalbank,” Fitch said in its report on the rating action. 

Kapitalbank, which also carries a ‘B’ rating with a Positive Outlook, is a key source of funding for Uzum through intercompany loans and dividends. 

However, “Fitch expects Uzum to increasingly issue debt at the holding company level.”

The agency highlights Uzum’s “leading franchise in Uzbekistan’s e-commerce and fintech segments,” which, despite rapid development, remain underpenetrated. 

Serving over 16mn monthly users in a country of 38mn, Uzum has built a national infrastructure combining online retail with financial services, including short-term, high-yield lending products such as buy-now, pay-later (BNPL) loans.

“The Positive Outlook reflects Uzbekistan’s improving operating environment for financial institutions and Fitch’s view that Uzum has strong medium-term growth prospects,” the rating firm said. 

While legally domiciled in Abu Dhabi (AA/Stable), Uzum conducts all of its operations in Uzbekistan (BB/Stable).

Still, Fitch noted that the group’s rapid expansion and evolving business model brought risks. 

“Uzum’s ratings are constrained by recent fast growth, our view that the business model remains to be tested through economic cycles and the high risk inherent in BNPL lending,” it stated. 

The group’s planned eurobond issuance could introduce foreign currency risk, “unless it is hedged.”

Nevertheless, the agency pointed to “a cash-generative business model, strong profitability (with a consolidated net interest margin of 11% and pre-tax return on assets of 4.5% in 2024) and a granular, short-dated and largely local currency-denominated loan book” as supportive factors.

Kapitalbank, Uzum’s largest subsidiary, holds approximately 6% of system loans in Uzbekistan and has delivered “highly profitable” results, driven by auto finance and a pivot to SME lending. 

Although the impaired loans ratio rose to 4.5% at end-2024 due to the seasoning of auto-backed loans, Fitch argued that “credit risk is mitigated by the granular and largely secured nature of its loan book.”

Beyond Kapitalbank, Uzum provides local-currency lending to e-commerce clients through BNPL and credit lines, supported by “robust data-driven scorecards to manage risks.” 

The group’s cost of risk was “an acceptable 3% of average gross loans in 2024,” though Fitch expected it to rise moderately as the lending model matures.

On capitalisation, Fitch reported that Uzum’s consolidated gross debt to tangible equity improved from 10.1x in 2023 to 6.7x in 2024, “driven by strong internal capital generation at 33%.” 

The group has no plans to pay dividends. 

At end-2024, the unreserved portion of impaired loans represented just 11% of tangible equity.

Fitch added that “liquidity is sound and supported by Uzum’s cash-generative business model,” with Kapitalbank’s liquid assets covering 35% of customer accounts and a loan-to-deposit ratio of 87% at end-2024. 

However, the agency cautioned that “capital and liquidity are not fully fungible across the group due to regulatory limitations.”

Looking ahead, Fitch warned it could revise Uzum’s Outlook to Stable in the event of “weaker profitability or materially increasing leverage,” especially if double leverage exceeds 120%. 

Similarly, a downgrade of Kapitalbank would likely lead to a downgrade of Uzum, given the bank’s share of the group’s consolidated earnings and assets.

Fitch also flagged regulatory and credit risks in the BNPL sector as potential downside triggers.

Conversely, “an upgrade of Kapitalbank combined with maintenance of strong profitability, prudent leverage and adequate asset quality metrics within its e-commerce and fintech segments would be positive for Uzum’s ratings.”