Tashkent, Uzbekistan, June 2
By Demir Azizov - Trend:
The international ratings agency Standard&Poor's (S&P) affirmed 'В-/С' long-and short-term counterparty credit ratings on the Uzbek Turkiston Bank, revising its outlook on the bank from 'stable' to 'negative'.
Turkiston Bank's capitalization may weaken in the next 12-18 months, according to S&P.
The agency's analysts believe that the bank's risk-adjusted capital (RAC) ratio is likely to exceed 10 percent in the next 12-18 months.
However, S&P noted the risks, the impact of which can lower this ratio.
S&P believes that the bank's net interest margin will rise to an average of 8 percent in 2014-2015 as a result of a slowdown in the growth of portfolio of more costly retail deposits and recovery of interbank lending market following the regulator's intervention in 2013.
This will allow the bank to increase interest income.
The message said that some two billion soums (nearly $875,000) worth capital injection in 2014 and the expected payments to the shareholders in the amount of nearly 20 percent of the net profit from 2014 to 2015 are also taken into account.
"We forecast that given the high figures in the bank's loan portfolio in the past two years, the reserves created for possible losses will not exceed some 0.5 percent of the portfolio in 2014-2015. At the same time, we expect high growth rates in assets (on average, 30 percent per year in 2014-2015), which can have a moderating influence on capitalization," the message said.
The agency also pointed out that for many years the Turkiston Bank hasn't been able to get a license to carry out currency transactions.
"This has a negative impact on the bank's market positions, competitive positions, and resource base," the message said.
The S&P analysts believe that the outflow of the customers' deposits throughout 2013 testifies to the increase in the volatility of the Turkiston Bank's resource base.
""Negative" Forecast on the "Turkiston" Bank's ratings reflects our view that in the next 12-18 months, the bank may not be able to maintain strong capital ratios and at the same time strengthen its current weak position on the market" the report said.
"We may revise outlook on the bank`s ratings to "Stable", if the bank receives a license to conduct transactions in foreign currency and this steadily strengthens its market position, herewith maintaining strong capital ratios and RAC co-efficient at the level of 10 percent. Upgrading of the bank's rating in the next 12-18 months is unlikely," the Standard & Poor's report said.
Turkiston Bank was founded in 1997. The bank belongs to a number of small banks with capital of about 13.3 billion soums. Bank shares are owned by 153 shareholders, including 27 legal entities and 126 individuals.
The main activities of the bank are lending to small businesses and providing services to individuals. The client base of the bank is represented mainly by small and medium-sized businesses. Today the total number of customers of the bank is 2,200.
The official exchange rate on May 30 is 2296.43 UZS / USD.