By Demir Azizov- Trend:
Fitch Ratings has affirmed Ipak Yuli Bank (IY) and PJSEB Trustbank's (TB) Long-term foreign currency Issuer Default Ratings (IDRs) at 'B-' with a Stable Outlook and Universalbank's (UB) Long-term local currency IDR at 'CCC', Fitch said.
These banks' Long-term IDRs are driven by their standalone strength, as reflected in their Viability Ratings (VR) of 'b-' for IY and TB and 'ccc' for UB.
The affirmation of these banks' ratings reflects limited changes in the banks' standalone credit profiles since their previous review in February 2014.
The VRs consider their challenging operating environment, including the difficult business climate, structural weaknesses in the economy, high concentration risk and external pressures due to the significant weakening of commodity markets and deterioration in key trading partners (in particular, Russia), Fitch said.
The ratings are also constrained by the high transfer and convertibility risks present in the economy due to the country's tightly regulated FX market, and the banks' generally limited franchises. The latter is more acute for UB, which is consequently rated one notch lower than its peers.
The Stable Outlooks on IY and TB's ratings reflect Fitch's expectations for continued economic growth, backed by government spending on industrial development, and solid domestic consumption.
Reported asset quality metrics remain reasonable across the board, with impaired loans at below 3.6% at all banks at end-3Q14. At the same time, loan books are yet to season after rapid growth in 2014 (up by 63%, 50% and 23% for IY, TB and UB, respectively, albeit from a relatively low base), Fitch said.
In addition, solid pre-impairment profitability, underpinned by a high non-interest income, mostly fees (in the range of 52%-61% of gross revenues in 2014) provides additional loss absorption capacity. UB's weaker-than-peers' operating efficiency (cost/income ratio of 72% in 2014) reflects its limited scale.
The banks' liquidity positions vary significantly. IY and TB's highly liquid assets net of potential debt repayments comfortably covered around 32% and 47%, respectively, of customer accounts at end-3Q14. UB's liquidity cushion was small covering just 9% of its customer accounts, Fitch said.
These banks' Support Rating Floors (SRFs) of 'No Floor' and their '5' Support Ratings reflect their limited systemic importance and rendering of extraordinary support from Uzbek authorities is unlikely.
An upgrade of IY and TB's IDRs and VRs would require a general improvement in the operating environment. An upgrade of UB would require notable growth and diversification of its franchise as well as significant strengthening of its liquidity position, Fitch said.
Trustbank, with its main focus on rendering financial services to the companies on the stock exchange and wholesale trade, was established in 1994. It was transformed into a private bank upon the shareholders' decision in 2006.
"Universalbank" was created in May 2002 on the basis of "Kokand" private open joint-stock commercial bank. It is one of the Uzbek smallest banks with assets worth $ 30.5 million at the end of April 2013. The main activity is to support small and private business, as well as housing construction in rural areas.
The head office is located in the city of Kokand (Ferghana region). The bank has a branch in Tashkent. In late 2010, the Uzbek regional private equity fund gained control over the bank. It intends to focus on the development of management processes and control systems.
"Ipak Yuli" bank was created in 1990. The bank`s shares are owned by about 1000 shareholders - legal and physical entities, the largest of which are the "UzbekInvest" National Export-Import Insurance company (about 18 percent) and the Asian Development Bank (13.56 percent).