Uzbekistan, Tashkent, June 3 / Trend, D.Azizov /
Moody's Investors Service has today assigned the following global-scale ratings to State Joint-Stock Commercial Bank Agrobank (Agrobank): a bank financial strength rating ("BFSR") of E+ (mapping to a Baseline Credit Assessment (BCA) of B2), long-term and short-term local currency deposit ratings of Ba3/Not Prime, and long-term and short-term foreign currency deposit ratings of B2/Not Prime. All ratings carry a stable outlook.
According to Moody's, Agrobank's BFSR reflects (i) the bank's high visibility in servicing agriculture clients in the Republic of Uzbekistan, where it ranks fourth in terms of assets; (ii) its wide geographic national coverage; (iii) healthy capital adequacy levels; and (iv) its diversified funding base which benefiting from access to facilities from international financial institutions.
At the same time, Agrobank's BFSR is constrained by: (i) corporate governance and risk management issues; (ii) the high single-name and industry concentration of the bank's assets and liabilities; (iii) the predominantly short-term nature of its customer funding base; (iv) low profitability and cost-efficiency metrics; and (v) the unseasoned nature of the bank's loan portfolio and its potential for deterioration under challenging credit conditions.
Agrobank's deposit ratings are underpinned by Moody's assessment of a high probability of systemic support to the bank in case of distress. This assessment takes into account the 59% state ownership of the bank, its material share of the country's total banking system, which varies from 7% to 10% of corporate loans and deposits, as well as the bank's special mandate in servicing the socially important agriculture segment. "As a result, in accordance with Moody's Join Default Analysis (JDA) methodology for banks, Agrobank's deposit rating of Ba3 benefits from a two-notch uplift from its own B2 Baseline Credit Assessment," says Elena Redko, a Moscow-based Moody's Analyst.
Moody's notes that Agrobank's deposit ratings are strongly dependent upon the stance and condition of Uzbekistan's operating environment and the conditions prevailing in the country's agricultural sector.
According to Moody's, Agrobank's ratings could be upgraded if the bank's risk management and corporate governance standards significantly improve and if such improvement is accompanied by a material decrease in concentration levels as well as strengthening in profitability and efficiency metrics. The ratings may also be upgraded if the bank manages to diversify its business profile towards more granular retail and SME segments outside the agricultural sector.
"Significant deterioration in asset quality indicators -- leading to erosion of capital adequacy indicators coupled with loss of market share -- could lead to a downgrade of Agrobank's stand-alone ratings. The bank's Ba3 GLC deposit rating could be downgraded if any bank-specific or system-wide factors were to change Moody's current perception of (i) the probability of systemic support for the bank from the government of Uzbekistan and (ii) the state's financial flexibility to render such support," Ms Redko adds.
The principal methodologies used in rating Agrobank are Moody's "Bank Financial Strength Ratings: Global Methodology", published in February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
Headquartered in Tashkent, Uzbekistan, Agrobank reported total consolidated IFRS assets of UZS1.4 trillion (US$895 million) and net consolidated income of UZS12 billion (US$7.7 million) as at 31 December 2009.