Fitch affirms ratings of two Uzbek banks

Uzbekistan, Tashkent, Feb. 29 / Trend D.Azizov /

Fitch Ratings has affirmed the long term issuer default rating (IDR) of the private joint stock commercial bank Hamkorbank (Uzbekistan) on the level of B-.

The long term foreign currency IDR has been affirmed at B-, short term foreign currency IDR - at a level B, individual rating - at the level of D/E, support rating 5 and IDR Support Rating - no level of support.

All ratings have been confirmed with a forecast of stable, the Fitch report said on Wednesday. These ratings were first assigned to the bank in late 2007 and confirmed in February 2011.

Simultaneously Fitch has withdrawn the ratings of Hamkorbank because it opted out of the rating process.

The agency also affirmed the similar ratings with an outlook of stable to private joint stock exchange bank Trust Bank in Uzbekistan. Ratings were first assigned in February 2011.

Confirmation of banks' IDR at B- reflects the weaknesses in the operating environment in Uzbekistan, the limited scale of operations and client base of the banks as well as the high rates of growth of lending, Fitch reported.

Agency analysts noted that the ability of these banks to service foreign currency obligations and in particular off-balance sheet related to international trade transactions, may be weakened because of exchange control in Uzbekistan.

The ratings of Trustbank also reflect its significant dependence on the funding provided by the Uzbek Republican Commodity Exchange (UZEX) and other related parties, representing 51 per cent of debt financing at the beginning of July 2011.

According to Fitch, the exposure of Hamkorbank to foreign currency liquidity risk is now higher due to the more active participation of the bank in trade finance operations.

At the same time, banks' IDRs reflect their acceptable financial results in terms of capitalisation, liquidity in domestic currency and asset quality reporting.

The profitability throughout the economic cycle has also been good and was maintained by high lending margins and fee income on money transfers and trade finance. Funding comes primarily from deposits of local customers.

Open joint-stock commercial private Hamkorbank with assets of more than 400 billion soums, was founded in 1991. The bank's head office is located in Andijan (the centre of the homonymous province). It has a representative office in Tashkent as well as 26 branches and 145 mini-banks.

The main line of the bank's business is lending to small and medium-sized enterprises and individual entrepreneurs. It actively cooperates with international financial organisations such as the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), which provide the bank with financing and technical assistance.

As previously reported, in June 2010, the International Finance Corporation (IFC) acquired a 15 per cent stake in the bank.

Trust Bank, whose main activity is financial service of companies in the stock market and wholesale trade, was established in 1994. In 2006, the bank was converted into a private bank.

In 2010, the bank's assets, calculated according to national accounting standards, grew by 46.7 per cent, compared with 2009 up to 392.4 billion soums, the credit portfolio by 1.8 times to 80.7 billion soums and own capital by 46.7 per cent to 40.85 billion soums. Data for 2011 has been made public yet.

The structure of the bank includes six branches, 16 mini-banks, 22 remittance points, 14 currency exchange office and 15 savings banks. Correspondent relationships have been established with 15 banks, including 10 overseas.

The official exchange rate is 1827,89 soums /$1 on Feb. 29.

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