Tashkent, Uzbekistan, Feb. 21
By Demir Azizov - Trend:
The international 'Fitch Ratings' agency has approved the long term ratings of three private Uzbek banks, according to a message from the agency.
Fitch affirmed Universalbank's long term local currency issuer default rating (IDR) as being 'CCC' and KDB Bank Uzbekistan (KDBUz) and POJSEB Trustbank's long term foreign currency IDRs at 'B-'.
"At the same time, the agency has withdrawn KDBUz's ratings as the bank has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for KDBUz," the agency said.
Fitch affirmed Universalbank's short term local currency IDR at 'C', viability rating at 'ccc', support rating at '5'and support rating floor at 'No Floor'.
Initially these ratings were assigned to Universalbank in June 2011 and affirmed by the bank in 2012 and 2013.
The short term foreign and local currency IDRs assigned for Trustbank at 'B', viability rating at 'b-' and support rating at '5', were also affirmed.
Fitch affirmed and also withdrew KDBUz's short term foreign currency IDR at 'B', short term and long term local currency IDR at 'B', viability rating at 'b', support rating at '5'.
These ratings were assigned to the bank in November, 2012.
All ratings have Outlook Stable.
"The affirmations reflect Fitch's assessment of persistent weaknesses in the Uzbekistan operating environment and in particular high transfer and convertibility risks presented in the economy due to the country's tightly regulated FX market, and the banks' generally limited franchises," Fitch said.
Trustbank's and Universalbank's long term IDRs are driven by their intrinsic creditworthiness as reflected in their viability ratings, according to the agency.
Trustbank's and Universalbank's support rating floors of 'No Floor' and their support ratings at '5' reflect their relatively limited scale of operations rendering extraordinary support from Uzbek authorities unlikely.
Trustbank's ratings are pressured by a risky operating environment, as well as high reliance on cheap funding from its related party, the Uzbek Commodities Exchange (UCE) and its affiliates which accounted for about half of the bank's total liabilities in late November, 2013.
"On the same date, Trustbank's liquid assets (net of potential debt repayments) covered 33 percent of its customer accounts, mitigating withdrawal risk to an extent," Fitch said. "Trustbank's ratings also account for its rapid loan growth by 1.8x in 2013 which means current solid reported asset quality (zero reported NPLs) may deteriorate somewhat as the loans season."
Trustbank's profitability metrics have historically been strong with a return on average assets (ROAA) and return on average equity (ROAE) for 2013 of 3.4 percent and 29.2 percent, respectively. Capitalisation is healthy (regulatory capital adequacy ratio (CAR) was 17.7 percent at end-2013), allowing the bank to reserve up to 21 percent of its gross loans without breaching the regulatory minimum of 10 percent.
"Universalbank's ratings are mainly constrained by its small franchise (total assets of only $32 million at end-2013) resulting in high concentrations on both sides of the balance sheet and low operating efficiency (cost/income ratio of 77 percent for 2013)," Fitch said.
The ratings also account for the bank's potential asset quality relapses, as the Universalbank reported 22 percent impaired loans in its 2012 International Financial Reporting Standards financial statements (IFRS FS).
"Positively, Universalbank's credit profile benefits from the bank's current sufficient liquidity covering 32 percent of the bank's customer accounts at the end of 2013 and high regulatory CAR of 31.3 percent at the same time which is sufficient to reserve up to 50 percent of gross loans," Fitch said.
The official exchange rate for February 21 is 2222.73 soums/$1.
Translated by E.A.
Edited by S.M.