Tashkent, Uzbekistan, Dec. 26
By Demir Azizov- Trend:
Standard & Poor's Ratings Services affirmed its 'CCC/C' long- and short-term counterparty credit ratings on Uzbekistan-based Ravnaq-bank. At the same time, the agency revised the outlook on Ravnaq-bank to stable from positive.
Ravnaq-bank did not obtain the foreign currency license or permission to open a new branch in Tashkent, the capital city of Uzbekistan, in 2014. The stable outlook on Ravnaq-bank incorporates our view that gaining a foreign currency license is uncertain, although not impossible, and without this license, any improvement of the business financial profile will be challenging.
The agency said that the outlook revision largely reflects our opinion that Ravnaq-bank may face additional difficulties in achieving these targets, and we consider these plans to be crucial for further development of the bank's business position.
"Our 'CCC' long-term ratings on Ravnaq-bank continue to reflect the bank's vulnerability to operating conditions in Uzbekistan," the agency said. "In the absence of regulatory approval, Ravnaq-bank managed to expand its franchise only marginally in 2014, with assets shrinking on the back of a large, albeit planned, withdrawal by one of the depositors and subdued earnings."
"We note that Ravnaq-bank plans to attract a third-party investor, but we believe them to be contingent to the regulatory approval for a foreign currency license," the statement says.
If the bank's inability to resolve the regulatory issues prolong beyond 2015, in our opinion, shareholders may feel less inclined to support the bank. This is likely to complicate compliance with the growth requirements set by the Uzbekistani authorities, increasing already high regulatory risks for the entity.
"We might consider raising the rating if the bank obtained a foreign currency license, boosting its ties with clientele," the statement said. "If so, we expect the bank will diversify its funding profile and expand its business volumes and earnings. We also assume that business expansion would not further erode the bank's adequate capitalization."
"We might consider a negative rating action if we see that the shareholders' propensity to support the bank declined, resulting in a deterioration of the bank's business profile," the statement said. "An additional source of pressure on the bank's creditworthiness could come from a decline in liquidity or solvency, with the bank's risk-adjusted capital ratio falling below 7%."
Ravnaq-bank was founded in Tashkent in 2001. It is among small private banks in the country. The bank has nine branches in Tashkent.
As of late 2013, its assets amounted to 65.345 billion soums, including loan portfolio - 28.085 billion soums, own capital - 15.880 billion soums, the bank said.
There are 27 commercial banks, including three - state banks, four - with foreign capital, 11 - joint stock, nine - private in Uzbekistan.
The total assets of commercial banks of Uzbekistan increased by 30.3 percent - up to 43.9 trillion soums, the total loan portfolio - by 29.9 percent to 26.5 trillion soums in 2013.
The total equity capital increased by 4.8 percent - up to 6.5 trillion soums during the year.
The official exchange rate is 2418,20 soums/$ 1 on Dec. 26.