Baku, Azerbaijan, Nov. 12
By Aygun Badalova - Trend
The creditworthiness of state-owned Uzbek banks remains stable, reflecting limited impact on Uzbekistan's operating environment from the oil price shock/slowdown in major CIS trading partners, Fitch Ratings says in a report on November 12.
The reported loan quality metrics of Uzpromstroybank (UzPSB), Asaka Bank (Asaka) and OJSC Agrobank (Agrobank) have been stable with non-performing at below 3 percent (fully covered by reserves) at end-2014, while Microcreditbank's (MCB) rose to 14 percent at end-2014 from 4 percent at end-2013 due to financial difficulties in a number of agricultural companies, according to Fitch.
The agency said that foreign currency lending is significant at about 60 percent on average in reviewed banks, reflecting high deposit dollarisation.
"This poses asset quality risks in case of sharp foreign exchange movements; Uzbekistan has not devalued the currency recently, unlike some other CIS countries," Fitch said.
Reported profitability is moderate at Asaka (ROAE at 12.2 percent in 2014), modest at UzPSB (6.4 percent), weak at Agrobank (1.7 percent) and MCB (0.2 percent), reflecting the significant share of state-directed operations and rather weak operating efficiency, according to the agency.
UzPSB and Asaka benefit from lower funding costs due to mostly government funding, stronger asset quality/lower impairment charges and greater efficiencies of scale compared with the smaller Agrobank and MCB, Fitch said.
Capitalisation, according to Fitch, is strong at UzPSB (FCC/ risk-weighted assets ratio of 19.1 percent at end-2014), moderate at Asaka (16.2 percent), satisfactory at MCB (12.9 percent), and weak at Agrobank (3 percent).
Liquidity is comfortable due to solid buffers (liquid assets of over 15 percent at UzPSB, Asaka and Agrobank and a somewhat tighter 9.2 percent at MCB at end-1H15), as well as potential state support, according to Fitch. UzPSB is the only bank with meaningful borrowings from international financial institutions (17 percent of total liabilities), although near-term repayments are small (around 1 percent of total liabilities in 2H15-2016).
Foreign currency liquidity was moderate at end-1H15. In Fitch's view, extraordinary support in foreign currency may be less available given conversion limitations and a rigidly managed foreign-currency exchange rate in Uzbekistan. Due to this reason the banks' foreign currency Issuer Default Ratings (IDRs) are one notch lower than their local currency IDRs.