S&P affirms credit ratings on Uzbekistan's Halk Bank
Baku, Azerbaijan, Nov. 23
By Aygun Badalova - Trend
Standard & Poor's Ratings Services affirmed its 'B+/B' long- and short-term counterparty credit ratings on Uzbekistan-based Halk Bank.
S&P removed the long-term rating from CreditWatch with negative implications, where S&P placed it on Aug. 21, 2015. The outlook is negative.
The report of S&P said that the rating actions follow the strengthening of Halk Bank's capitalization, with a regulatory capital ratio at 12.9 percent as of Nov. 1, 2015 - well above the current regulatory minimum of 10 percent.
This improvement is on the back a Uzbek sum (UZS) 39 billion capital injection from the Central Bank of Uzbekistan and the Ministry of Finance as part of the government's plan to inject the bank with a total of UZS185 million over 2015-2017, the report said.
S&P factored this short-term government support into the rating under our previous review, and has revised its assessment of Halk Bank's stand-alone credit profile (SACP) to 'b+' from 'b-' to reflect the bank's now strengthened capital position.
The recapitalization program was approved by presidential decree on March 25, 2015, and will be completed by the end of 2017; the bank is scheduled to receive another UZS23 billion by end-2015, UZS54 billion by mid-2016, and UZS69 billion over 2017, according to the report.
Under S&P's base case, it expects that these capital increases will sufficiently support Halk Bank's capitalization over 2015-2017, sustaining the regulatory capital ratios above the minimum set by the central bank.
S&P takes into account the expected gradual increase of the minimum regulatory capital ratio to 11.5 percent in 2016, incrementally increasing annually by 1 percent until it reaches 14.5 percent by the end of 2019.
At our 'B+' rating level, S&P expects a bank to operate with capital levels sustainably and substantially above the regulatory minimum. Today's rating action incorporates belief of S&P that Halk Bank will gradually shift to a less aggressive capital management approach.