S&P raises rating of Uzbek bank

Finance Materials 1 May 2019 11:58 (UTC +04:00)

Baku, Azerbaijan, May 1

By Fakhri Vakilov – Trend:

S&P Global Ratings has upgraded the long-term and short-term credit ratings of the issuer of the Uzbek JSCB Kapitalbank from CCC+/C to B-/B, the forecast of rating changes is Stable, Trend reports with reference to S&P.

S&P notes that as of March 1, 2019, the bank’s capital adequacy ratio was 13.7 percent (compared to 12.6 percent as of April 1, 2018), while the minimum level set by the regulator is currently 13 percent (compared with 12.5 percent in 2018).

However, despite the increase in regulatory capital stocks, S&P still generally evaluates the bank’s capital policy as aggressive, since the capital adequacy ratio only slightly (within 100 basis points) exceeds the minimum level set by the regulator.

In the next 18 months, this situation will not change due to the fact that Kapitalbank follows a business model characterized by a relatively low level of regulatory capital, said the company.

Moreover, the impact of these risks is partly offset by the likelihood of the bank receiving extraordinary state support if necessary.

S&P states that JSCB “Kapitalbank” is characterized by “moderate” importance for the banking system of Uzbekistan, since it occupies a leading position in the segment of retail currency deposits, serving about 2 million individual depositors.

As a result, S&P includes one additional step in the Kapitalbank rating regarding the evaluation of the characteristics of its own solvency (SACP- stand-alone credit profile), taking into account the probability of providing extraordinary state support to the bank.

The stable outlook on the ratings of JSCB Kapitalbank reflects S&P’s view that in the next 12 months the bank will continue to fulfill the requirements of the regulator for the minimum amount of capital and maintain a stable funding base, while maintaining moderate significance for the banking system of Uzbekistan.

S&P may take a negative rating action in case of significant pressure on the liquidity and funding of the bank, which will support the agency's opinion on the possible implementation of default scenarios in the next 12 months.

In addition, S&P may downgrade the rating if it concludes that it is less likely that the bank will receive extraordinary state support or the bank’s inability to comply with regulatory capital adequacy requirements in the next 12 months, which will be at risk of negative regulatory intervention.

The agency can take a positive rating action if the bank forms a sufficient capital base. In this case, S&P will assess the risk of the bank violating the regulator’s capital adequacy requirement as low.


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