BAKU, Azerbaijan, Feb. 25
By Klavdiya Romakayeva - Trend:
Uzbekistan’s state banks made up 85 percent of sector assets at end of 2020, Trend reports referring to the report on the challenges facing Uzbek banks in the current operating environment published by Fitch Ratings Agency.
According to Fitch, these banks should significantly transform their business models with assistance from international financial institutions (IFIs), that may become minority shareholders prior to sales of controlling stakes, aiming to improve profitability, corporate governance and investor attractiveness.
“If the seven banks are successfully privatized according to the plan of Uzbek government, the state banks' share of sector assets would decrease to 35 percent,” Fitch stressed.
“In recent years, banks have been actively increasing long-term financing. Most of the new corporate loans have been issued with grace periods for investment purposes and have not yet been repaid, which, together with the repayment holidays granted to some borrowers in 2020, means that the quality of assets is largely unverified,” the message says.
Fitch noted that impairment risks are also associated with the high dollarization of loans to the sector by 50 percent at the end of 2020.
Fitch experts say that the repayment of external borrowings will be manageable for most banks in 2021-2022, since the maturities are tied to the schedules of the financed loans, which are still in grace periods.
In mid-October, Fitch Ratings maintained Uzbekistan's long-term credit ratings at 'BB-'. Analysts had expected Uzbekistan to be one of the few countries to avoid a downturn in 2020.
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