S&P rates Uzbekistan-based Turon Bank 'B-/C'; outlook stable

Uzbekistan Materials 1 September 2012 09:28 (UTC +04:00)
Standard & Poor's Ratings Services assigned its 'B-' long-term and 'C' short-term counterparty credit ratings to Uzbekistan-based Turon Bank
S&P rates Uzbekistan-based Turon Bank 'B-/C'; outlook stable

Uzbekistan, Tashkent, Aug. 31 / Trend D.Azizov /

Standard & Poor's Ratings Services assigned its 'B-' long-term and 'C' short-term counterparty credit ratings to Uzbekistan-based Turon Bank. The outlook is stable, the agency said.

"The ratings on Turon Bank reflect its 'b+' anchor, as well as our view of the bank's "moderate" business position, "weak" capital and earnings, "moderate" risk position, "average" funding, and "adequate" liquidity," the statement said.

S & P analysts define business position of Turon Bank as moderate, given, on the one hand, the strong position of the bank in the service of power and water enterprises, on the other - the weak diversification of its products and services and customer base.

The bank has about two percent of the total assets of the banking system of Uzbekistan (514 billion soums as of August 1, 2012).

The agency estimates the capitalization and profitability performances of Turon Bank as weak - the capital adequacy ratio stood as of early August at 10.3 percent and exceeded the minimum required for a banking license by only 30 basis points.

By August 2012 the share of problem assets (loans overdue by more than 90 days) decreased to 5.5 percent from 22.1 percent at the end of 2011. In this case, reserves for possible losses on loans at the end of 2011 covered only 16 percent of the loans.

Turon Bank resource base is not enough diversified - in mid-2012, the 20 largest depositors accounted for 46 percent of the attracted deposits, but at the same time it's more stable in comparison with other private Uzbek banks - cash and short term deposits in other banks accounted for 25 per cent of assets of the bank, which is considered satisfactory level.

Turon Bank shareholders are more than two thousand legal entities owning 93.83 percent of its capital, and more than six thousand individuals who own the rest.

The government indirectly controls 20 percent of the bank's capital.

The stable outlook reflects expectation that the bank will improve its capital position via external capital injections to comply with regulatory requirements with a margin of at least 100 basis points.

The ratings could be upgraded if Turon Bank significantly improves capital ratios, significantly increases the diversification of its lending operations and improves asset quality.

At the same time, the ratings could be lowered if the Turon Bank does not meet the statutory requirements for minimum capital adequacy of its capital base gets worse. Any deterioration of liquidity or a further decline in asset quality could also be a reason for the downgrade.

Turon Bank was established in October 1990, and it is among the medium-sized banks in Uzbekistan. The founder of the bank is the Ministry of Agriculture and Water Resources of Uzbekistan and its affiliated companies.

Uzbek banking system is currently represented by 30 banks, including three state, five - with the participation of foreign capital, 12 0 joint-stock , and 10 - private.

The official exchange rate is 1921.74 soums to $ 1 for August 31.