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AKIPRESS.COM - Fitch Ratings has affirmed the Long-Term Foreign Currency Issuer Default Ratings (IDRs) of Uzbek Industrial and Construction Bank Joint-Stock Commercial Bank (Uzpromstroybank; UPSB), Asaka Bank (Asaka), OJSC Agrobank and Microcreditbank's (MCB) at 'B+'. The outlooks are stable, Fitch said.
The affirmation of the Long-Term Foreign Currency IDRs and Support Rating Floors (SRFs) of all four banks at 'B+' reflects Fitch's view of a high propensity of the Uzbek authorities to support the banks, in case of need.
This view of support is based on (i) the state's majority ownership; (ii) the banks' policy roles (to a lesser extent for MCB) and (iii) the track record of capital support, including from Fund for Reconstruction and Development and Ministry of Finance, which administered recapitalisation programmes of USD500 million and UZS1.2 trillion, respectively, for state banks (including the reviewed ones) in 2017. These injections are made in steps, with some amounts already disbursed and the rest by end-2017.
In Fitch's view, the state's ability to provide support is currently solid, considering the moderate size of the banking sector relative to the Uzbek economy (loans/GDP ratio of around 37% at end-2016) and reasonably large foreign-currency reserves. However, it should also be viewed in the context of the banking sector being concentrated and support-dependent and the economy's structural weaknesses, as Uzbek exports are commodities-driven and concentrated on a few countries, and external finances are heavily supported by remittances.
The previous government's plan to attract new foreign investors to all four banks through minority stake sale was abandoned in late 2016. Fitch therefore believes that the state is likely to retain majority stakes and operational control in the banks, and its propensity to support them should therefore remain strong.