BAKU, Azerbaijan, Oct. 11
By Fakhri Vakilov – Trend:
Uzbek banks’ ratings of remain low in the international context, but the forecasts for most of them are “Stable” or “Positive”, Trend reports citing a report from S&P Global Ratings.
“The forecasts for the ratings of Uzbek banks are Stable, despite fierce competition and a significant amount of problem loans,” the statement said.
S&P expects competition in the sector to remain significant in 2021-2022 and lending growth will slow.
According to S&P, Uzbek banks’ reported non-performing loans will remain high compared to previously very low levels, reflecting the impact of the COVID-19 pandemic and increasing maturity of loan portfolios.
“We expect that Uzbek banks will continue to rely mainly on domestic funding sources, including government funding, but the importance of external funding sources is starting to rise,” S&P reported.
The ongoing recovery in macroeconomic conditions and low consumer lending penetration in Uzbekistan will support loan demand over the next two years. Although nominal lending growth will decline sharply from an extremely high level, it will continue to be higher than in banking sectors in other CIS countries, averaging 20-25 percent over the next two years.
“In general, assessments of capitalization and profitability of Uzbek banks have a positive or neutral impact on the ratings. However, we expect a moderate decline in capitalization indicators in 2021-2022, as banks continue to grow and accumulate additional reserves,” S&P stated.
Funding profiles of Uzbek banks are largely stable due to growth in corporate and retail deposits and a recent increase in external funding.
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