TASHKENT, Uzbekistan, July 14. Fitch Ratings has affirmed Xalq Bank of Uzbekistan's Long-Term Issuer Default Ratings (IDRs) at 'BB-' with stable outlooks and its Viability Rating (VR) at 'ccc+', Trend reports.
According to the agency, Fitch's assessment of Xalq Bank's Long-Term IDRs reflects their perspective on the likelihood of support from the Uzbek government (BB-/Stable). This support is indicated by the bank's Government Support Rating (GSR) of 'bb-'.
Xalq Bank is highly likely to receive support from the Uzbek authorities due to several factors. These include its state ownership, role as the agent bank for subsidized social lending, and designation as a pension distributor.
Furthermore, the Uzbek authorities have a strong track record of providing support. The ability to offer assistance is supported by the banking sector's moderate size relative to the economy (with total assets amounting to 63 percent of GDP at the end of 2022) and the substantial international reserves (amounting to $36 billion at the end of 2022).
Xalq Bank's affirmed VR rating of 'ccc+' reflects weaknesses in the bank's business model and risk-management framework, which had a notable negative impact on its asset quality and resulted in net losses over the past two years.
However, the bank has taken steps to enhance its underwriting and risk frameworks, and its management is actively working to improve its financial position. Nevertheless, the bank's performance in the near future may be affected by its policy role as a social lending agent and the lingering effects of previous issues it faced.
