Fitch upgrades ratings of 4 state-controlled Uzbek banks

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TASHKENT (TCA) — Fitch Ratings has upgraded the Long-Term Foreign-Currency Issuer Default Ratings (IDRs) of Uzbek Industrial and Construction Bank (Uzpromstroybank, UPSB), Asaka Bank, Agrobank, and Microcreditbank (MCB) to ‘B’ from ‘B-’ with Stable Outlooks, the Jahon information agency reported with reference to the ratings agency.  

The agency has also upgraded the Viability Ratings (VRs) of UPSB and Asaka to ‘b’ from ‘b-’, and of Agrobank to ‘b-’ from ‘ccc’, and affirmed MCB’s VR at ‘b-’.

The upgrades of the four banks’ Long-Term Foreign-Currency IDRs and upward revision of their Support Rating Floors (SRFs) to ‘B’, and the level of their Local-Currency IDRs, reflect Fitch’s revised view that the state’s propensity to provide support in foreign and local currencies would be broadly similar, Fitch said.

This view is based on:

1) the banks’ extended record of sufficient access to foreign currency to service their obligations;

2) the moderate potential cost of any future foreign-currency support – given only limited foreign-currency debt in the cases of Asaka, Agrobank and MCB, and state guarantees already covering a significant part of UPSB’s external funding;

3) the state’s ongoing solid ability to provide support in foreign currency, with sovereign foreign-currency reserves of around USD24bn at end-2015 equal to about 2x the banking sector’s total foreign-currency liabilities or 11x its external debt.

The four banks’ IDRs, Support Ratings and SRFs continue to be underpinned by potential support from the Uzbek authorities. In Fitch’s view, the authorities would have a high propensity to provide support, if needed, because of the state’s majority ownership; the banks’ systemic importance (to a lesser extent in the case of MCB); tight supervision of their activities; and their policy roles. However, the likelihood of support is constrained by weaknesses in the sovereign credit profile, which are in turn driven by the economy’s structural weaknesses – including the difficult business environment and vulnerability to external shocks, the agency said.

Sergey Kwan

TCA