Moody’s: Uzbekistan’s Banking System Remains Stable

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May 15, 2014

Moody’s: Uzbekistan’s Banking System Remains Stable

Moody’s international rating agency published 15 April 2014 a report with forecasts on the development of the Uzbek banking system whereby the agency has confirmed the system’s progress as “stable” for the fifth year in a row.

According to Moody’s, the stable forecast is provided by the high rates of economic growth in Uzbekistan accompanied by considerable volumes of investments. The factors cited as positively influencing the forecast include the steadfast incomes of Uzbek banks that ensure the capital for funding the growth in loans.

The agency experts point out to the high rates of annual growth in Uzbekistan’s economy for as long as ten years, which have exhibited considerably lower volatility than that in other CIS nations, since Uzbekistan’s export configuration remains comparatively diversified.

Moody’s stresses the steady dynamics in the quality of assets of Uzbek banks, notably the encouraging trends in capital investments, affording every reason to suggest that the value of assets will remain at the stable level.

In 2013, the total sum of assets of Uzbekistan’s commercial banks grew by 30 percent, while for the last five years this indicator has multiplied 3.6 times.

Targeted measures geared to boost the capitalization of the banking system have helped secure a 3.5-times growth in the aggregate capital of banks within the last five years, and in the year 2013 alone the aggregate capital increased by 25.1 percent. In the meantime, the level of capital adequacy in the banking system is three times as high as the universal international standards.

In the view of the rating agency, those banks of Uzbekistan, who receive rating from Moody’s, ought to take measures to bolster the capital in order to secure the current factor of capital adequacy amid the growth in loaning during 2014-2015 by 20 percent.

The level of current liquidity of Uzbek banks constitutes one of the factors in the assessment of sustainability of the banking system, which for the last few years has exceeded 65 percent – twice as much as the fixed minimum.

It is noteworthy that the deposits of corporate bodies and those of private individuals as well as other funding sources will continue to uphold the liquidity of the banking system. Thus, the aggregate deposits in commercial banks have increased 4.1 times within the last five years, and in 2013 they grew by 30.2 percent.

Moody’s anticipates that the liquidity indicators and profitability of Uzbek banks will remain stable within the forecast period.

In general, the agency suggests that the nation’s high economic growth rates will ensure a favorable operational environment for the banks for the forecast interlude that encompasses 12-18 months.