Uzbekistan’s Banking Sector Outlook Remains Stable Despite Rise in Problem Loans
In 2024, Uzbekistan’s banking sector faces a rise in problem loans to 7%, yet Moody’s indicates a stable outlook due to ongoing government support. The capital adequacy ratio is projected to remain between 14-15%, with asset growth reflecting significant government backing. Economic resilience is underscored by projected GDP growth sales, with the financial stability likely to be upheld despite geopolitical tensions.
According to a recent analysis by Moody’s Rating Agency, Uzbekistan’s banking sector outlook remained stable in 2024 despite an increase in problem loans. The percentage of problem loans rose to 7% as state-owned banks recognized a higher proportion of problem assets. It is anticipated that this figure will stay within a range of 6-7% over the next 12-18 months, influenced by continued government support for large banks.
In terms of capital adequacy, the capital-to-risk-weighted assets ratio, excluding any additional state capital, is projected to remain steady between 14-15%, slightly down from 14.3% at the end of 2023. By the conclusion of 2024, the loan-to-deposit ratio across Uzbekistan’s banking sector is expected to reach 173%, with state-owned banks significantly higher at 237% and private banks at 108%. Long-term liabilities dominate market financing, leading to reduced refinancing risks, although foreign currency liabilities expose the sector to potential exchange rate shocks.
Moody’s has indicated that the possibility of state support for major banks remains very high, even amid the ongoing privatization efforts. Key financial institutions, like Agrobank and Mikrokreditbank, are still under government control, playing vital roles in the implementation of economic policy. Since 2018, state-owned banks have benefited from an injection of approximately $1.8 billion in capital. By 2024, the total assets in Uzbekistan’s banking sector are projected to reach $59.5 billion, equating to 53% of the nation’s GDP.
The banking market is notably consolidated, with the five largest banks controlling 54% of the market share and state-owned banks holding 65% of the total assets. Credit ratings for 13 commercial banks, which represent 62% of the sector’s assets, range from b1 to baa1, leading to a weighted average rating of b2. Strong national reserves, accounting for 37% of GDP, support the stability of Uzbekistan’s banking system, while total loans also represent 37% of GDP, demonstrating government capability to sustain financial stability.
Despite facing geopolitical challenges, such as the ongoing Russia-Ukraine conflict, Uzbekistan’s economy shows resilience. As reported by Bankers.uz, relying on Moody’s projections, real GDP growth is anticipated to maintain a rate of 5.7% in 2025-2026, which is expected to positively influence borrower solvency and enhance the health of the financial sector.
In summary, Moody’s analysis indicates that although Uzbekistan’s banking sector faces an increase in problem loans, the stability of the outlook is supported by government interventions and capital injections. The banking sector maintains a healthy capital ratio and is largely protected against refinancing risks. With significant national reserves and a projected steady GDP growth, the overall financial stability of Uzbekistan appears promising despite external challenges.
Original Source: daryo.uz
