Moody’s reports a stable outlook for Uzbekistan’s banking sector in 2024, with problem loans rising to 7%. State support for large banks continues, and while the loan-to-deposit ratio reaches 173%, financing risks are mitigated. Strong national reserves bolster the sector amid geopolitical challenges, with projected real GDP growth of 5.7% through 2026.
According to Moody’s Rating Agency, Uzbekistan’s banking sector outlook remained stable in 2024, despite a rise in problem loans to 7% due to state-owned banks identifying problematic assets. This trend is expected to stabilize within the 6-7% range for the next 12-18 months as state support for large banks continues, maintaining overall financial stability.
The capital-to-risk-weighted assets ratio, excluding additional state capital, is anticipated to hover between 14-15%, slightly above the 14.3% reported at the end of 2023. The loan-to-deposit ratio for the sector is projected to reach 173% by the end of 2024, with state banks at 237% and private banks at 108%. Long-term liabilities dominate market financing, which helps reduce refinancing risks despite vulnerabilities associated with high foreign currency liabilities and deposits.
Moody’s highlighted the high probability of state support for major banks, despite ongoing privatization efforts. The government still controls critical financial institutions like Agrobank and Mikrokreditbank, essential to implementing economic policies. Since 2018, an approximately $1.8 billion capital injection has been provided to state-owned banks, leading to total sector assets reaching $59.5 billion, or 53% of GDP by the year’s end.
The five principal banks collectively command 54% of the market, with state-owned banks holding 65% of total assets. The creditworthiness ratings for 13 commercial banks, which represent 62% of the sector’s assets, range from b1 to baa1, presenting a weighted average rating of b2. Uzbekistan’s banking system benefits from robust national reserves amounting to 37% of GDP, while total loans also equal 37% of GDP, highlighting the government’s economic and financial stability capabilities.
Despite facing geopolitical risks, particularly the Russia-Ukraine conflict, Uzbekistan’s economy shows resilience. Projected real GDP growth is estimated at 5.7% for 2025-2026, promoting borrower solvency and enhancing the overall health of the financial sector.
In summary, Uzbekistan’s banking landscape is navigating a slight rise in problem loans alongside stable state support, bolstered by significant capital injections. With a solid capital-to-risk ratio and robust national reserves, the outlook for the banking sector remains cautious yet optimistic. The anticipated GDP growth further supports long-term economic resilience.
Original Source: daryo.uz
