The Chairman of the Central Bank of Uzbekistan, Mamarizo Nurmuratov, has clarified the delay in the privatization of state-owned banks, media reports. According to Nurmuratov, the process has encountered obstacles in the wake of last year's geopolitical crisis, which has made it challenging for foreign investors to penetrate the markets of post-Soviet countries.
Mamarizo Nurmuratov emphasized the importance of preparing banks for transformation and stated that the sooner this process is accelerated, the sooner the banks can be prepared for sale. Besides, he noted that privatization could take longer than a year and is affected by international financial tensions rather than the willingness of Uzbek banks to privatize.
In March, President Shavkat Mirziyoyev approved a new privatization program to sell state assets worth UZS 13 trillion (nearly $1.1bn) by the end of the year, including eight banks through public tenders.
Additionally, the population can buy up to 2% of shares from the National Bank of Uzbekistan or Uzbek Industrial and Construction Bank.
In May, Uzbek Industrial and Construction Bank opened a tender to provide advisory services on the state share sale. The bank aims to implement a majority stake to private investors by the end of the year, at least 50% plus one share.
In June, Hungarian OTP Bank acquired almost 75% of the state stake in "Mortgage-bank" for $324mn, becoming the first foreign bank to participate in the privatization of Uzbekistan's banking sector.
Earlier, Daryo reported that Fitch revealed that the Long-Term Issuer Default Ratings (IDRs) of Uzbekistan's state-owned banks have traditionally relied on support from the country's authorities (BB-/Stable). Due to their majority state ownership, low cost of potential support relative to sovereign reserves, and risks associated with the state, Fitch's state-owned Uzbek bank IDRs reflect the sovereign's ratings.
When analyzing ratings, Fitch considers the state capital's history and funding support. Fitch-rated banks have received over $3.3bn in Tier 1 capital injections since 2018, approximately 4% of Uzbekistan's 2022 GDP. The government's capital contributions have been uneven since 2020, with policy banks such as Joint-Stock Commercial Bank Agrobank, Joint Stock Commercial Xalq Bank, and Microcreditbank receiving more support as they will remain under state ownership. JSC National Bank for Foreign Economic Activity is also a policy bank but has not required capital injections in the past three years.
Banks targeted for privatization received capital injections only when their capital ratios neared regulatory minimum levels, with policy banks receiving faster and pre-emptive support. Fitch predicts that privatization may take longer than anticipated by authorities, and the government is likely to continue supporting state-owned banks.
Policy banks received an average of 2% of their risk-weighted assets in capital support between 2020 and 2022, significantly higher than banks marked for privatization, which received 0.6%. As a result, policy banks maintained higher capital ratios, enhancing their loss-absorption capacity. However, Fitch believes that the government's support for some banks is limited relative to their capital needs, affecting smaller banks with higher-risk business models and leading to downgrades in Viability Ratings for weaker state-owned banks.
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