Fitch Ratings has assigned ANORBANK Long-Term Issuer Default Ratings (IDRs) of 'B-' with Stable Outlooks and a Viability Rating (VR) of 'b-'. This decision is influenced by ANORBANK's standalone creditworthiness, reflected by its 'b-' VR. The VR takes into account the bank's developing business model, limited operational history, resulting in a modest franchise, and a recent track record of losses over the past three years.
ANORBANK, a small player in Uzbekistan's banking sector, representing less than 1% of sector assets and loans, and below 2% of sector deposits as of end-3Q23, was established in 2020. Adopting a digital bank business model, ANORBANK primarily focuses on providing unsecured consumer lending online, with recent ventures into corporate and SME financing.
Despite its size, ANORBANK has exhibited notable loan book expansion, emphasizing granular and high-margin unsecured retail lending. However, this strategy comes with inherent risks, even though it results in lower loan concentrations and dollarization compared to other Fitch-rated banks in Uzbekistan.
Impaired loan ratios remained low at 2.5% of gross loans at end-2022, but the potential for growth exists due to the nature of the lending model. ANORBANK aims to turn profitable in 2023 as business volumes increase, with an expected improvement in operating profit to about 4% of regulatory risk-weighted assets in 2024.
The bank's capitalization poses concerns, with tight local GAAP capital ratios and Fitch Core Capital (FCC) ratio at 5% at end-2022. ANORBANK's capital buffers are expected to remain moderate despite profitability growth in 2023-2024, indicating potential sensitivity to loan production volumes.
Funding-wise, ANORBANK heavily relies on customer accounts (95% of total liabilities at end-3Q23), primarily term deposits from retail customers. While deposit concentration has slightly decreased, it remains high, with the 20 largest depositors constituting 30% of total liabilities. The bank's liquidity position is modest, covering only about 20% of customer accounts.
ANORBANK's ratings are sensitive to asset quality changes, deviations from performance expectations, and potential significant deposit outflows. An upgrade would necessitate a substantial improvement in the bank's business profile, sustained profitability, and enhanced capital ratios. Government support is considered limited due to ANORBANK's low market shares and systemic importance.
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