The assets of commercial banks in Uzbekistan have surged to UZS 652.16 trillion ($52.9bn) as of January 1, 2024, marking a 12% increase compared to figures from 2022, as per the data released by the Central Bank of Uzbekistan.
The data further indicates a growth trajectory across various aspects of the banking sector. Credit investments by commercial banks have risen to UZS 471.41 trillion ($38.3bn), reflecting a 16% increase compared to the previous year. Similarly, deposits have shown a healthy uptick, reaching UZS 241.69 trillion ($19.6bn), marking a 9% increase over the same period.
Foreign currency assets have also witnessed growth, with bank holdings in foreign currency surpassing UZS 291.79 trillion ($23.7bn) by the end of 2023. Loans denominated in foreign currency amounted to UZS 212.36 trillion ($17.2bn), indicating a considerable presence of international financial transactions within the Uzbek banking landscape.
Moreover, the total capital of commercial banks has reached UZS 97.08 trillion ($7.9bn) as of January 1, 2024, showcasing a 22% growth compared to the figures reported in 2022. At the end of the third quarter of 2023, the banking industry in Uzbekistan experienced an increase in net earnings, rising by 12.6% to UZS 8 trillion ($646.4mn). This expansion has been driven by several major participants in the sector, with the Joint-stock company "National Bank for Foreign Economic Activity of the Republic of Uzbekistan" (NBU), ATB "Kapitalbank," and ATB Hamkorbank taking the forefront.
In neighboring Kazakhstan, the banking sector has also experienced notable developments. With assets reaching KZT 51.4 trillion ($114bn) at the beginning of the new year, representing an increase of KZT 2.3 trillion ($5.1bn) from the previous month, the sector demonstrates resilience and growth. Key players such as Halyk Bank, Kaspi, BCC, Forte, and RBK have spearheaded this expansion, showcasing significant increases in assets.
Loan issuance has seen a moderate increase, reaching KZT 29.6 trillion ($66bn), with most banks achieving record highs in lending volumes. Despite this positive trend, Bereke stands out for a decline in its loan book. However, the overall quality of loan portfolios has improved, with a decrease in problem loans contributing to a healthier financial environment.
Additionally, deposits from both individuals and legal entities have seen growth, with investments totaling KZT 20.4 trillion ($45.5bn) and KZT 14.7 trillion ($32bn), respectively. The banking sector in Kazakhstan recorded a profit of KZT 2.2 trillion ($4.9bn) over the past year, with prominent institutions such as Halyk Bank, Kaspi, Otbasy, Jusan, and BCC leading the earnings chart.
Meanwhile, in Kyrgyzstan, the banking sector continues its upward trajectory, with total assets surging by 27.7% to KGS 615.7bn ($6.8bn) and the loan portfolio expanding by 26.3% to KGS 257.8bn ($2.8mn). Year-to-date, the banking system garnered a net profit of KGS 24.237bn ($272mn). Despite a slight increase in overdue loans, the sector maintains stability and growth, with significant contributions to the country's economy evident through healthy financial intermediation indicators.
With such performance across Central Asian banking sectors, the region demonstrates resilience and potential for further growth and development in the financial domain, contributing to broader economic stability and prosperity.
Experts from the Institute of Macroeconomic and Regional Studies have analyzed the level of competition within Uzbekistan's banking system for the fourth quarter of 2023. Utilizing the Herfindahl-Hirschman index (HHI), a widely recognized measure of market concentration, the analysis revealed an HHI value of 892 for assets, indicating increased competition within the sector compared to the previous year.
This decrease in the HHI value suggests a more competitive market environment. Concurrently, the total assets of commercial banks experienced a significant 17% increase, reaching UZS 652 trillion ($52.9bn) by the end of 2023. This growth was attributed in part to the establishment of new banks such as Hayot Bank, Apex Bank, Yangi Bank, and Smart Bank, whose collective share in the banking system's total assets reached 0.22% as of January 1, 2024. Furthermore, the acquisition of 75% of Ipoteka Bank's shares by Hungary's OTP Bank in June 2023 contributed to a rise in the share of private and foreign banks in the total assets, reaching 32%, a 10-percentage point increase compared to 2022.
Regarding loans, the HHI index improved to 985 units, indicating enhanced competition in this segment as well. The total balance of commercial bank loans increased by almost 1.2 times compared to the previous year, reaching UZS 471.4 trillion ($38.3bn) by January 1, 2024. However, during this period, there was a notable increase in the weighted average nominal interest rate on loans in the national currency, rising from 22.3% to 24%, resulting in a significant rise in the real interest rate on loans.
In the realm of deposits, the HHI index rose from 761 to 672 units, suggesting an increase in competition in attracting deposits. Despite this, the volume of total deposits surged, indicating sustained confidence in the banking system. The share of deposits held by private banks increased from 37% to 49% during the period, while the share of the three largest state-owned banks decreased from 31% to 25%.
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