Five of the 17 leading players failed to maintain their positions in 2Q24, while only three banks improved, with nine banks remaining unchanged, indicating heightened sector competition, the Center for Economic Research and Reforms (CERR) reported .
CERR analyzed Uzbekistan's banking sector in 2Q24, noting increased public engagement with banking services. Loans to individuals in banks' portfolios grew moderately, while deposits saw a rise. This trend suggests improved financial health among citizens and increased trust in the banking system.
Previously, banks moved more actively in the ranking, but now there is a stabilization of the balance of power, reflecting the increasing stability of the largest market participants.
The top five banks—Kapitalbank, Trast Bank, Asia Alliance Bank, Hamkor Bank, and Ipak Yuli Bank—held their positions. Orient Finance Bank and Ipoteka Bank moved up to 6th and 9th places, respectively.
The state-owned Business Development Bank (BDB) advanced by four positions to 11th place, leading among large banks. It improved financial intermediation, accessibility, asset quality, management efficiency, and profitability, but slightly fell in capital adequacy and liquidity.
In contrast, Investfinance Bank, Aloqa Bank, Agrobank, and Uzsanoatqurilish Bank each dropped one position. Mikrokredit Bank faces significant challenges, including a high 6.7% rate of problem loans, low liquidity, and a liquidity coverage ratio below Basel Committee standards. Aloqa Bank's ranking fell due to declines in capital adequacy, management efficiency, and liquidity, posing risks to its obligations. Agrobank also saw decreases in financial intermediation and liquidity, raising concerns about its financial stability.
In 2Q24, among Uzbekistan's small banks, the top five are Universal Bank and Davr Bank leading again, followed by Anor Bank moving up to third place. Okto Bank gained two positions to rank fourth, while TBC Bank dropped two places to round out the top five. Among the 14 small banks, six improved their ratings, with AVO Bank showing the most growth, up by three points. However, six other banks saw their ratings decline.
CERR releases quarterly "Bank Activity Index," monitoring Uzbekistan's banking sector through analysis of 27 financial ratios across 31 commercial banks (17 large and 14 small). It aims to track private sector share in banking assets and evaluate banking sector reforms.
The latest data shows positive growth in Uzbekistan's banking sector. As of June 1, 2024, total bank assets rose by 20% compared to the previous year, reaching UZS 686.2 trillion ($54.6bn), with liabilities at UZS 583.4 trillion ($46.4bn).
State-owned banks hold 67.3% of assets, 70.1% of loans, and 50.6% of deposits, while private banks manage the remainder. Analysis reveals that state banks have a lower "deposits/loans" ratio (38 sums per 100) compared to private banks (87 sums, down from 101 last year), indicating differing lending and deposit strategies.
In Q2, loan growth slowed to 17% from 22% last year, and there was a gradual decrease in foreign currency loans (from 46% to 44%) and deposits (from 33% to 29%), suggesting cautious credit policies. The rise in individual loans (32.4% from 28.6%) and deposits (36.3% from 33.5%) reflects increased public banking activity, possibly due to improved financial conditions and confidence in the banking system, expanding access to banking services.
There has been a decline in profitability within Uzbekistan's banking sector, alongside stable liquidity conditions. Banks have implemented measures to maintain system stability. Profitability metrics saw a sharp decrease: interest-free income fell by 24.1%, and net profits dropped by 13.3%, contrasting with a 40.5% growth last year. Key indicators like ROA decreased from 2.6% to 2%, and ROE from 14.1% to 10.1%.
Highly liquid assets totaled nearly UZS 101 trillion ($8bn), maintaining a consistent share of total assets compared to the previous year. This liquidity level supports stability amid challenging conditions. The analysis noted an increase in problem loans, with non-performing loans (NPL) rising from 3.5% to 4.3%, impacting banks' financial health. State-owned banks, notably BDB with 13.5% NPL, Mikrokredit Bank at 6.7%, and Xalq Bank with 6.1%, show higher NPL levels compared to the private sector's average of 3.1%.
Capital adequacy ratios remain strong, exceeding minimum requirements by more than 1.3 times. For instance, regulatory capital adequacy was 17.1%, and Tier 1 capital adequacy was 14.3%. This robust capitalization is critical, providing banks with reserves to absorb losses and maintain financial stability amid rising problem loans.
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