Fitch Ratings has affirmed the long-term issuer default ratings (IDRs) of Uzbekistan's state-owned banks, Xalq Banki and MKBANK (Microcreditbank), at 'BB-' with a stable outlook.
Fitch Ratings has upgraded Xalq Banki’s viability rating (VR) from 'ccc+' to 'b-', reflecting improved capital metrics. This improvement is attributed to a planned capital injection from the government and a recovery in the bank's profitability. According to the Fitch report, Xalq Banki is set to receive a substantial capital infusion of UZS 3.9 trillion ($311mn), equivalent to 11% of its assets, in 2024. This capital injection is mandated by a presidential decree issued in April 2024.
Since 2019, Xalq Banki has received approximately UZS 7 trillion ($558mn) in capital, including UZS 315 bn ($25mn) in 2023 alone. These injections have bolstered the bank’s financial foundation, allowing it to navigate challenges and improve its profitability.
Xalq Banki became profitable in 2023, primarily due to a notable reduction in loan impairment charges. Experts anticipate that the bank will maintain its profitability trajectory in the near future. However, the bank's operating performance will continue to be influenced by asset quality risks and the need for related provisioning. Fitch's report highlights that while the bank has shown positive developments, it still faces challenges related to asset quality and the associated financial provisions required to mitigate these risks.
MKBANK’s viability rating remains steady at 'b-', indicating consistent performance and stability. The bank's financial health and operational integrity have been maintained, ensuring it remains a reliable financial institution within Uzbekistan's banking sector.
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