Moody’s reports a stable outlook for Uzbekistan’s banking sector in 2024, despite a rise in problem loans to 7%. State support for large banks is anticipated to ensure financial stability, with projections indicating that the loan-to-deposit ratio will remain manageable and GDP growth steady at 5.7%.
According to Moody’s Rating Agency, the outlook for Uzbekistan’s banking sector remains stable in 2024, despite an increase in problem loans that have risen to 7%. This rise is predominantly linked to state-owned banks identifying problem assets. However, the proportion of these loans is expected to remain stable within the 6-7% range for the following 12 to 18 months. Continued state support for large banks is anticipated to sustain financial stability.
The capital-to-risk-weighted assets ratio, excluding additional state capital, is projected to maintain levels between 14% and 15%, slightly down from 14.3% at the close of 2023. By year-end 2024, the loan-to-deposit ratio across the banking sector reached 173%, with state banks at 237% and private banks at 108%. Long-term liabilities dominate market financing, mitigating refinancing risks. Nonetheless, extensive foreign currency liabilities present potential vulnerabilities to exchange rate shifts.
Moody’s assessment indicates a very high probability of continued state support for large financial institutions. The government maintains oversight over essential banks such as Agrobank and Mikrokreditbank, which are integral to executing economic policy amidst ongoing privatization initiatives. Since 2018, state-owned banks have received approximately $1.8 billion in capital injections, with sector assets totaling $59.5 billion by the end of 2024, constituting 53% of the country’s GDP.
The five leading banks in Uzbekistan command 54% of the market share, with 65% of total assets in the hands of state-owned banks. The creditworthiness ratings for 13 commercial banks, which represent 62% of the sector’s assets, range from b1 to baa1, averaging b2. The banking system benefits from robust national reserves, equivalent to 37% of GDP, while total loans also account for 37% of GDP, illustrating the government’s ability to uphold economic stability.
Despite prevailing geopolitical uncertainties, including the conflict between Russia and Ukraine, the Uzbek economy demonstrates resilience. As reported by Bankers.uz, citing Moody’s data, real GDP growth is forecasted to maintain a steady 5.7% in 2025-2026, which should enhance borrower solvency and bolster the overall health of the financial sector.
In summary, Uzbekistan’s banking sector faces some challenges, notably an increase in problem loans; however, ongoing state support is expected to mitigate these risks and maintain stability. The government’s proactive measures and strong national reserves position the sector for continued growth despite external geopolitical factors. Overall conditions indicate a favorable outlook for the banking industry moving forward.
Original Source: daryo.uz
