(The following statement was released by the rating agency)
MOSCOW/LONDON, February 18 (Fitch) Fitch Ratings has published
Ipak Yuli Bank's
(IY) Long-term foreign currency Issuer Default Rating (IDR) of
'B-'. Fitch has
also affirmed KDB Bank Uzbekistan (KDBUz) and POJSEB Trustbank's
foreign currency IDRs at 'B-' and Universalbank's (UB) Long-term
IDR at 'CCC'. At the same time, the agency has withdrawn KDBUz's
ratings, as the
bank has chosen to stop participating in the rating process.
will no longer have sufficient information to maintain the
Fitch will no longer provide ratings or analytical coverage for
A full list of rating actions is at the end of this commentary.
KEY RATING DRIVERS - ALL BANKS' IDRS, SUPPORT RATINGS AND
SUPPORT RATING FLOORS
The affirmations reflect Fitch's assessment of persistent
weaknesses in the
Uzbekistan operating environment, in particular high transfer
risks presented in the economy due to the country's tightly
regulated FX market,
and the banks' generally limited franchises (more acute for UB,
consequently rated one notch lower than its peers).
IY's, TB's and UB's Long-term IDRs are driven by their intrinsic
creditworthiness, as reflected in their Viability Ratings (VR).
IY's, TB's and UB's SRFs of 'No Floor' and their '5' Support
their relatively limited scale of operations rendering
from Uzbek authorities unlikely. The ability of the banks'
to provide support cannot be reliably assessed and, therefore
this support is
not factored into the ratings.
KEY RATING DRIVERS AND SENSITIVITIES - IY
IY's 'b-' VR reflects its reasonable asset quality metrics,
and currently sufficient liquidity and capital buffers. On the
the VR also takes into account the bank's quite narrow franchise
weaknesses of the operating environment.
IY reported impaired loans at moderate 3% of the end-2013 loan
book, which were
fully covered by impairment reserves. Based on the analysis of
exposures, Fitch does not have concerns about these.
Nevertheless, should asset
quality deteriorate, IY's capitalisation (regulatory capital
(CAR) of 16% at end-2013) would allow it to increase loan
provision up to about
15% of gross loans before breaching minimum regulatory capital
Credit risks are further mitigated by solid profitability (local
ROAE of 28% in 2013). Liquidity is reasonable with available
stock of liquid
assets covering about 39% of customer funding at end-2013.
In 2Q13 Asian Development Bank (ADB; AAA/Stable) acquired a
13.6% stake in IY.
Fitch believes this may be moderately positive for the bank's
governance, but does not factor support from ADB into the bank's
KEY RATING DRIVERS AND SENSITIVITES: TB
TB's ratings are pressured by a risky operating environment, as
well as high
reliance on cheap funding from its related party, the Uzbek
(UCE) and its affiliates, which accounted for about half of the
liabilities at end-11M13. At the same date, TB's liquid assets
(net of potential
debt repayments) covered around 33% of its customer accounts,
withdrawal risk to an extent.
TB's ratings also account for its rapid loan growth (by 1.8x in
means current solid reported asset quality (zero reported NPLs)
somewhat as the loans season. TB's profitability metrics have
strong, with ROAA and ROAE for 2013 of 3.4% and 29.2%,
Capitalisation is healthy (regulatory CAR was 17.7% at end-2013)
bank to reserve up to 21% of its gross loans without breaching
minimum of 10%.
KEY RATING DRIVERS AND SENSITIVITES: UB
UB's ratings are mainly constrained by its small franchise
(total assets of only
USD32m at end-2013) resulting in high concentrations on both
sides of the
balance sheet and low operating efficiency (cost/income ratio of
77% for 2013).
The ratings also account for the bank's potential asset quality
reported 22% impaired loans in its 2012 IFRS FS; 2013 local GAAP
accounts show a
positive trend but the sustainability is questionable),
relatively short track
record of operations and past regulatory problems (UB's licence
currency operations was revoked in July 2012) limiting its fee
Positively, UB's credit profile benefits from the bank's
liquidity (covering around 32% of the bank's customer accounts
at end-2013) and
high regulatory CAR of 31.3% at end-2013, which is sufficient to
reserve up to
50% of gross loans.
RATING SENSITIVITIES: IY, TB, UB
An upgrade of IY and TB's Long-term foreign currency IDRs and
VRs would require
a general improvement in the operating environment. An upgrade
of UB would
require significant growth of its franchise, greater
profitability improvement, while maintaining adequate asset
A downgrade could occur in case of deterioration of operating
significantly increased pressure on capital as a result of
of the credit quality and/or major liquidity shortfalls (eg. in
withdrawals by key customers).
Fitch does not anticipate changes to the Support Ratings and
SRFs of these banks
given their moderate systemic importance.
The rating actions are as follows:
Long-term foreign currency IDR: published at 'B-', Outlook
Short-term foreign currency IDR: published at 'B'
Long-term local currency IDR: published at 'B-', Outlook Stable
Short-term local currency IDR: published at 'B'
Viability Rating: published at 'b-'
Support Rating: published at '5'
Support Rating Floor: published at 'NF'
Long-term foreign currency IDR: affirmed at 'B-', Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: affirmed at 'B-', Outlook Stable
Short-term local currency IDR: affirmed at 'B'
Viability Rating: affirmed at 'b-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'NF'
Long-Term local currency IDR: affirmed at 'CCC'
Short-Term local currency IDR: affirmed at 'C'
Viability Rating: affirmed at 'ccc'
Support Rating: Affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Long-term foreign currency IDR: affirmed at 'B-'; Outlook
Stable; and withdrawn
Short-term foreign currency IDR: affirmed at 'B'; and withdrawn
Long-term local currency IDR: affirmed at 'B'; Outlook Stable;
Short-term local currency IDR: affirmed at 'B'; and withdrawn
Viability Rating: affirmed at 'b'; and withdrawn
Support Rating: affirmed at '5'; and withdrawn
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Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 31
January 2014, is available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
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