Fitch Affirms Aloqabank at 'BB' with Positive Outlook

Tashkent, Uzbekistan (UzDaily.com) — International rating agency Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of Joint-Stock Company Aloqabank in foreign and national currencies at 'BB' with a Positive Outlook. Concurrently, the agency's experts affirmed the financial institution's Viability Rating (VR) at 'b'.

The bank's current Issuer Default Ratings are directly linked to the sovereign rating of the Republic of Uzbekistan. This reflects the expert opinion that there is a moderate probability of prompt state support for the bank, with the Government Support Rating (GSR) affirmed at 'bb'. The Positive Outlook on the bank's obligations fully mirrors the agency's expectations regarding the country's sovereign profile.

The state's high willingness to provide capital and financial assistance to Aloqabank is driven by the government's majority stake in its ownership structure, a history of past capital injections, and the financial institution's updated status as a government agent for preferential lending to young entrepreneurs. According to Fitch's assessments, the potential cost to the state budget to support the structure remains minor compared to Uzbekistan's total international reserves. Despite declared privatization plans, analysts factor state support into the ratings, as an actual sale of the bank is not expected in the short term.

An additional positive factor is the general improvement of the operating environment in Uzbekistan's banking sector over the past five years, where Fitch forecasts further progress in reducing structural risks, improving regulatory frameworks, and upgrading corporate governance standards.

As of the end of the first quarter of 2026, Aloqabank ranked tenth among the 34 commercial banks in the republic, controlling approximately 4% of system assets and deposits, and around 3% of the total loan portfolio. The bank's core specialization remains serving the corporate sector and small businesses, although the retail segment is showing moderate growth.

This corporate focus drives a high concentration of the portfolio among large borrowers and a significant level of dollarization, which reached 41% compared to the market average of 40%. The organization's risk profile is also affected by aggressive loan growth rates: in 2025, the bank's gross loan portfolio expanded by 45%, significantly outstripping the sector average of 13%.

This massive balance sheet expansion led to a technical reduction in the share of Stage 3 impaired loans from 7.5% at the end of 2024 to 7.2% at the close of 2025. Nevertheless, asset quality raises questions due to low provisioning levels, which cover only 40% of non-performing loans (NPLs), forcing the bank to rely heavily on collateral. As newly issued loans mature, Fitch forecasts the share of problem debt to rise to 8% in 2026.

Against this background, the bank's profitability remains weak. A small net loss was recorded in 2025, and the operating loss increased to 0.7% of risk-weighted assets due to a drop in the net interest margin from 4.5% to 3.3%, rising impairment charges, and low operational efficiency. In 2026, only a symbolic return of operating profit to the break-even mark is expected.

Excessive asset growth reduced the Fitch Core Capital ratio from a stable 12.6% to 9.8% at the end of 2025, bringing regulatory capital adequacy metrics close to minimum allowable limits. In 2026, the agency expects this ratio to recover to 11% due to the planned conversion of US$65 million in Tier 2 subordinated debt into equity.

Within the liability structure, there is an increasing dependence on wholesale funding, which reached 28% of obligations, partly due to the issuance of US$300 million in Eurobonds. This drove the loan-to-deposit ratio up to 140%. At the end of the first quarter of 2026, the bank's liquid assets covered only 20% of non-state funding sources, pointing to sustained tight liquidity conditions.