Fitch Affirms Microcreditbank Credit Rating at 'BB'

Tashkent, Uzbekistan (UzDaily.uz) — The international rating agency Fitch Ratings has affirmed the long-term foreign- and local-currency issuer default ratings of Uzbekistan's joint-stock commercial bank Microcreditbank at "BB" with a positive outlook.

The financial institution's government support rating has been maintained at "bb", while its viability rating was affirmed at "ccc+".

According to the financial organization's estimates, the current metrics and the positive outlook are directly linked to the sovereign rating of Uzbekistan. This alignment is driven by the high willingness of the authorities to provide a moderately high level of support to the bank.

The bank's state-owned status and its key role in implementing national programs for subsidized social and entrepreneurial lending remain the primary stabilizing factors for its credit profile.

Fitch analysts note a general improvement in the operating environment of the Uzbek banking sector over the past five years, expecting a further reduction in structural risks and the refinement of regulatory mechanisms. Against this backdrop, the country's strong macroeconomic indicators are anticipated to stimulate the expansion of commercial activities and strengthen the capital base of financial institutions.

At the same time, Microcreditbank currently maintains a relatively small business scale. At the end of the first quarter of 2026, its share accounted for approximately 3% of the total assets and loan portfolio of the banking sector. The majority of its operations, around 60%, are concentrated in the retail segment and the support of small and medium-sized enterprises.

Concurrently, the agency assesses the risk profile of the financial institution as vulnerable, pointing to the persistence of high credit risks in both the commercial and subsidized segments.

The share of Stage 3 impaired loans decreased to 11.6% at the end of 2025, compared to 14.4% a year earlier. However, this decline was driven by write-offs and the restructuring of corporate loans, while total reserve coverage dropped from 42% to 32%.

Experts project that the volume of problem assets will remain substantial throughout 2026–2027, exerting pressure on the structurally low profitability of the organization. An additional vulnerability factor is the high dependence of liabilities on borrowings. By the beginning of the second quarter of the current year, market funding accounted for 48% of liabilities, while government resources made up an additional 31%.

Regular capital injections from the state continue to exert a positive influence on the bank's capitalization. Thanks to these injections, the Fitch core capital ratio rose to 18.4% at the end of 2025.

Nevertheless, the pressure on capital from unhedged problem debts remains notable. The agency also drew attention to environmental, social, and governance (ESG) factors, assigning the bank a relevance score of "4" in the area of corporate governance and transparency due to heavy state involvement and delays in the publication of high-quality financial reporting.

The future dynamics of the organization's ratings will depend directly on changes to the sovereign rating of the republic, the effectiveness of asset quality management, and the stability of state support.