Fitch affirms TBC Bank Uzbekistan rating at BB-

Tashkent, Uzbekistan (UzDaily.uz) — Fitch Ratings has affirmed TBC Bank Uzbekistan’s Long-Term Issuer Default Ratings (IDRs) at BB- with a Stable Outlook. The bank’s Viability Rating has also been affirmed at b.

Fitch’s decision takes into account potential support from Georgia-based TBC BANK JSC, which has a BB rating with a Stable Outlook. TBC BANK is the main bank of TBC BANK Group PLC, which controls the Uzbek bank.

Fitch expects that, if necessary, emergency financial support for TBC Bank Uzbekistan would ultimately be provided by TBC BANK. The Stable Outlook on the Uzbek bank’s ratings is consistent with the outlook on its parent structure.

TBC Bank Uzbekistan’s Shareholder Support Rating is one notch below its Long-Term IDR. Fitch assesses the Uzbek bank’s role within the group as moderate, although it expects the role to strengthen gradually over the next five years.

The agency also considered significant reputational risks for TBC BANK in the event of a default by its Uzbek subsidiary, as well as the acceptable cost of potential support. At the end of 2025, TBC Bank Uzbekistan’s assets accounted for 8% of TBC BANK’s assets.

Fitch has simultaneously upgraded its assessment of the operating environment for Uzbek banks from b/Positive to b+/Stable.

The agency attributed the revision to progress in banking-sector reforms over the past two years, including stronger regulation and efforts to address legacy risks.

Improved banking-sector conditions, a stable business environment and strong economic growth should support business expansion and, over the medium term, contribute to higher profits and banks’ ability to generate capital independently. Uzbekistan’s economy grew by 8.5% year on year in the first half of 2026.

TBC Bank Uzbekistan remains a small digital bank focused on the retail segment. At the end of the first half of 2026, it accounted for 1.4% of the country’s total banking-sector assets.

Unsecured consumer lending remains the bank’s main business area, where TBC Bank Uzbekistan has become a market leader. At the same time, the bank has started developing products for small and medium-sized businesses in response to regulatory changes, seeking to diversify its business model.

Rapid loan expansion has been accompanied by a higher cost of risk. In 2025, it rose to 11.2% of average gross loans, compared with 6% a year earlier. Fitch attributed the increase to the gradual maturing of the loan portfolio following a period of rapid growth, as well as one-off expenses.

The bank’s loan portfolio increased by 44% in 2025, following 112% growth in 2024. Fitch expects loan growth to remain above the market average as the bank develops its small and medium-sized business financing operations.

Asset quality has deteriorated at the same time. The share of impaired loans increased to 6% at the end of 2025 from 2.2% a year earlier. Together with significant write-offs, this contributed to the high cost of risk.

However, reserve coverage of impaired loans remained adequate at 129% at the end of 2025. Fitch expects the share of problem loans to increase further to about 10% in 2026 as the portfolio continues to mature, assuming write-offs do not exceed forecasts.

The bank’s financial performance is supported by a high net interest margin. It stood at 23.7% in 2025, while the ratio of operating expenses to revenue was 49%.

Non-interest income, however, remains weak. In addition, impairment charges reached 80% of operating profit before impairment. As a result, return on average equity stood at 8%.

Fitch forecasts moderate profitability in 2026, followed by a slight recovery in 2027.

TBC Bank Uzbekistan’s capitalisation declined amid rapid asset growth. Fitch Core Capital stood at 15.4% at the end of 2025, compared with 20.8% a year earlier. Internal capital generation significantly lagged the increase in risk-weighted assets.

During the nine months of 2026, the bank received additional capital injections. They are intended to support loan growth and maintain adequate capitalisation in view of the bank’s risk profile.

Customer funds remain the main source of funding. At the end of 2025, they accounted for 58% of funding excluding equity, down from 67% a year earlier. These funds mainly consist of diversified but relatively expensive retail deposits.

The remainder of the funding base consists of wholesale debt and short-term interbank borrowings.

Fitch assesses the bank’s liquidity as moderate. The loans-to-deposits ratio was 165% at the end of 2025, compared with 162% a year earlier. Refinancing risks are declining due to regular liquidity support from shareholders.

A downgrade of TBC Bank Uzbekistan’s Shareholder Support Rating and Long-Term IDRs could result from a deterioration in TBC BANK’s ratings. Another factor could be a weakening of the Uzbek bank’s role within the group and a reduction in its contribution to the group’s overall results, which would widen the gap between the ratings of the two entities.

The Viability Rating could be downgraded if capitalisation deteriorates significantly due to loss-making operations or rapid growth in risk-weighted assets, if such growth is not promptly offset by additional capital.

Fitch also considers instability in the deposit base or liquidity outflows a potential negative factor if these risks are not offset by regular support from the parent structure.

TBC Bank Uzbekistan’s ratings could be upgraded following an upgrade of TBC BANK’s ratings. Fitch could also raise the Uzbek bank’s ratings to the level of TBC BANK if its importance to the group increases substantially and this leads to a stronger willingness by the group to provide support.

The prospects for an upgrade of the Viability Rating remain limited. Such an upgrade would require a significant strengthening of TBC Bank Uzbekistan’s market position and successful implementation of its new business model, accompanied by improvements in its risk profile, asset quality and profitability while maintaining adequate capitalisation.

The bank’s Short-Term Foreign- and Local-Currency IDRs have been affirmed at B, consistent with its BB- Long-Term IDRs.