According to Moody’s, NBU’s ratings reflect the bank’s strong franchise value within the context of Uzbekistan, where the bank has a dominant share in terms of assets, capital and loans (40%, 46% and 44% of the banking sector totals, respectively), as well as the bank’s utmost importance for the Uzbek economy given its major role in attracting and conducting foreign investments to the country and servicing foreign trade operations.
At the same time, NBU’s ratings are constrained by the bank’s currently low profitability and cost-efficiency, the low diversification of its funding base and a degree of uncertainty relating to the bank’s asset quality, as well as its corporate governance and risk management practices, which are currently at the process of development.
NBU’s deposit ratings are underpinned by Moody’s expectation that support from the Uzbek government to NBU in the event of need would be very likely, since failure to render such support would result in a serious distress to the payment and financial systems of the country.
Given the geographic concentration of NBU’s business to the domestic market and its ownership by and close links with the Government of Uzbekistan, the bank’s deposit ratings are largely dependent upon the stance and conditions of Uzbekistan’s operating and economic environment.
According to Moody’s, an upgrade of NBU’s BFSR might be possible if the bank were to materially improve the major factors that are currently constraining its rating -- specifically, if it continues to enhance its corporate governance and risk management practices, demonstrates a sustained trend of improving profitability that does not significantly increase the bank’s risk profile, in addition to notable improvements in asset quality and a decrease in borrower concentration. Moody’s does not, however, consider that such qualitative improvements are realisable in the near term. Positive developments in Uzbekistan’s operating and economic environment could also exert positive pressure on NBU’s local and foreign currency deposit ratings.
Conversely, a material deterioration in the quality of NBU’s loan portfolio, increase in borrower concentration, as well as a worsening of the bank’s capital adequacy level would be very likely to result in a downgrade of the bank’s BFSR.
"NBU’s global local currency deposit rating could also be downgraded if any new developments were to change Moody’s current perception of the probability of systemic support for the bank from the government of Uzbekistan" added Olga Ulyanova, a Moody’s Assistant Vice-President/Analyst. "Such developments might include, inter alia, a material change in NBU’s ownership structure, failure of the government to make, when needed, additional capital injections to the bank, as well as reduced government commitment as a result of political decisions".
Headquartered in Tashkent, Uzbekistan, NBU reported in YE2006 IFRS total assets of US$2.48 billion, total capital of US$436 million and net income of US$2 million.
The bank is 100% controlled by the Uzbek government and to a large extent serves as a vehicle in implementing state investment and economic policies, acting as an agent of the government in financing large-scale projects of national importance for Uzbekistan. The Uzbek government has declared its plans to sell up to 49% of the bank’s shares in the following two years.
As earlier reported, NBU became the third Uzbek bank, which received rating from international rating agencies. Earlier, Fitch Rating assigned rating to Pakhta Bank and Hamkor Bank.