30 Aug 2010 13:53

Outlook changed to stable from negative for Uzbekistan's banking system

MOSCOW. Aug 30 (Interfax) -- The outlook for Uzbekistan's banking system has been changed to stable from negative, reflecting the banks' resilience to the global economic downturn, their stabilizing asset quality and improved capitalisation levels, Moody's Investors Service said in its new Banking System Outlook on Uzbekistan.

The statement said: "The deterioration in the financial health of the banks' borrowers, which was a key concern last year, has been mitigated by the country's continued economic growth which was fuelled by the government's counter-cyclical fiscal measures. In the next 12 to 18 months, recovering demand for Uzbekistan's export commodities, combined with growing internal consumption, should provide for supportive macroeconomic conditions and thus limit asset-quality problems for the banks."

"Banks' capital levels have notably strengthened since 2008, owing to the government's injection of more than UZS400 billion (approximately USD300 million) into several of the largest Uzbek banks," Olga Ulyanova, assistant vice president analyst, and author of the report was quoted as saying. "Coupled with their earnings generation capacity, the banks now have a sufficient cushion to absorb anticipated credit and investment losses and, at the same time, support the 15%-20% annual growth we expect to see in their loan books over the next 12-18 months," she said.

The statement said: "Despite the stabilisation of the outlook's key drivers, Moody's cautions that longstanding weaknesses persist in the country's banking system. Its banks' stand-alone financial strength ratings (BFSRs) are a low E+ on average and are unlikely to improve because of the sector's structural weaknesses and the under-developed regulatory and supervisory framework. Continued weakness in corporate governance and risk management, as well as rudimentary strategy-setting and management processes, also restrain the banks' BFSRs."