PB’s Long- and Short-term IDRs and Support rating are underpinned by potential support from the Uzbek authorities. In Fitch’s opinion, there would be a high propensity of the authorities to provide support to PB, if needed. This is because of PB’s role in the economy as a financial agent of the state, particularly for agriculture projects; its close ties with the authorities and state-controlled industry associations, which are also the bank’s shareholders and important clients, and also the recent acquisition by the state of a direct blocking stake in the bank. However, in the light of the Uzbek sovereign’s credit profile, this support cannot be relied upon.

Improvement or deterioration in Uzbekistan’s sovereign risk profile could generate upward or downward pressure, respectively, on PB’s ratings. A deepening of the relationship between the Uzbek authorities and PB, especially if the Ministry of Finance (MoF) ultimately decides to raise its stake in the bank to majority ownership, could result in Fitch revising upwards its view of the authorities’ propensity to provide support and therefore generate rating upside.

The Individual rating reflects the bank’s size, which is small by international standards, its high and concentrated risk profile given its business focus on the agriculture sector, modest profitability and certain weaknesses in the operating environment. At the same time, the rating considers its currently low levels of loan impairment and market risk.

Upside for the Individual rating is currently limited, but PB’s stand-alone credit profile could benefit from further diversification and growth of franchise, a notable increase in profitability and improvements in the Uzbek operating environment. Its large planned equity increase in H208 will provide, at least, short-term support to PB’s currently low capitalisation. A key risk for PB is a failure of the cotton crop, which could result in large credit losses and possibly the need for external support, thus causing a downgrade of the Individual rating.

PB was established in 1995 on the basis of the state-owned UzAgroPromBank, headquartered in Tashkent, Uzbekistan. At end-2007, PB was the fourth-largest bank in the country, holding around 7% of sector assets, in an industry dominated by state-owned banks. PB has fragmented ownership, but the state, via the MoF, has acquired a direct blocking stake of about 38%, following a recent share issue in H207; in addition, state-controlled (cotton and chemical) associations together held around 6% of PB’s capital at end-2007. The bank serves SMEs and individuals through 186 branches and 850 other outlets located nationwide. Financing agriculture sector companies (mainly cotton and grain producers) remains its core business.