Tashkent, Uzbekistan (UzDaily.com) -- Fitch Ratings has upgraded the Long-Term Issuer Default Ratings (IDRs) of four Uzbek state-owned banks to ‘BB-’ from ‘B+’.

The affected banks are Uzbek Industrial and Construction Bank Joint-Stock Commercial Bank (UPSB), Joint Stock Commercial Bank Asaka (Asaka), OJSC Agrobank (Agro) and Microcreditbank (MCB). The Outlooks are Stable. A full list of rating actions is at the end of this rating action commentary.

The four banks’ IDRs, Support Ratings and Support Rating Floors (SRFs) were upgraded after Fitch assigned Long-Term Foreign- and Local-Currency IDRs to Uzbekistan at ‘BB-’ with a Stable Outlook (see ‘Fitch Assigns Uzbekistan ‘BB-’ IDRs; Outlook Stable’ dated 20 December 2018).

Equalisation of the four banks’ ratings with that of the sovereign reflects Fitch’s view of a high propensity of the Uzbek authorities to provide support to these banks in case of need, due to:

-Majority state ownership;

-High systemic importance (UPSB, Asaka) and important policy roles (to a lesser extent at MCB);

-High flexibility of the state to provide support, as reflected by substantial international reserves of USD26 billion at end-3Q18;

-State guarantees on banks’ largest exposures (UPSB and Asaka); and a large share of government-related funding (received both from the Uzbek Fund for Reconstruction and Development and from other state-owned entities);

-Positive track record of capital and liquidity support provided to state-owned banks (USD670 million of capital injections in 2017 alone).

The banks’ support-driven IDRs are sensitive to changes in sovereign’s ratings. In addition, signs of weaker propensity of the Uzbek authorities to provide extraordinary support to the state-owned banks could result in a downgrade of the banks’ Support Ratings and SRFs and, consequently, their IDRs.

The rating actions are as follows:

UPSB

Long-Term Foreign- and Local-Currency IDRs upgraded to ‘BB-’ from ‘B+’; Outlooks Stable

Short-Term Foreign- and Local-Currency IDRs affirmed at ‘B’

Support Rating upgraded to ‘3’ from ‘4’

Support Rating Floor revised to ‘BB-’ from ‘B+’

Viability Rating: unaffected at ‘b’

Asaka

Long-Term Foreign- and Local-Currency IDRs upgraded to ‘BB-’ from ‘B+’; Outlooks Stable

Short-Term Foreign- and Local-Currency IDRs affirmed at ‘B’

Support Rating upgraded to ‘3’ from ‘4’

Support Rating Floor revised to ‘BB-’ from ‘B+’

Viability Rating: unaffected at ‘b’

Agro

Long-Term Foreign- and Local-Currency IDRs upgraded to ‘BB-’ from ‘B+’; Outlooks Stable

Short-Term Foreign- and Local-Currency IDRs affirmed at ‘B’

Support Rating upgraded to ‘3’ from ‘4’

Support Rating Floor revised to ‘BB-’ from ‘B+’

Viability Rating: unaffected at ‘b-’

MCB

Long-Term Foreign- and Local-Currency IDRs upgraded to ‘BB-’ from ‘B+’; Outlooks Stable

Short-Term Foreign- and Local-Currency IDRs affirmed at ‘B’

Support Rating upgraded to ‘3’ from ‘4’

Support Rating Floor revised to ‘BB-’ from ‘B+’

Viability Rating: unaffected at ‘b-’