The upgrades of the four banks’ Long-Term IDRs and upward revision of their Support Rating Floors (SRFs) to ‘B+’ reflect the strengthening of the sovereign’s ability to provide support to them. Fitch’s positive reassessment of the sovereign’s credit strength in turn reflects (i) Uzbekistan’s economic resilience to the regional downturn; and (ii) moderately reduced political risks following a smooth political transition.

Average real GDP growth over last 10 years was 8.3% and is forecast to hold up at around 6% in 2016 and 2017 despite lower commodity prices and lower demand from Uzbekistan’s main export markets. The state’s ability to provide support in foreign currency is also sound, due to significant sovereign foreign-currency reserves of around USD24bn at end-2015 (equal to about 2x the banking sector’s total foreign-currency liabilities or 11x its external debt) and the only moderate potential cost of any future foreign-currency support.

The four banks’ IDRs, Support Ratings and SRFs continue to be underpinned by potential support from the Uzbek authorities. In Fitch’s view, the authorities would have a high propensity to provide support, if needed, because of the state’s majority ownership; the banks’ systemic importance (to a lesser extent in MCB); tight supervision of their activities; and their policy roles.

A change in UPSB’s, Asaka’s, Agrobank’s and MCB’s support-driven IDRs could result from a strengthening or weakening of the sovereign’s credit profile.

A change of the banks’ controlling shareholder could lead to a downgrade of their support-driven ratings.

The rating actions are as follows:

UPSB
Long-Term Foreign and Local Currency IDRs upgraded to ‘B+’ from ‘B’; Outlook Stable
Short-Term Foreign and Local Currency IDRs affirmed at ‘B’
Viability Rating: ‘b’ unaffected
Support Rating affirmed at ‘4’
Support Rating Floor revised to ‘B+’ from ‘B’

Asaka
Long-Term Foreign and Local Currency IDRs upgraded to ‘B+’ from ‘B’; Outlook Stable
Short-Term Foreign and Local Currency IDRs affirmed at ‘B’
Viability Rating: ‘b’ unaffected
Support Rating affirmed at ‘4’
Support Rating Floor revised to ‘B+’ from ‘B’

Agrobank
Long-Term Foreign and Local Currency IDRs upgraded to ‘B+’ from ‘B’; Outlook Stable
Short-Term Foreign and Local Currency IDRs affirmed at ‘B’
Viability Rating: ‘b-’ unaffected
Support Rating affirmed at ‘4’
Support Rating Floor revised to ‘B+’ from ‘B’

MCB
Long-Term Foreign and Local Currency IDRs upgraded to ‘B+’ from ‘B’; Outlook Stable
Short-Term Foreign and Local Currency IDRs affirmed at ‘B’
Viability Rating: ‘b-’ unaffected
Support Rating affirmed at ‘4’
Support Rating Floor revised to ‘B+’ from ‘B’