At the same time the rating agency has also upgraded the bank’s baseline credit assessment (BCA) / adjusted BCA to b2 from b3, its long-term Counterparty Risk Assessment (CR Assessment) to B1(cr) from B2(cr) and affirmed short-term local- and foreign-currency deposit ratings of Not-Prime and its short-term CR Assessment of Not-Prime(cr).

Outlook on all long term Bank Deposit ratings is stable.

The upgrade of Asia Alliance Bank’s ratings with a stable outlook is driven by the recent improvements in the bank’s risk profile and reflects the bank’s (1) reduced appetite for credit risk; (2) track record of strong financial performance; (3) growing business diversification and strengthening business franchise and (4) Moody’s expectation of gradual diversification of Asia Alliance Bank’s highly concentrated funding base.

In 2011-2014, Asia Alliance Bank demonstrated high appetite for credit risk evidenced by its aggressive business expansion, which was the key factor constraining the ratings in recent years. Over the past two years, the bank has significantly reduced its risk appetite and its lending growth will likely be in line with the system average growth going forward, supporting the bank’s risk profile.

Moody’s rating upgrade also takes into account the good quality of the bank’s loan book (the problem loan ratio has consistently been below 1% of gross loans) and Moody’s expects the bank’s asset quality to remain solid over the next 12-18 months supported by the bank’s significant credit exposure on state-controlled borrowers and private companies with good credit profiles.

Asia Alliance Bank continues to maintain strong capital ratios, As of 30 September 2016, Asia Alliance Bank reported Tier 1 ratio ( Basel I, reported under IFRS) of 23.4% up from 20.76% reported at year-end 2015. Moody’s expects the bank to maintain healthy capital position supported by its good internal capital generation.

Asia Alliance Bank reports a stronger (compared to B3/B2-rated banks) profitability metrics owing to the bank’s good access to low cost corporate deposits, limited reliance on expensive retail deposits; its robust fee-generating capacity and operating efficiency.

For 9M 2016, Asia Alliance Bank reported net profit of UZS 29 billion, which translates into a high annualized return-on-average assets of 3.6% (3.9% in 2015 and 4.5% in 2014). The bank’s financial results in 2015-2016 were supported by a significant increase of net interest income driven by a larger income stream and lower funding cost.

Asia Alliance Bank’s funding profile remains a key constraining factor for its ratings given its high concentration with its five largest customers accounting for 37% of total liabilities. To date, the depositors proved to be `loyal’ to the bank and its high funding concentration is partly mitigated by an ample liquidity cushion (cash and interbank placements amounted to 53% and 43% of total assets as of 1 January 2016 and 1 June 2016, respectively).

A longer track record of improving its risk profile, reduced funding concentration, sustained good loss absorption capacity along with strengthening and diversification of its business franchise could lead to an upgrade of Asia Alliance Bank’s BCA and long-term ratings. At the same time, negative pressure could be exerted on the bank’s ratings in case of significant deterioration of its asset quality and/or liquidity from current levels or if Asia Alliance Bank resumes its rapid growth.

Headquartered in Tashkent, Uzbekistan, Asia Alliance Bank reported total audited IFRS assets of US$ 377 million and total shareholders’ equity of US$68 million as at 30 June 2016.