In 2011, Uzpromstroybank's share capital was increased by 20%. Uzbekistan's government, which is the main stakeholder, intends to further increase Uzpromstroybank's Tier 1 capital base by Uzbek sum 152 billion (almost twice the current level) over 2012-2013. This is in addition to the capital that the bank can generate internally through retained earnings.

“In our view, retained earnings and the capital increase together will be sufficient to absorb the bank's planned annual 30% asset growth for the same period, and is likely to improve the bank's capital ratios. We have therefore revised our assessment of Uzpromstroybank's capital and earnings to "moderate" from "weak", as our criteria define these terms. We now forecast that the bank's risk-adjusted capital (RAC) ratio, before adjustments for diversification, will be between 6%-7% over the next 12-24 months. However, this positive revision of the bank's capital and earnings assessment is neutral for the rating of a bank with a 'b+' anchor,” the agency said.

Standard & Poor's bases its ratings on Uzpromstroybank on its 'b+' anchor, its "adequate" business position, "moderate" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity, as our criteria define those terms. “The stand-alone credit profile is 'b+'. Although we do not rate the Republic of Uzbekistan, the ratings on Uzpromstroybank are constrained by our assessment of the sovereign's creditworthiness,” it added.

“We consider Uzpromstroybank to be a bank of "high" systemic importance and also a government-related entity (GRE) with a "high" likelihood of government support, reflecting its "important" role for and "very strong" link with the sovereign. However, given our assessment of the sovereign's creditworthiness, which is based on publicly available information, we include no notches of uplift in the ratings. Our view of the likelihood of government support is based on Uzpromstroybank's position as one of the largest Uzbek banks involved in developing key domestic industries and its government ownership,” the agency said.

“The stable outlook balances high economic and industry risks for banks operating in Uzbekistan against our expectation of continued state ownership and ongoing government support. We think that Uzpromstroybank's financial and business profiles will remain stable, at least for the next 12-24 months,” Standard & Poor's said.

“We consider the creditworthiness of Uzbek banks, including Uzpromstroybank, to be closely linked to that of the sovereign. We currently consider the sovereign's creditworthiness to be a rating constraint. Therefore, we are unlikely to raise the ratings on Uzpromstroybank before we considered that the sovereign's creditworthiness had improved. Such a scenario would indicate more supportive operating conditions for banks. In our view, the likelihood of an upgrade triggered by improvements in some bank-specific factors appears limited over the next two years,” Standard & Poor's added.

“We might lower the ratings on Uzpromstroybank if operating conditions deteriorated for the banking sector, notably if the sovereign's credit quality worsened. A deterioration of the bank's asset quality represents the main risk for the bank's financial profile. It could stem from weakening underwriting standards, uncontrolled credit expansion, or the government's inability to continue supporting key economic and industrial sectors. Although such risks appear remote at present, they could potentially put pressure on the ratings. We could also consider lowering the ratings if Uzpromstroybank's capitalization deteriorated to the point where its RAC ratio fell below 3.0%,” the agency concluded.