Standard & Poor's bases its ratings on Amirbank on the bank's "weak" business position, "strong" capital and earnings, "weak" risk position, "below-average" funding, and "adequate" liquidity, as Standard & Poor's criteria define these terms. The stand-alone credit profile (SACP) is 'ccc'.

Standard & Poor's regards Amirbank's business position as "weak" due to the bank's only marginal market share in the Uzbek banking system, a narrow business profile, small customer base, lack of track record due to its fairly recent creation, and its inexperienced management team. Amirbank was founded in October 2008 and is a small regional bank based in the city of Samarkand. It had total assets of Uzbek sum (UZS) 20.6 billion (about $11 million) as of Sept. 30, 2011. Amirbank focuses on retail and small and midsize enterprises in its home and neighboring regions.

Standard & Poor's said: “We currently view Amirbank's capitalization as "strong". We project that the risk-adjusted capital (RAC) ratio before adjustments for diversification will remain above 20% over the next 24 months. High net interest margins currently boost profitability, largely thanks to a high share of interest-free equity. However, due to a high cost structure and lack of economies of scale, the bank's earnings are low, displaying only a negligible return on equity of about 0.05% at year-end 2010. Amirbank's main short-term strategic priority is to obtain a foreign exchange license, which would allow the bank to expand its revenue base from correspondent money transfer and currency conversion operations. We think this would strengthen its overall financial performance.”

“We assess Amirbank's risk position as "weak". This reflects the bank's unseasoned portfolio, expansionary strategy, weak--albeit developing--customer franchise, and tight competition for borrowers with good credit quality. Given its early stage of development and very narrow customer base, the bank is exposed to high concentration: The top 20 borrowers accounted for 88% of the loan portfolio as of Sept. 30, 2011. We do not expect concentration to decrease significantly in the medium term. As of Sept. 30, 2011, Amirbank and its subsidiary leasing companies had no problem assets, which compares favorably to peers. However, we view Amirbank's currently low level of nonperforming loans as unsustainable,” the agency said.

Standard & Poor's considers Amirbank's funding to be "below average" and its liquidity "adequate". Due to its weak franchise and start-up nature, Amirbank has limited available funding sources. Funding concentration is high and the top 20 depositors constitute 59% of total liabilities. The largest depositor accounted for 21% of total liabilities as of Sept. 30, 2011. Demand deposits comprise about 57% of total deposits, while loans granted are mainly of a long-term nature. The bank consequently has a negative cumulative liquidity gap up to one year of UZS1.5 billion or 7.3% of total assets as of Sept. 30, 2011, which is not covered with a sufficient liquidity buffer. However, Standard & Poor's understands that foreign currency conversion operations require more cash resources and the agency therefore expects the bank's liquidity cushion to improve after it receives its foreign exchange license.

The long-term rating on Amirbank reflects no uplift for extraordinary government or parent support, which Standard & Poor's believe is uncertain. Standard & Poor's considers Amirbank to be of "low" systemic importance for the Uzbek banking sector.

The positive outlook reflects the agency’s view that Amirbank's business position will gradually improve as soon as the bank receives a foreign exchange license, which is likely to occur in the next six months. This would help to expand its franchise and client base. Standard & Poor's also expects the bank to maintain adequate capitalization and liquidity over the near future.

Standard & Poor's could consider raising the ratings if the bank successfully implements its expansion strategy, while improving its risk management, operational capacity, diversity, and profitability, while maintaining asset quality and capitalization at adequate levels.

Standard & Poor's could consider a negative rating action if the current liquidity cushion declines significantly or if asset quality deteriorates to such an extent that it hurts the bank's already weak earnings and pressures its solvency, or if the RAC ratio fell below 10%.