The ratings reflect Amirbank's very weak business position and marginal market share. They also reflect its intrinsic vulnerability as a small financial institution in a risky operating environment, large balance-sheet concentrations, limited diversity, and unseasoned loan portfolio. Amirbank's financial performance is weak and constrained by the absence of a foreign exchange license and high operational expenses.

Although Amirbank has strong capitalization, its capital in absolute terms is small. This makes it vulnerable to fluctuations in its operating performance and market conditions. Positively, the bank has a good knowledge of customers in the Samarkand region.

Founded in October 2008, Amirbank is a small regional bank based in the city of Samarkand. It had total assets of 20.6 billion soums (about $11 million) as of 30 September 2011.

Amirbank is owned by 18 individuals and eight legal entities. S&P understands that the bank benefits from its shareholders' business connections and regular capital increases and the agency factors this support into its stand-alone credit profile. S&P does not, however, include any notches of uplift for extraordinary external support, either from the shareholders or from the government given the bank's low systemic importance.

Amirbank's main short-term strategic priority is to obtain a foreign exchange license, which would allow the bank to expand its customer base by attracting deposits and granting loans denominated in foreign currency. S&P understands that Amirbank is likely to obtain a foreign exchange license by the end of 2011 or early 2012.

S&P believes that Amirbank's asset quality is vulnerable given its unseasoned loan portfolio, expansionary strategy, and weak customer franchise, as well as tough competition for borrowers with good credit quality. The bank's currently very low level of nonperforming loans is not sustainable, in S&P view. Because the bank is at an early stage in its development and has a narrow customer base, it suffers from high concentrations; the 20 leading borrowers accounted for 88% of the loan portfolio as of 30 September 2011. The agency does not expect such concentrations to decrease significantly over the medium term.

Profitability is currently boosted by high net interest margins, largely due to a high share of no-interest-paying equity. However, due to a high cost structure and lack of economies of scale, the bank's earnings are low with a negligible return on equity of 0.05%.

The positive outlook reflects S&P view that Amirbank's business position will gradually improve as soon as the bank receives a foreign exchange license, as the agency expects. This would help to expand its franchise and client base.