Tashkent, Uzbekistan (UzDaily.com) -- S&P Global Ratings said that state- and foreign-owned banks in Uzbekistan performed generally above expectations in 2020 despite the pandemic. However, the sovereign's creditworthiness constrains our ratings and outlooks on the banks. Results for privately owned banks in 2020 were mixed, and while some outperformed peers, some small banks’ performances were challenged in 2020.  

While we recently took several positive actions on some domestic privately owned banks (see "Various Rating Actions Taken On Uzbek Banks On Resilient Performance Despite The Pandemic’s Impact," published April 6, 2021, on RatingsDirect), our views of government-owned NBU (BB-/Negative/B), Uzpromstroybank (BB-/Negative/B), Ipoteka Bank JSCM (BB-/Negative/B), and Joint-stock Commercial Xalq Bank of the Republic of Uzbekistan (BB-/Negative/B) are unchanged. Likewise, we have not changed our assessment of KDB Bank Uzbekistan JSC (BB-/Negative/B),  Ravnaq Bank (B-/Negative/B), Turkiston Bank (CCC+/Negative/C), Turon Bank (B/Stable/B), and Hamkorbank JSCB (B+/Negative/B).

The negative outlooks on most state owned and foreign owned Uzbekistan banks continue to reflect outlook on Uzbekistan (see "Uzbekistan 'BB-/B' Ratings Affirmed; Outlook Remains Negative," published Dec. 4, 2020) taking into account the negative impact that potential deterioration of the sovereign's creditworthiness might have on the banks' credit profile.

Major rating factors and outlooks on other privately owned banks have not changed. 

We believe that COVID-19's effects remain manageable for the Uzbek economy. Generally supportive package provided by the Uzbekistan government helped alleviate the stress on the economy and households. Uzbekistan GDP continued to show positive real growth in 2020 at 1.6% and we believe that growth will accelerate in 2021-2022 to about 5%. 

The banking sector's performance showed resilience to COVID-19. Credit costs and nonperforming loans, while up from 2019 levels, did not lead to running losses in the sector. While average return on equity for Uzbek banking system declined to 10.0% in 2020 from 12.5% in 2019, return on assets improved to 2.20% from 1.92%. 

The hit on asset quality was uneven and generally softer for government-owned banks versus some private banks. This is because the state-related banks had higher exposure to state-owned enterprises (SOEs) and subsidized mortgages, and lower exposure to small and midsize enterprises and private entrepreneurs compared with private banks. SOEs suffering from the pandemic's effects, for example, those in the transport sector, benefited from government support. Subsidized mortgages brought fewer credit losses than entrepreneur and unsecured retail loans.

S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later.