The privatization of state-owned banks may be postponed to a later date in Uzbekistan.

Pavel Kaptel, Associate Director for Financial Institutions at Fitch Ratings, spoke about this forecast during the “Fitch on Uzbekistan” Conference in Tashkent.

The Rating Agency expert drew attention to plans to reform the banking system in the country. One of the goals is the sale of a number of state-owned banks, which includes cooperation with leading international development institutions such as the EBRD, IFC and ADB. They provide technical assistance, consulting services and can become minority shareholders of privatized state-owned banks for the purpose of further sale to a strategic investor.

“But the reform is not only about this. An important role is also played by a significant improvement in corporate governance procedures and risk management in banks, not only in those that are subject to sale, but also in those that remain in state ownership. Another important aspect of the reform is improving regulation in the sector, in particular in terms of potential bank capital standards,” noted Pavel Kaptel.

According to the expert, some progress is already visible. Over the first four years, the share of non-state banks in the sector has doubled compared to the end of 2019, and currently accounts for approximately a third of the sector’s assets. But this is still significantly lower than the target set by the government (60% at the end of 2025). Of the three large banks, only one was sold – Ipoteka Bank. Next in line are SQB and Asakabank.

“Let me remind you that both banks were planned to be sold to strategic investors by the end of 2023. But last year the government announced that the deadlines were being pushed back. For Uzpromstroybank – the end of 2024, for Asakabank – the end of 2025. We believe that there is a possibility that these deadlines will also have to be extended,” a Fitch representative explained.

The expert said about the reasons for this scenario that pre-sale preparations for financial institutions are still ongoing. This is a large-scale process. Both banks have historically focused on lending to the corporate sector and state-owned companies and are now building a more diversified model (SMEs and retail). This will take both players time. Fitch is observing positive trends; the share of SMEs and retail is growing, but not so quickly yet.

To increase their sales prospects, banks need to show greater profitability. This requires more active lending growth, especially in the retail segment. But this requires capital.

“Therefore, the prospect of the EBRD, IFC and other organizations entering the bank’s capital as anchor investors is very important from the point of view of whether the banks will be sold on time or not. If this happens, it will give banks capital to grow lending, thereby improving profitability and increasing market shares,” said the deputy director of Fitch.

This will also provide some comfort to potential investors. They will be confident that the first stage of transformation has been completed and the banks are interesting for purchase, concluded Pavel Kaptel.

Source: Курсив