At the same time, the agency has assigned the banks Long-term local-currency IDRs of 'B'. Fitch has also affirmed privately-owned OJSCB Hamkorbank's (HB) and POJSEB Trustbank's (TB) Long-term IDRs at 'B-'. A full list of rating actions is at the end of this comment.

The 'B' local-currency Long-term IDRs assigned to the four state-owned banks reflect Fitch's view that the Uzbek authorities are likely to have a high propensity to provide assistance to these banks in Uzbek sums, should the need arise. This view is based on the close integration of the banks with the state, which is reflected in direct and indirect control of majority stakes in the banks by the authorities, significant volumes of state-directed and policy lending, and the high proportion of funding provided by state agencies or state-controlled companies.

The downgrades of the state-owned banks' foreign currency Long-term IDRs reflect Fitch's concerns over the banks' ability to always access and utilise foreign exchange (FX) to service their obligations. In light of these concerns, Fitch has capped the foreign currency Long-term IDRs of all rated banks in Uzbekistan at 'B-'.

The agency understands that the banks have so far been able to meet their obligations related to direct foreign borrowings. However, Fitch believes there is a greater risk that banks will not always meet their off-balance sheet obligations in a timely manner, specifically those relating to export-import guarantees and letters of credit. The agency also understands that depositors may sometimes experience significant delays in being able to access foreign currency balances.

The affirmation of both the state-owned and private banks' Individual Ratings at 'D/E', reflects the risks of the operating environment and the banks' relatively limited standalone franchises. In addition, the ratings factor in the banks' weak corporate governance, the high level of government interference and weak internal controls, which give rise to significant operational risks, aggravated for state-owned banks by large geographical networks. Liquidity positions are also potentially vulnerable due to significant reliance on corporate settlement accounts (funds deposited for currency conversion operations).

At the same time, the Individual Ratings are supported by the relatively favourable commodity price environment, which in turn is driving the Uzbek economy's growth. The banks' reported asset quality and capital positions are largely reasonable, although both are highly reliant on the authorities' support for the mostly state-owned economy.

The rating actions are as follows:

Asaka Bank

Long-term foreign currency IDR: downgraded to 'B-' from 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: downgraded to '5' from '4'
Support Rating Floor: revised to 'B-' from 'B'

Uzpromstroybank

Long-term foreign currency IDR: downgraded to 'B-' from 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual rating: affirmed at 'D/E'
Support Rating: downgraded to '5' from '4'
Support Rating Floor: revised to 'B-' from 'B'

OJSC Agrobank

Long-term foreign currency IDR: downgraded to 'B-' from 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: downgraded to '5' from '4'
Support Rating Floor: revised to 'B-' from 'B'

Microcreditbank
Long-term foreign currency IDR: downgraded to 'B-' from 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: downgraded to '5' from '4'
Support Rating Floor: revised to 'B-' from 'B'

OJSCB Hamkorbank

Long-term foreign currency IDR: affirmed at 'B-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B-'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'

POJSEB Trustbank

Long-term foreign currency IDR: affirmed at 'B-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: assigned at 'B-'; Outlook Stable
Short-term local currency IDR: assigned at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'