According to Moody’s, Asaka Bank’s ratings reflect the bank’s entrenched market positions (especially in the corporate banking sector) in the Republic of Uzbekistan, its relatively expanded geographic national coverage, healthy and recurring income structure and adequate capitalisation levels, as well as the bank’s established partnership with a diverse number of international financial institutions.

At the same time, Asaka Bank’s ratings are constrained by the high concentration of the bank’s assets and liabilities (in terms of both single-name and industry concentration), the predominantly short-term nature of its customer funding base, modest cost-efficiency metrics, as well as the untested quality of the bank’s loan book and its potential deterioration in a less favourable economic environment. Other constraining factors include the bank’s corporate governance issues, largely derived from the fact that Asaka Bank is at the same time 100% state-owned and predominantly focused on servicing state-owned clientele.

Asaka Bank’s deposit ratings are underpinned by Moody’s expectation of a very high probability of systemic support to the bank, in case of need. This expectation takes into account the 100% state ownership of the bank and its material share of the country’s total banking system, which varies from 10% to 15% in the context of corporate loans and deposits within the framework of Uzbekistan. As a result, in accordance with Moody’s JDA methodology for banks, Asaka Bank’s deposit rating of B1 benefits from a one-notch uplift from its own B2 Baseline Credit Assessment (mapped, in turn, from its E+ BFSR).

Moody’s notes that Asaka Bank’s deposit ratings are strongly dependent upon the stance and condition of Uzbekistan’s operating and economic environment.

According to Moody’s, an upgrade of Asaka Bank BFSR of E+ might be possible if the bank qualitatively enhances its corporate governance and risk management practices, especially as regards serving state-owned projects and clientele, and demonstrates a sustained trend of strengthening profitability and improving asset quality, including a decrease in borrower concentration. Greater diversification and longer duration of the bank’s funding base could also exert positive pressure on its stand-alone rating positioning.

"A dramatic deterioration in Asaka Bank’s asset quality indicators, especially if not compensated by adequate capitalisation, or weakening of its liquidity profile could lead to a downgrade of the bank’s stand-alone ratings," says Olga Ulyanova, a Moody’s Assistant Vice-President/Analyst. "Asaka Bank’s B1 GLC deposit rating could be downgraded if any bank-specific or system-wide factors were to change Moody’s current perception of (i) the probability of systemic support for the bank from the government of Uzbekistan and (ii) the state’s financial flexibility to render such support," Ms Ulyanova adds.

Headquartered in Tashkent, Uzbekistan, Asaka Bank reported in YE2008 IFRS total assets of US$1.067 billion and total shareholders’ equity of US$139 million. Net income for that year was US$15.7 million.