Moody's rating action is largely based on Infinbank's audited financial statements for 2009 and 2010 prepared under IFRS.

According to Moody's, the E+ BFSR and B3 deposit ratings are constrained by Infinbank's narrow franchise (as at year-end 2010, the bank ranked 20th out of a total of 30 banks in Uzbekistan by total assets), as well as its short track record of operation. Infinbank's liabilities predominantly consist of current accounts and short-term deposits of corporate clients, thus necessitating consideration of an elevated liquidity cushion to address potential volatility of the funding base. The bank's concentration on a limited number of clients also leads to an insufficient diversification of its income streams, whereby the bank's overall performance depends on financial standing and sentiments of just a small number of key clients. Additionally, due to the rapid growth of Infinbank's loan portfolio (although from a low base), Moody's expects rising asset quality pressures as the loan book matures and becomes more seasoned over time.

Among other factors constraining Infinbank's ratings, are the bank's sizeable investments in equity instruments (made through its insurance subsidiary) and fixed assets accounting together for almost three-quarter of its Tier 1 capital as of year-end 2010. On top of that, 13% of Infinbank's total gross loans and 9% of customer accounts were attributable to operations with related parties as of the same reporting date.

On a positive note, factors underpinning Infinbank's ratings include (i) the predominantly recurring nature of its income streams, with the portion of fees and commission income accounting for 54% of total revenues and net interest income contributing another 17% of the total in 2010; (ii) the relatively good performance of the bank's loan book, to date, with the share of impaired loans standing at 3.61% of total gross loans at year-end 2010 and accumulated loan loss reserve accounting for 2.06% of the portfolio as of the same reporting date; as well as (iii) the bank's conservative liquidity position, with more than half of its assets kept in the form of cash and cash equivalents, which, according to the rating agency, somewhat compensates for the predominantly short-term duration of Infinbank's funding mix (but at the same time explains the limited proportion of net interest income in the bank's total operating revenues).

Moody's said that Infinbank's global local currency deposit ratings of B3/Not Prime do not incorporate any element of systemic support given the bank's limited franchise value and its low importance for the Uzbek banking system as a whole. Nor do Infinbank's ratings incorporate any probability of shareholders' support to the bank, in case of distress.

According to the rating agency, Infinbank's E+ BFSR has limited upside potential at its current level. However, in the longer term, BFSR might map to a higher long-term scale, as opposed to B3 currently, if the bank were to strengthen its franchise and increase its core business volumes while also reducing credit concentrations and lengthening the maturity of its funding base. In order to achieve higher ratings, all the conditions mentioned above would need to be accompanied by stable and sound financial fundamentals.

On the other hand, Infinbank's intrinsic financial strength is exposed to common risks of the economic and operating environment in Uzbekistan, particularly as regards asset quality. Negative pressure could be exerted on the ratings as a result of (i) any failure by the bank to address these challenges, thereby causing a significant weakening of its financial fundamentals, and (ii) any notable increase in concentration on either the asset or liability side of the balance sheet (or both). Moody's also notes that a substantial increase in the volume of related-party business or non-core investments represents another factor that could have an adverse impact on Infinbank's ratings.

Headquartered in Tashkent, Uzbekistan, Infinbank reported - under audited IFRS - total assets of US$67.6 million and total equity of US$8.8 million as at 31 December 2010; net IFRS income for 2010 stood at US$4.0 million.