Ravnaq-bank did not obtain the foreign currency license or permission to open a new branch in Tashkent, the capital city of Uzbekistan, in 2014. The outlook revision largely reflects opinion of Standard & Poor’s that Ravnaq-bank may face additional difficulties in achieving these targets, and Standard & Poor’s consider these plans to be crucial for further development of the bank’s business position.

«Our ‘CCC’ long-term ratings on Ravnaq-bank continue to reflect the bank’s vulnerability to operating conditions in Uzbekistan. In the absence of regulatory approval, Ravnaq-bank managed to expand its franchise only marginally in 2014, with assets shrinking on the back of a large, albeit planned, withdrawal by one of the depositors and subdued earnings. We note that Ravnaq-bank plans to attract a third-party investor, but we believe them to be contingent to the regulatory approval for a foreign currency license», - Standard & Poor’s said.

Current base-case scenario of Standard & Poor’s does not include any foreign currency license or new branches opening before the second half of 2015, contrary to the bank’s more aspiring expectations. If the bank’s inability to resolve the regulatory issues prolong beyond 2015, in opinion of Standard & Poor’s, shareholders may feel less inclined to support the bank. This is likely to complicate compliance with the growth requirements set by the Uzbekistani authorities, increasing already high regulatory risks for the entity, the agency said.

“The stable outlook on Ravnaq-bank incorporates our view that gaining a foreign currency license is uncertain, although not impossible, and without this license, any improvement of the business financial profile will be challenging,” the agency said.

Standard & Poor’s might consider raising the rating if the bank obtained a foreign currency license, boosting its ties with clientele. If so, Standard & Poor’s expects the bank will diversify its funding profile and expand its business volumes and earnings. Standard & Poor’s also assumes that business expansion would not further erode the bank’s adequate capitalization.

“We might consider a negative rating action if we see that the shareholders’ propensity to support the bank declined, resulting in a deterioration of the bank’s business profile. An additional source of pressure on the bank’s creditworthiness could come from a decline in liquidity or solvency, with the bank’s risk-adjusted capital ratio falling below 7%,” Standard & Poor’s concluded.