Fitch Ratings has initiated coverage of digital bank TBC Bank Uzbekistan (TBCU) with a ‘BB-’ rating.
The long-term issuer default rating (IDR), issued with a stable outlook for the LSE-listed TBC Bank Group’s Uzbek subsidiary, is in line with the
Nika Kurdiani, CEO of
“We are one of few companies to achieve a credit rating of BB- in
“We are scaling our digital banking business and launching a wide range of digital financial services to improve the lives of the people of
Fitch also gave TBCU a viability rating (VR) of ‘b’, and said: “TBCU's Long-Term IDRs, as captured by the Shareholder Support Rating (SSR) of 'bb-', reflect potential ultimate support from
Looking at the roots of the Uzbek unit, Fitch said: “TBCU was established in 2020 as a digital bank to focus solely on retail operations, predominantly unsecured cash lending (95% of gross loans at end-1Q24).
“It is controlled by
Fitch also noted: “Since its operations began, TBCU has been growing its loan book rapidly (2023: 148%). We expect this above-sector growth to continue into 2024-2025 as the bank continues to expand its business in the higher-risk unsecured retail segment. However, we assess TBCU's underwriting standards as reasonably conservative for the domestic market as the bank issues granular loans denominated in local currency.”
TBCU’s impaired loans ratio equalled a limited 2.2% at end-2023, where, said Fitch, it is forecast to remain in 2024-2025 due to write-offs and expected high lending growth. Problem exposures were fully provisioned for, which further reduces asset-quality risks.”
TBCU was loss-making during the first three years of its operations due to high operating costs related to establishing its business operations, said Fitch, adding that in 2023, the bank reported its first annual net profit, with a return on average equity of 7%. High margins and economies of scale should boost TBCU's profitability in 2024-2025, although it will remain moderate in Fitch’s base case due to still substantial operating expenses, the rating firm said.
Fitch also concluded: “TBCU is largely funded by granular, albeit pricey, retail deposits (86% of end-2023 total liabilities). However, the bank has recently started to attract wholesale debt, including from the parent group, and we expect the share of external borrowings to increase in the medium term. The bank's liquidity position is modest, with total liquid assets covering around a quarter of customer deposits at end-2023.”
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