Page 24 - Uzbekistan rising bne IntelliNews special report

24 I Special Report: Uzbekistan Rising bne December 2021
Uzbek banking privatisation gathering steam
Ben Aris in Tashkent
Uzbekistan's most profitable bank, UzPromStroyBank (known locally by the Uzbek language abbreviation SQB), is going to be the first big bank to be sold off as the country’s banking sector privatisation gets under way. Two smaller banks
have already been sold this autumn,
but the sale of the big banks is just starting and SQB will probably have new shareholders sometime next year.
The Uzbekistan state is committed to getting out of the economy. The cotton sector has already been sold and
a raft of hotels and real estate assets
as well. Most of the largest industrial family jewels will be sold in the coming years, but banks have been the focus
of an intense restructuring programme and most are now ready to go.
As bne IntelliNews reported, the effort moved to a practical level in March this year as the State Assets Management Agency (SAMA) began to implement a presidential decree that mandates the privatisation of banks with a new zeal.
The decree included lists of banks
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to be sold but work on getting the banks ready started earlier with the acceptance of a roadmap for reform prepared by the IFC and EBRD.
In all, six banks are being prepared for privatisation and SQB is the biggest and most profitable. The banks that have been prepared for privatisation are: SQB, Asakabank, Aloqa Bank, QQB, Ipoteka Bank and Turonbank.
The international financial institutions (IFIs) have been actively involved in the process and as part of the changes all Uzbek banks must have switched
to IFRS reporting by the end of 2022 and the government hopes to have the whole programme completed by 2025.
Uzbek media outlet Spot compiled a list of Uzbekistan's domestic banks in terms of their profitability following the release of 3Q results, and SQB tops the list. Its analysis showed that almost all of the financial institutions ended the reporting period in profit. The profit posted by the top ten banks is fivefold that of the other 17 banks in the sector, according to Spot.
The banking business
As part of the preparations the bank
has been refocusing its business. Under the previous Karimov administration the country’s banks were split up by activity and used to provide directed credits to finance the various aspects
of the economy. SQB was primarily focused on industry and infrastructure, a focus it retains, but now all its business decisions are made on a commercial basis, not state orders from on high.
“Our funding is from the local
market deposits and the Ministry
of Finance funds. The bank’s focus
is investment and development of Uzbekistan infrastructure and industrial development. We can fund these projects on a commercial basis, drawing on our deposits as well as synthetic loans from international financial institutions,” Ilkhom Khudayberganov, SQB chief funding officer, told bne IntelliNews in an exclusive interview.
SQB’s loan portfolio is largely made
up by corporate clients (60%), with SMEs comprising another third (30%), and the rest is retail customers (10%),