Analysis Update: Ravnaq Bank

The negative outlook indicates our view that the bank's loan book quality could deteriorate because of the tough operating conditions' effect on the bank's credit standing. In addition, it incorporates the bank's relatively high loan book concentration and its past aggressive liquidity policy. We could consider lowering the rating over the next 12-18 months if asset quality deteriorates and disrupts loan repayments, which would lead us to believe Ravnaq is vulnerable and dependent upon favorable business, financial, and economic conditions to meet its financial commitments. A downgrade could also follow deterioration of the bank's funding and liquidity profile. An upgrade is a remote possibility, in our view, and would depend on a visible improvement in the sustainability of the current

...High economic and industry risks in Uzbekistan and the bank's purely domestic operations constrain its creditworthiness. Ravnaq Bank's geographic concentration in Uzbekistan exposes it to low wealth levels and debt servicing capacity of domestic households and companies. Our starting point in assigning an issuer credit rating for a commercial bank operating only in Uzbekistan is 'b+'. Ravnaq's financial standing was hit harder by the COVID-19 pandemic than most of its domestic peers and its financial results remain vulnerable to further provisioning needs. Over the past year, the bank had to renegotiate payments on loans worth around 30%-40% of its loan book. This has increased the pressure on Ravnaq's credit losses and limited its business growth prospects. Although we understand that most of these restructured loans were repaid in line with the agreed schedules, the bank's problem loans amounted to 34% of its gross loans at Aug. 1, 2021, well-above the 6.2% average for the system. In...

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