Research Update: Uzbekistan-Based Ravnaq Bank Ratings Lowered To 'CCC+/C' On Asset Quality Deterioration; Outlook Negative

Ravnaq Bank suffered payment delays from its largest borrowers which have been experiencing logistic issues due to the Russia-Ukraine conflict. Due to its highly concentrated business model, these delays led to adramatic deterioration in Ravnaq's asset quality and Uzbekistani sum (UZS) 6 billion of losses in the first five months of 2022, causing a breach of minimum regulatory capital ratios in May and June 2022. We anticipate Ravnaq will post losses in 2022-2023 owing to the increased vulnerability of its business model to macroeconomic turbulence. It threatens the sustainability of Ravnaq's franchise also, given its sensitivity to a potential liquidity squeeze in case of prolonged asset quality deterioration. We therefore lowered our ratings on Ravnaq to 'CCC+/C' from 'B-/B'. The

...- Ravnaq Bank suffered payment delays from its largest borrowers which have been experiencing logistic issues due to the Russia-Ukraine conflict. - Due to its highly concentrated business model, these delays led to adramatic deterioration in Ravnaq's asset quality and Uzbekistani sum (UZS) 6 billion of losses in the first five months of 2022, causing a breach of minimum regulatory capital ratios in May and June 2022. - We anticipate Ravnaq will post losses in 2022-2023 owing to the increased vulnerability of its business model to macroeconomic turbulence. - It threatens the sustainability of Ravnaq's franchise also, given its sensitivity to a potential liquidity squeeze in case of prolonged asset quality deterioration. - We therefore lowered our ratings on Ravnaq to '###+/C' from 'B-/B'. - The negative outlook reflects our expectation in the next 12 months that Ravnaq's asset quality, profitability, and capitalization will remain under pressure owing to the less benign operating environment...

Research Update