THE UZBEK BANKING SYSTEM 15th BACEE Country and Bank Conference 14-16 November 2006, Budapest

THE UZBEK BANKING SYSTEM

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

14,9%

11,8%

46,3%

19,2%

4,7%

3,1%

Government

Households

Companies ow n fund's

Foreign investment

Off-budget funds

Bank loans

Financing of investments



Number of banks by type (2005)

29

3

129

5

0

5

10

15

20

25

30

35

Commercialbanks

Government-owned

Joint-stock Private With foreigncapital

29 operating banks, down from 38 in 4 years• Top – 5 (NBU, Asaka, Uzpromstroybank, Pakhtabank, Ipoteka) control over 80%

of T. A.• 17 banks’ shares traded on the USE



• Specialised banks (Asaka: automobile industry, Pakhtabank: agriculture, cotton industry, Tadbirkorbank: SME finance)

• 1997 presidential decree stimulating setting up private banks

• Minimum capital requirement (from 1 April 2007) USD 2.5 M for private, USD 5 M for other banks

• Deposit insurance provides compensation for 100% of deposits up to 100 minimum wages, 90% for up to 250 MW

• 2004: government decision on creation of 2-level credit bureau system (National institute on credit information, managed by the Central Bank + Inter-bank Credit Bureau (ICB) under Uzbek Banks’ Association)

• Banks closed in 2003-2005: C. Asian Cooperation and Development Bank, Karron Bank, Istiqbol Bank, Business Bank (March 2005)

• 2005 May: Uzzhilsberbank and Zamin Bank merge into Mortgage Bank (Bank Ipoteka)

• In March 2006 Uzromstroybank and Uzprivatbank complete merger



Changes in H1 2006: licence of Ravnakbank withdrawn, MicroCredit Bank established on the bsasis of Tadbirkorbank, R&D Express – Aussenhandels GmbH buys 40% of Savdogarbank

Plastic cards

Government’s bank card project (September 2004)

• Plan to reach 3 M cards by 2007

• 3-year exception on property tax and 0% import duty on ATMs, card-related equipment, software

• 8,030 terminals (+180%)



Role of foreign banks 6 of 29 banks with foreign capital (in form of JV) ABN Amro, UzKDB bank (former UZ

Daewoo), Uzprivat, UT (with Turkish capital) , Bank Saderat, Savdogarbank. Except for ABN Amro, quite small

16 foreign banks have rep office in Tashkent

Privatisation• Privatisation: state’s stakes in Tadbirkorbank, Savdogarbank, Trustbank, Ipak Yuli

Bank, Aviabank, Gallabank, Privatbank sold. Asaka Bank to be sold by 2006, NBU by 2009



Banking reform 2005-2007

• Special resolution signed by the President in April 2005• Former specialised banks (Pakhtabank, Alokabank, Asaka, Gallabank) turned into universal banks• Lending liberalised• Deposit insurance introduced in 2002. By 2006 nearly 200 types of deposit products developed• Strenghtening of equity base: from 1 January 2007, minimum capital requirement: USD 2.5 M for private banks, USD 5 M for state banks. Reinvested dividend becomes tax-free• Mini-banks: 1,450 of which 328 opened in 2005• Micro-lending: new special law passed in June 2005



Small loans

• Simplified procedure for loans up to USD 5,000 (max. 3 years, 16% p.a.) State grants subsidies for half of interest payable• Main players are the banks but role of other market participants: (25 credit unions, 7 lombards) also increases• In 2005, 419.9bn UZS SME loan granted, 77% funded by banks’ own funds, 18.1% by foreign loans, 4.9% by off-budget funds



In bn UZS

Assets

Retail deposits per capita: USD 20

Negative interest rate paid on private deposits

* without Bank Saderat Iran, Trust bank



0

1000

2000

3000

4000

5000

6000

2001 2002 2003 2004 2005*



0100020003000400050006000700080009000

100001100012000

2 004 2 005

Loans

other assets

Bank’s assets and loan portfolio

Private deposits



0

100

200

300

400

500

2002 2003 2004 2005*

In bn UZS

Equity



Number of mini-banks

530795

1003

1450

0

500

1000

1500

2000

2002 2003 2004 2005



Funding problems - Loans to deposits ratio

115%135%

188%

0

50

100

150

200

Average for UZ banks Uzpromstroy Bank Gallabank

Low level of deposits – banks need alternative funding (incl. state funds). Small banks tend to have higher L/D ratio



Opportunities for growth• Fee-based business – money transfers (Uzbek diaspora in Russia, USA, UK) is the fastest-

growing segment• Bank cards – state program to develop cashless payments• Corporate bonds• New services (leasing, factoring)

Retail business• Retail: average deposit per person under 20 USD• NBU dominates with 70% of retail deposits, 50% of retail loans• Only few other banks are involved in retail business: Alp Jamol, Zamin, Capital• In 2005, retail loans grow to UZS 216.8bn, by 92.2%

Plastic cards• 2 M cards issued, +400% in a year• 11,000 POS terminals• 143 bn UZS turnover in 2005



Leasing• Number of leasers over 30• Total volume grows by 21%• Tax incentives, improving legislation

Pension payments• Accumulative pension system introduced on 1 January 2005• Monopoly of People’s Bank (Narodniy Bank)• PB has > 200 branches, 2,700 offices, 60 mini banks, 30,000 corporate and 9 M private

clients• PB’s Total Assets UZS 191 bn

Mortgages• February 2005: Presidential decree ”On further development of housing construction and

housing market”• Mortgage Crediting Fund created within the MinFin• New Bank Ipoteka set up (merger of Uzzhilsberbank and Zamin Bank)



Foreign funding

Government drastically reduces amount of guarantees provided to UZ banks when borrowing from foreign banks

In 12 years, UZ received investment loans + FDI of USD of USD 14 bn, 90% with state guarantee

International business

• Except for NBU, Pakhtabank and Asaka Bank few other Uzbek banks appear in international markets

• Uzzhilsberbank participates in EBRD trade finance program• UzPrivatbank, Ipak Yuli have a EUR 6 M framework agreement with KfW for

SME finance

















INFORMATION ON SELECTED UZBEK BANKS



The National Bank for Foreign Economic Activity of the Republic of Uzbekistan (NBU)• Established in 1991 by Presidential Decree• in state ownership, 40% was supposed to be offered to a foreign investor in 2004 but

privatisation delayed to 2009• acts as government’s agent in international financial markets, as export-import bank,

involved in project finance• has 96 branches and 18 mini-banks• subsidiary in Moscow (Asia-Invest Bank, No. 433 by T.A. in Russia)• 550,000 clients• services over 70% of Uzbek foreign trade

• holds 52.2% of banking system’s assets, about 11% of authorised capital, 59.2% of loans

• in July 2005, the bank’s former First Deputy CEO and 13 other employees convicted for economic crimes

• Total Assets: 2.6 bn USD

• authorised capital: 20 M USD, equity: 485 M USD



1999-2003 sharp decline of TA due to transfer of FX reserves to CBU, unification of UZS rates

Total Assets of the NBU (bn USD)

3,9

2,9 2,8 2,92,6

4,4

0

1

2

3

4

5

1999 2000 2002 2003 2004 2005



• Established in November 1995 to serve UzDaewooAuto• 98.33% Ministry of Finance, 1.67% Association "Uzavtosanoat”• 27 branches, 62 mini banks• Diversification since 1995, automobile production 25% of loans• Privatisation foreseen for 2005 with EBRD participation (letter of intent May

2002), delayed to 2006• Total Assets: 599.2 bn UZS (+8.3% in 2005)• Equity: 155.8 bn UZS• Loans: 423.0 bn UZS

Asaka Bank



Uzpromstroybank

• Established in 1991• Main shareholder: ”Uzbekneftegaz” state oil and gas company (over 51%)• 3,828 employees• Total Assets: 521.5 bn UZS (+21.9% in 2005)• Equity: 30.8 bn UZS• Profit: 2.7 bn UZS



Pakhta Bank

• Established in July 1995• Ownership: state agricultural companies 31%, Uzpakhtasanoatsotish 19%, private companies 40%, individuals 10% (76,669 shareholders)• 183 branches, 229 mini-banks, 6.500 employees• 240,000 clients • Specialised in agricultural finance (in particular cotton production, processing)• Total Assets: UZS 357.3 bn (+34.4% in 2005)• Equity: UZS 51.3 bn





Ipoteka Bank

• Specialised in retail business• 580 ” communal and savings banks” (outlets), incl. mobile banks to collect communal payments• Total Assets (December 2005): 272.0 bn UZS (+31.8%)

ABN Amro Bank UZ

• Largest foreign bank in UZ• Established in December 1996• Ownership: ABN Amro Bank N.V. (58.8%), NBU (17.6%), EBRD (11.8%), IFC (11.8%)• 1 branch• Total Assets: 103.9 bn UZS (-7.6%)• Equity: 10.0 bn UZS• Profit (2004): 140.7 M UZS, down 7.4 times



UzKDB Bank (former UzDaewoo Bank)

• Established in July 1995• Ownership: KDB 61%, Management 10%, EBRD 27.8%, NBU 5.6%, Turon Bank 5.6%• 1 branch• Market leader in M/M, securities business• Korean Development Bank bought out Daewoo’s stake• Total Assets (December 2005):58.2 bn UZS (+24.8%)• Loans: 14.9 bn UZS• Equity: 11.5 bn UZS



Gallabank

• 31 branches, 62 mini banks• 5,800 shareholders, incl. 3,300 individuals. Main shareholder: Uzkhleboproduct State grain company• Total Assets (2005) 71.9 bn UZS (-0.3%)• Loans: 56.1 bn UZS (-6.9%)• Equity: 16.3 bn UZS (+31.8%)• Specialisation: lending to enterprises in the grain industry



Kapital Bank

• Established in 2001 as part of the Elsun Group• Ownership: 51% individuals, 49% private companies• 1 full service, 6 retail branches• Main business: SME, retail• Total Assets (December 2005): 53.4 bn UZS (+192.2%)



Turon Bank

• Established in November 1990 as UZ’s very first commercial bank. It has a nationwide coverage• Ownership: Ministry of Agriculture + 5,500 shareholders• 17 branches, 2 retail, 36 mini banks• Planned: retail expansion• Total Assets (December 2005): 47.3 bn UZS (+56.4%)



Aloqa Bank

• Established in November 1990 as a bank of the telecom industry• Shareholders: state agency of Telecommunications + affiliated structures• 10 full service branch• Market segment: telecom finance (icl. Uzbek part of Asian European fiber optic line (Frankfurt-Shyzai), state program of computerization and development of IT (2002-2010)• Total Assets (December 2005): 33.6 bn AZS (+20.4%)• Loans: 15.17 bn AZS



Documents

THE UZBEK BANKING SYSTEM 15th BACEE Country and Bank Conference 14-16 November 2006, Budapest