Asiamoney best bank awards 2020: Uzbekistan
Best domestic bank: Sanoat Qurilish Bank
|Sakhi Annaklichev, SQB|
Sanoat Qurilish Bank (SQB), one of the country’s largest state-owned lenders, has managed to achieve impressive growth over the last 12 months. It had assets of Som35.4 trillion ($3.7 billion) on February 1, according to the central bank, a rise of 15.4% from the previous year.
That is noticeably better than at National Bank of Uzbekistan and Asaka Bank, whose assets rose 7.2% and 11.6% respectively. The three banks together represent almost half of the overall assets in the banking system.
Led by chairman Sakhi Annaklichev, SQB, still sometimes known as Uzpromstroybank despite its rebranding in 2018, has 45 branches in the country, including its head office in Tashkent. Although the bank is a believer in the digital banking revolution, it still plans to keep adding branches, in part because it is well positioned to tap the country’s wealthiest client base. SQB Premium, a service aimed at high net-worth customers, opened in 2019.
It has also forged relationships with foreign banks, something that will prove crucial as Uzbekistan continues to integrate further into the global financial system. SQB has 40 credit lines worth $1.7 billion from foreign lenders.
The bank’s $300 million five-year Eurobond in November was also a big breakthrough for the country. The sovereign raised $500 million from its own debut deal earlier in the year, when no other Uzbek bank had ever sold an offshore bond.
SQB is mainly a corporate lender: 49% of its loans were to large corporations, another 40% to small and medium-sized enterprises and the rest to retail accounts, as of the end of 2019. But it is the latter two categories that have given SQB by far the largest growth – the percentage of its loans that went to SMEs doubled over the course of 2019.
This is a good sign for an economy that needs to move away, however slowly, from a reliance on lumbering state-owned enterprises to generate growth.
There are plenty of opportunities for plucky entrepreneurs in Uzbekistan, but without willing lenders like SQB, they will fall at the first hurdle.
Some observers worry about the dominance of the state in Uzbekistan’s financial system. With all state-owned banks combined controlling some 84% of banking assets in the country, and much of their lending going to state-owned enterprises, there is reason to worry.
But like it or not, those banks will play a role in Uzbekistan for years to come. SQB has proved that even the biggest institutions can embrace the rapid changes taking place in the market.
Best corporate and investment bank: Silk Capital
|Sardor Koshnazarov, Silk Capital
How should one judge a corporate and investment bank in a market such as Uzbekistan? Its capital market is practically non-existent, defined more by its prospects than the handful of private placements that have been issued.
Mergers tend to be between one state-owned company and another. Loans are offered generously but largely from state-owned banks to state-owned corporations, leading to questions about how much due diligence is taking place.
Asiamoney could simply tally a list of achievements in the above markets, weighing up the banks with the biggest loan books against those who worked on the most acquisitions. But that would be to ignore the great changes taking place in Uzbekistan, including a landmark reformof the currency market in September 2017 and the creation of a capital market development agency at the start of 2019.
The country is in the middle of a stark transformation, and our choice of Silk Capital as the best corporate and investment bank reflects that. The firm, a boutique investment bank set up in 2017, represents the best way forward for Uzbekistan’s domestic capital market.
The market needs a few things if it is to prosper: a more helpful regulatory environment, a more transparent approach to corporate governance and an influx of foreign capital that helps to accurately price risk. Silk Capital can do little about the first point, but on the latter two it is already making progress.
Under the stewardship of founder Alisher Djumanov and managing director Sardor Koshnazarov, Silk Capital has won mandates from several foreign corporations hoping to make acquisitions in Uzbekistan, including potential deals in the banking, insurance and retail sectors.
It has been hired as a consultant for companies hoping to conform with requirements from the European Bank for Reconstruction and Development, now returned to the country and hungry to lend. It has won mandates from six locally listed companies to help them improve their corporate governance.
The bank also worked on a Som50 billion ($5.2 million) bond for Asia Alliance Bank in September, generating most of the demand for the seven-year deal. The bond was, alas, sold entirely to domestic investors. But Silk Capital’s attempt to market the bond to international accounts at least moved the conversation on and identified some of the main concerns of foreign fund managers, such as a 10% withholding tax for non-residents.
Silk Capital’s key pitch to domestic corporations is that foreign investors can be an invaluable source of capital to fuel growth. The firm wants to be a test case for this approach. Later this year, it plans to list a holding company, Alfin Capital, on London’s Alternative Investment Market.
Best digital bank: Agrobank
|Rustam Mamatkulov, Agrobank|
When Asiamoney was discussing the digital banking landscape with a senior banker in Uzbekistan, he started by reeling off a list of his bank’s many investments in technology, clearly doing his best to clinch this award. Briefly, though, the pitch faltered.
“Our mobile app is not good enough,” the banker told us. “I am a customer as well as an employee of the bank, and I’m not happy with the service.”
That level of honesty about banking services is unusual, even in a country like Uzbekistan, which is still getting used to the scrutiny of international journalists. But it’s not altogether surprising. Locals say that most banks’ mobile apps and online banking options are poor, the result of years of underinvestment.
But many banks are not willing to accept this situation. They are investing time, energy and, of course, money into a digital banking push that will improve access and product choice for retail and corporate customers alike. Agrobank is the most prominent among them.
After bringing in KPMG to help it craft a five-year business plan in 2019, the bank has gone all-in on digital. About 260,000 consumer customers now use its mobile app and 52,118 use its business app, which allows them to apply for and receive loans online: the bank can approve micro loans within minutes.
It has started work on a cross-channel digital banking platform, implemented credit-scoring software and launched an electronic trading platform for its clients. Agrobank has also tied up with Sberbank to piggyback on its branch network in Russia, a useful move for Uzbeks remitting money.
Digital banking in Uzbekistan is still streets behind more developed markets, but the country is catching up. And Agrobank is catching up fastest.
Best bank for SMEs: Asaka Bank
|Nodirbek Saydullaev, Asaka Bank
Asaka Bank is the second-largest bank in the country, boasting assets of Som35 trillion ($3.7 billion) at the beginning of February. It is not often that such a large institution also turns out to be an ambitious lender to small and medium-sized enterprises, but Asaka defies conventional wisdom.
The bank, under chairman Nodirbek Saydullaev, provided financing to 11,250 SME projects in 2019. That is a huge jump from approximately 3,440 the year before, indicating that the bank is not just attempting to increase its loan book but also trying to bring even the smallest clients along for the ride.
Its focus on SMEs helped it forge relationships with international lenders long before Uzbekistan’s reform efforts brought it back into the spotlight. In 2012, Asaka Bank secured a loan from the IFC to help it fund micro and SME loans. The supranational lender now owns a small stake in Asaka.
Asaka’s focus on SME lending makes economic sense. Moody’s Investors Service pointed to the shift to “higher-yielding loans to retail and SME sectors” as a factor likely to increase profits, albeit gradually. That encouraged the agency to change the bank’s B1 local deposit rating to stable from negative in January.
That should be enough to ensure Asaka Bank continues its shift away from large corporates towards the country’s small businesses. That would be the right move for a bank that has so much to offer to the country’s budding entrepreneurs.
Best bank for CSR: Orient Finans Bank
|Babur Parpiev, Orient Finans Bank
Orient Finans Bank is relatively small by Uzbek standards. Its Som4.3 trillion ($450 million) of assets means it cannot compete with the country’s state-owned firms, while only Hamkorbank truly eclipses it among the country’s privately owned lenders. But when it comes to the bank’s corporate and social responsibility (CSR) efforts, it has an outsized impact on the market.
Some rival bankers admit their institutions have not paid much attention to CSR during Uzbekistan’s rapid and sweeping reforms over the last few years. Under the watch of chairman Babur Parpiev, Orient Finans has become a clear exception to this rule.
Sightseeing tours for orphans, fitness drives and sports sponsorship – the bank’s range of CSR efforts fit a type: local and direct. Orient Finans does not appear to go in for the grand gestures and heady rhetoric that sometimes define CSR initiatives at other banks. Instead, its executives just try to fix problems.
Some of these are broad financial literacy problems, making it among a long line of emerging market banks to put this at the forefront of their efforts. Others are very specific, for example paying for surgery for a boy born with heart disease.
Orient Finans deserves plaudits for its approach. For many banks, CSR is a marketing device. For Orient Finans, it appears to be a way to really make a difference.