The ratings of Hamkorbank reflect its relatively small size, its limited franchise, the fast growth of the loan portfolio and some weaknesses in the operating environment. They also take into consideration its good profitability, adequate capitalisation, low loan losses to date and positive experience of cooperation with international financial institutions (IFIs).

Upside potential for the ratings is currently limited, and would probably require improvements in the operating environment. However, further expansion and diversification of franchise and deeper co-operation with IFIs, for example by one of them becoming a shareholder of the bank, would be positives for the credit profile. Significant credit losses are the major potential source of downside risk for the ratings.

Hamkorbank was founded in 1991 by state-owned industrial entities located in Andijan, Uzbekistan’s fourth-largest city. The city is situated in the Fergana Valley, a densely populated and fertile region, specialising mainly in agriculture, particularly in cotton growing and related processing industries. Hamkorbank was ranked 14th by assets out of 28 Uzbek banks at end-2006, with a market share of approximately 1.1%.

The bank has a significant presence in the Fergana Valley and also has a network of branches and outlets covering 13 out of Uzbekistan’s 14 administrative districts.

The bank’s business is focused on lending to small and medium-sized enterprises (SMEs) and individual entrepreneurs. Hamkorbank actively cooperates with international financial institutions, such as the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC) and International Bank for Reconstruction and Development (IBRD), which provide finance as well as technical assistance to the bank.

Hamkorbank became the second bank of Uzbekistan, which obtained rating of Fitch Ratings. Earlier, assigned Uzbekistan-based Pakhta Bank (PB) ratings of Long-term Issuer Default (IDR) ’B-’ (B minus) with Stable Outlook, Short-term IDR ’B’, Individual ’D/E’, Support ’5’ and Support Rating Floor ’B-’ (B minus).