Tashkent, Uzbekistan (UzDaily.com) -- IPMI experts analyzed the level of competition in the banking system of Uzbekistan.

In this study, the Herfindahl-Hirschman index (HHI) was used. The Herfindahl-Hirschman Index is a generally accepted indicator of market concentration and is used to determine market competitiveness. A market with an HHI below 1500 is a competitive market, an HHI between 1500 and 2500 is moderately concentrated, and an HHI of 2500 or above is highly concentrated.

Over the past 5 years, competition in terms of assets, loans, as well as deposits has intensified in the banking system of Uzbekistan. As of 1 January 2018, the HHI for assets was 1520, and as of 1 December 2022, it decreased to 1016. This indicator for loans decreased from 1709 to 1082.

Thanks to the functioning of the deposit market, based on the principles of a market economy, there is strong competition between banks for deposits, and this competition is intensifying every year. This trend is also evident when the HHI deposit index fell from 919 to 852.

Assets. The share of 5 largest banks with a state share (Uznatsbank, Uzpromstroybank, Asakabank, Ipotekabank, Agrobank) in the assets of the banking system decreased from 70.9% to 60.5%. The share of other state-owned banks increased from 11% to 18%, while the share of private banks increased from 18.1% to 21.5%. By 2025, it is planned to increase the share of assets of non-state banks in the total assets of the banking system to 60%.

During this period, Tenge bank, TBC bank, Anor bank, Uzum (Apelsin) bank and Poytaxt bank entered the banking system. The share of these banks in total assets reached 1.8%.

Credits. The share of the top 5 banks in the total loan portfolio decreased from 77% to 64%. While the share of private banks increased from 11.6% to 16.6%, the share of other banks with a state share reached 19%. Private banks such as Kapitalbank, Hamkorbank, Ipak yo’li bank have become a serious competitor in the commercial loan market for both state banks and other private banks. The share of Kapital Bank in the total loan portfolio of the banking system increased from 1.2% to 3.8%, while the share of Ipak yo’li bank increased from 1.8% to 2.1%. Hamkorbank retains 3% market share.

Deposits. At the beginning of 2018, 51.2% of total deposits in the banking system accounted for the top 5 banks, and as of 1 December 2022, their share decreased to 46.9%. The share of deposits attracted by private banks increased from 34.1% to 36.4%. The share of other banks with a state share in the deposit market increased to 2 p.p. – from 14.7% to 16.7%.

Mutual competition between private banks in the deposit market is stronger than competition between state-owned banks and private banks. The share of UzKDB in the bank in this market decreased from 8.6% to 3.6%, while Kapitalbank increased its share from 4.8% to 10.9%. The share of bank deposits of Hamkorbank decreased from 5.5% to 3%.

Increased competition for deposits is also reflected in the attractiveness of interest rates on time deposits. For example, in April 2017, the average interest rate on term deposits of legal entities was 5.8%, in December 2017 it increased to 12.1%, and in December 2022 it reached 16.9%. Over the past 2 years, the average rate on term deposits of individuals has been 20%.