Uzbek Banks See Rise in Problematic Loans Despite Growth in Credit Portfolio in Q1 2026
Total credit portfolios in Uzbekistan's banking sector expanded, but the volume of non-performing loans increased notably in state banks.
In the first quarter of 2026, Uzbekistan's banking sector experienced significant growth in its total credit portfolio, reaching 623.3 trillion soms, an increase of 19.3 trillion soms compared to the previous quarter. However, this expansion was accompanied by a notable rise in problematic or non-performing loans (NPLs), which increased by 1.8 trillion soms to nearly 19.9 trillion soms.
Credit Portfolio Growth and Rising Non-Performing Loans
The Central Bank's data highlights that the overall credit growth was primarily driven by state-owned banks, whose loan portfolios grew by 11.1 trillion soms. Key contributors included Agrobank with a 5.44 trillion som increase, Milliybank (+2.63 trillion soms), Xalq Bank (+1.95 trillion soms), and Aloqabank (+1.89 trillion soms).
Conversely, some banks such as SQB and Asakabank saw a contraction in their credit portfolios during this period.
Among private banks, Hamkorbank, Hayot Bank, and Kapitalbank demonstrated active credit expansion, while TBC Bank and Orient Finans Bank experienced reductions in their lending volumes.
"Despite the growth in problematic loans, their share in the total credit portfolio declined from 3.19% to 2.99%, reflecting faster overall credit growth."
Problematic loans primarily increased within state banks by 1.46 trillion soms, with SQB, Aloqabank, and Asakabank recording the largest rises in non-performing exposures. Meanwhile, some banks like Ipoteka Bank reduced their NPLs significantly, writing off 316 billion soms worth of bad loans. However, Anor Bank and Garant Bank reported increases in their problematic loan volumes.
Capital Markets Implications for Investors
The mixed signals from Uzbekistan’s banking sector present a nuanced picture for investors and market participants. The expansion in credit portfolios indicates ongoing economic activity and demand for financing, which can be positive for bank earnings and related equities. However, the rise in non-performing loans, especially concentrated in state banks, signals potential risks that could affect asset quality and profitability going forward.
From a capital markets perspective, investors should monitor the trajectory of NPLs closely, as sustained increases could pressure bank balance sheets and increase credit risk premiums. The slight decline in the NPL ratio suggests that credit growth is currently outpacing the rise in problem loans, which might sustain investor confidence in the near term.
Bond markets could react to these developments depending on the creditworthiness outlook of individual banks, especially the state-owned ones that dominate the sector. Deterioration in loan quality tends to raise concerns about future loan-loss provisions and capital adequacy, potentially leading to wider spreads on bank-issued debt.
For equity investors, the sector's performance will hinge on how banks manage their asset quality issues while continuing to grow their lending business. The divergent trends among different banks also highlight the importance of selective investment strategies focusing on institutions with prudent risk management and robust balance sheets.
Overall, the first quarter results underscore the need for continuous monitoring of credit risk developments in Uzbekistan’s banking system as they hold significant implications for both domestic and international investors engaged in the country's capital markets.
