Uzbek Banks Show Robust Q1 Earnings Growth Amid Rising Competition and Asset Expansion

The Uzbek banking sector’s leading players — Octobank, Tengebank, Kapitalbank, Milliybank, and Hayotbank — have released their financial results for the first quarter of 2026, showing significant revenue growth, asset expansion, and intensifying market competition.

Sector-Wide Asset Growth and Income Diversification

Bank assets collectively reached 15.52 trillion Uzbek soums by the end of Q1, marking a notable increase from the start of the period. Investments constitute the largest portion of these assets, standing at 6.71 trillion soums, reflecting banks’ strategic allocation toward investment instruments.

Income diversification is evident, with interest income recorded at 238.3 billion soums and non-interest income significantly higher at 1.2 trillion soums. This diversification suggests banks are increasingly relying on fee-based and other non-interest revenue streams to bolster profitability.

On the expense side, interest expenses accounted for 176.9 billion soums, while non-interest expenses reached 1.04 trillion soums. Operational costs totaled 111.6 billion soums, with employee compensation comprising 73.8 billion soums. The banking sector also contributed 110 million soums in income tax to the state budget during this period.

Tengebank Leads in Profit Growth Amid Credit Risk Concerns

“Tengebank’s net profit surged to nearly 34 billion soums, a multiple increase over the previous year’s 920.9 million soums for the same quarter.”

Tengebank posted a remarkable net profit of approximately 34.0 billion soums in Q1 2026, a dramatic rise from 920.9 million soums in Q1 2025. For context, the bank closed 2025 with a total profit of 54.9 billion soums, up from 36.2 billion soums in 2024.

While interest income remained largely stable, increased reserves for potential losses on loans and leasing operations pushed net interest income into negative territory, registering a loss of 5.3 billion soums. However, commission income soared from 12.8 billion soums to 57.0 billion soums, driving the bank’s strong quarterly profitability.

Tengebank’s loan portfolio expanded to 4.5 trillion soums by early March, reflecting an 8.4% year-on-year growth. However, the share of non-performing loans increased from 2.3% to 3.4%, signaling rising credit risk that investors should monitor closely.

Milliybank and Kapitalbank Display Solid Profitability and Asset Growth

Milliybank reported a net profit of 603.2 billion soums for Q1 2026, marking a 28.9% increase compared to the same period last year (467.9 billion soums). The bank’s interest income totaled 4.7 trillion soums, up 15% year-on-year, while interest expenses were 2.5 trillion soums. Operational expenses also rose by 26% year-on-year to 673.1 billion soums, with employee costs at 372.2 billion soums. The bank paid 22.5 billion soums in income tax during the quarter.

Kapitalbank’s net profit stood at 324.8 billion soums, supported by asset growth to 58.23 trillion soums. Credit and leasing operations dominate its asset mix at 36.6 trillion soums, remaining the primary growth driver. Interest income was 1.85 trillion soums, and non-interest income reached 1.64 trillion soums. Interest and non-interest expenses totaled 1.07 trillion and 648.6 billion soums, respectively, with operational costs at 715.7 billion soums, including 269.8 billion soums on employee compensation.

Hayotbank’s Modest Profit Growth and Asset Expansion

Hayotbank reported a net profit of 14.6 billion soums in Q1 2026. Its assets grew to 7.43 trillion soums, primarily driven by credit and leasing operations totaling 5.63 trillion soums. Interest income was 332.5 billion soums, with non-interest income at 87.2 billion soums. Expense figures included interest expenses of 253.5 billion soums, non-interest expenses of 22.2 billion soums, and operational costs of 66.8 billion soums, of which 41.6 billion soums were employee-related.

Market Implications and Investor Takeaways

The Q1 2026 results underscore a dynamic banking sector in Uzbekistan, marked by expanding asset bases and diversified income streams. Banks’ growing reliance on non-interest revenue, particularly commissions, suggests evolving business models less dependent on traditional interest margins.

However, the increase in non-performing loans, especially noted at Tengebank, raises credit risk concerns that could affect investor sentiment toward bank equities and bond issuances. Operational cost increases, notably in employee compensation, may pressure future profitability if not managed effectively.

Investors should closely monitor banks’ credit quality trends, income diversification efforts, and expense management as these factors will shape earnings stability and capital market valuations going forward.

Based on reporting by Deutsche Welle.