OREANDA-NEWS. June 08, 2010. Moody's Investors Service has assigned the following global-scale ratings to Agrobank state joint-stock commercial bank: a bank financial strength rating ("BFSR") of E+ (mapping to a Baseline Credit Assessment (BCA) of B2), long-term and short- term local currency deposit ratings of Ba3/Not Prime, and long-term and short-term foreign currency deposit ratings of B2/Not Prime.

All ratings carry a stable outlook. According to Moody's, Agrobank's BFSR reflects (i) the bank's high visibility in servicing agriculture clients in the Republic of Uzbekistan, where it ranks fourth in terms of assets; (ii) its wide geographic national coverage; (iii) healthy capital adequacy levels; and (iv) its diversified funding base which benefiting from access to facilities from international financial institutions.

At the same time, Agrobank's BFSR is constrained by: (i) corporate governance and risk management issues; (ii) the high single-name and industry concentration of the bank's assets and liabilities; (iii) the predominantly short-term nature of its customer funding base; (iv) low profitability and cost-efficiency metrics; and (v) the unseasoned nature of the bank's loan portfolio and its potential for deterioration under challenging credit conditions.

Agrobank's deposit ratings are underpinned by Moody's assessment of a high probability of systemic support to the bank in case of distress, according to a release published by Info-Prod Strategic Business Information.

This assessment takes into account the 59% state ownership of the bank, its material share of the country's total banking system, which varies from 7% to 10% of corporate loans and deposits, as well as the bank's special mandate in servicing the socially important agriculture segment.

"As a result, in accordance with Moody's Join Default Analysis (JDA) methodology for banks, Agrobank's deposit rating of Ba3 benefits from a two-notch uplift from its own B2 Baseline Credit Assessment," says Elena Redko, a Moscow-based Moody's Analyst.

Moody's notes that Agrobank's deposit ratings are strongly dependent upon the stance and condition of Uzbekistan's operating environment and the conditions prevailing in the country's agricultural sector.

According to Moody's, Agrobank's ratings could be upgraded if the bank's risk management and corporate governance standards significantly improve and if such improvement is accompanied by a material decrease inconcentration levels as well as strengthening in profitability and efficiency metrics.

The ratings may also be upgraded if the bank manages to diversify its business profile towards more granular retail and SME segments outside the agricultural sector.

"Significant deterioration in asset quality indicators - leading to erosion of capital adequacy indicators coupled with loss of market share - could lead to a downgrade of Agrobank's stand-alone ratings. Thebank's Ba3 GLC deposit rating could be downgraded if any bank-specific orsystem-wide factors were to change Moody's current perception of (i) theprobability of systemic support for the bank from the government ofUzbekistan and (ii) the state's financial flexibility to render suchsupport," Ms Redko adds.

Headquartered in Tashkent, Uzbekistan, Agrobank reported total consolidated IFRS assets of 1.4 trillion soums (USD895 million) and netconsolidated income of 12 billion soums (USD7.7 million) as at 31 December2009.