OREANDA-NEWS. September 07, 2010. The outlook for Uzbekistan's banking system has been changed to stable from negative, reflecting the banks' resilience to the global economic downturn, their stabilizing asset quality and improved capitalization levels.

The deterioration in the financial health of the banks' borrowers, which was a key concern last year, has been mitigated by the country's continued economic growth which was fueled by the government's counter-cyclical fiscal measures, says Moody's Investors Service in its new Banking System Outlook on Uzbekistan.

In the next 12 to 18 months, recovering demand for Uzbekistan's export commodities, combined with growing internal consumption, should provide for supportive macroeconomic conditions and thus limit asset-quality problems for the banks.

"Banks' capital levels have notably strengthened since 2008, owing to the government's injection of more than 400 billion soums (approx. USD300 million) into several of the largest Uzbek banks," explains Olga Ulyanova, Assistant Vice President Analyst, and author of the report.

"Coupled with their earnings generation capacity, the banks now have a sufficient cushion to absorb anticipated credit and investment losses and, at the same time, support the 15%-20% annual growth we expect to see in their loan books over the next 12-18 months."