BAKU, Azerbaijan, September 4. Moody's Ratings
has assigned Uzbekistan's JSC Apex Bank a B3 long-term local- and
foreign-currency deposit and issuer rating, citing shareholder
support and the bank's growing franchise while highlighting risks
stemming from rapid loan growth, borrower concentration and
related-party exposures.
This was reflected in the ratings by Moody's.
Moody's also assigned Apex Bank a b3 Baseline Credit Assessment
(BCA) and adjusted BCA of b3. The bank's long-term Counterparty
Risk Assessment was set at B2(cr), while its long-term local- and
foreign-currency Counterparty Risk Ratings were assigned at B2. The
outlook on the long-term deposit and issuer ratings is stable.
The ratings reflect Apex Bank's standalone credit profile and
Moody's assessment of a low probability of government support,
given the bank's small size and private ownership in Uzbekistan,
which Moody's rates Ba2 with a stable outlook.
A key strength cited by Moody's is Apex Bank's position within a
broader group of affiliated companies, including JSC Apex
Insurance, one of Uzbekistan's largest insurance companies. The
rating agency said the group provides synergies and ongoing
shareholder and affiliated-company support, while established
client relationships could help the bank expand its franchise.
However, the bank's limited operating history and rapid
balance-sheet expansion remain key credit constraints. Moody's also
pointed to high borrower and related-party concentrations, which
increase the bank's exposure to individual counterparties and
connected entities.
Apex Bank reported problem loans at just 0.9% of gross loans at
the end of 2025, but Moody's cautioned that the figure does not yet
fully reflect underlying asset-quality risks because of the bank's
short track record and largely unseasoned loan portfolio. The
rating agency expects problem loans to gradually increase as the
portfolio matures. Capitalization is another area of concern. Apex
Bank's tangible common equity-to-risk-weighted assets ratio stood
at about 6.2% at the end of 2025, although regulatory capital
ratios remained above minimum requirements. Moody's expects
capitalization to improve moderately over the next 12-18 months as
the bank retains earnings and receives continued shareholder
support, partly offset by further balance-sheet growth.
Profitability also remains relatively weak, with Apex Bank's net
income-to-tangible assets ratio at 0.7% in 2025. Moody's attributed
the subdued profitability to the bank's evolving business model and
significant reliance on income from related-party transactions,
while expecting this dependence to gradually decline as Apex Bank
expands its customer base and diversifies its business. In the near
term, however, earnings are likely to remain under pressure from
elevated operating expenses related to investments in
infrastructure and operating capacity, as well as a gradual
increase in credit costs as the loan portfolio matures.
Trend's assessment
show that Moody's rating highlights the trade-off between Apex
Bank's rapid expansion and the risks associated with scaling a
relatively young banking franchise. Strong growth can help the bank
quickly build market share and diversify revenues, but rapid
lending from a small initial base can also weaken capital buffers
and make emerging asset-quality problems more difficult to
absorb.
The bank's 6.2% TCE/RWA ratio is particularly important in this
context. Although regulatory capital remains above required levels,
continued loan growth could put pressure on capital if
risk-weighted assets expand faster than retained earnings. Full
earnings retention and shareholder support therefore provide an
important cushion, but they do not eliminate the underlying capital
risk associated with rapid expansion.
Trend's analysis also shows that related-party exposure is
central to Apex Bank's current business model. Affiliations can
provide the bank with customers, funding and revenue opportunities
during its early development, but Moody's emphasis on related-party
lending, deposits and earnings indicates that the bank has yet to
demonstrate that its franchise can operate on a sufficiently
diversified standalone basis.
Trend's calculations show that Apex Bank's core banking
liquidity buffer of 24.4% of total assets was nearly four times its
6.2% tangible common equity-to-risk-weighted assets ratio at the
end of 2025. Meanwhile, the bank's 0.7% net income-to-tangible
assets ratio was substantially lower than both indicators,
underscoring the relatively limited earnings buffer currently
available to support balance-sheet expansion.
Liquidity remains another consideration. Core banking liquidity
represented 24.4% of total banking assets at the end of 2025,
primarily consisting of cash, balances with financial institutions
and government securities. While this provides a meaningful buffer,
Moody's expects the ratio to decline as lending expands. The
concentration of funding among large corporate and related-party
depositors adds another vulnerability.
The stable outlook therefore reflects a balance rather than an
absence of risk. Moody's expects shareholder and affiliated-company
support and continued franchise development to offset the risks
associated with rapid growth, concentrated borrowers and
related-party exposures over the next 12-18 months.
For an upgrade, Apex Bank would need to demonstrate a longer and
stronger operating track record, maintain sound asset quality,
strengthen capitalization, reduce borrower and related-party
concentrations, and develop more diversified and sustainable
earnings. Conversely, a significant deterioration in asset quality
or capitalization, or failure to reduce reliance on related-party
business, could put downward pressure on the rating. Overall,
Moody's assessment suggests that Apex Bank's key challenge is not
simply expanding its balance sheet, but demonstrating that rapid
growth can translate into a sustainable, diversified and
independently resilient banking franchise, making the bank's
ability to manage the risks associated with its expansion critical
to its future credit profile.
