The government-owned stake in Uzagroexportbank was sold to a private company without a public tender. According to the State Assets Management Agency (the message appeared on December 28 on the website without publications in social networks), a bid was received from the foreign enterprise Support Level to acquire a 100% stake in Uzagroexportbank in worth of $5 million “with the conditions of a one-time payment of the redemption value, increasing the authorized capital of the bank by at least 29 billion soums, as well as making investments in worth at least 50 million dollars for the development of banking infrastructure, the introduction of technologies and banking products.
The international consulting company Grant Thornton, previously involved in the process of privatization of the bank, underscored that due to the suspension of credit operations of Uzagroexportbank since December 2019, as of December 1, 2022, the bank’s loan portfolio was at 6.1 billion soums, while, “problem loans make up a significant part, and losses have to date amounted to 31 billion soums, as a result of which the bank's net assets have decreased to 50 billion soums,” the report said.
Also, Uzagroexportbank received a warning from the Central Bank about non-compliance with economic standards for banking supervision, failure to form sufficient reserves for possible losses on assets, failure to fully comply with established procedures for issuing loan documents, as well as failure to meet the requirements for the authorized capital (authorized the capital was formed by 29 billion soums less than the requirements) of banks in accordance with the current legislation.
According to the SAMA, for this reason, Grant Thornton recommended accepting the Support Level proposal, "which provides not only for the preservation of the bank's activities, but also for its development", and also taking into account that "this proposal is the most attractive in terms of price and other conditions in relation to the previous proposal ".
As a result, the government and the State Commission for Tenders for the Sale of State-Owned Property reviewed and approved the proposal.
The agency and the company entered into a sale agreement of the bank. “The shares of JSCB Uzagroexportbank have been withdrawn from the quotation list of the stock exchange and are being sold over the counter,” the report says.
About the privatization process
It was reported in October that under a closed government decree (the document is classified as “for official use”), it is planned to transfer the state block of shares to Support Level, subject to the performance of investment obligations. Perhaps such obligations will be associated with bringing capital to a minimum level in accordance with license requirements (100 billion soums, now the bank has just over 70 billion soums).
According to USREO data, this company was registered in August 2015 in Tashkent. The main activity is the activities of other organizations for work with personnel. It is noteworthy that as of October 18, the authorized capital of the company was 6 million soums, but as of October 28 it increased to 56 billion soums. The CEO of Support Level is Iskander Usmanov, the sole founder is Olimjon Shodiev, the younger brother of Pattokh Shodiev.
He is the Deputy Chairman of the Supervisory Board of the largest company in Uzbekistan, the Navoi Mining and Metallurgical Combine (the head of the State Assets Management Agency Akmalkhon Ortikov is also a member of the Supervisory Board). Olimjon Shadiev was also listed among the affiliates of the IFG Kontitent group of investment companies operating in the financial markets of Kazakhstan and other countries.
In the bond issue prospectus of Eurasian Bank, Olimjon Shadiev was listed as an affiliate of the bank as the head of Izarus Investment B.V. (Luxembourg). The document also indicated other members of the family of billionaire Fattokh Shadiev, including his brother Kasym Shadiev.
Two weeks ago, the Kazakh Agency for Regulation and Development of the Financial Market allowed the Eurasian Bank to open a subsidiary in Uzbekistan.
When announcing plans to sell the state-owned stake in Poytakht Bank and Uzagroexportbank, the SAMA set the following criteria: at least three years of experience in the banking sector with an ROE (return on equity) index of 10%, proven competencies and experience in bank management, the presence of authorized capital and credit score and many other requirements.
About Uzagroexportbank
Joint-Stock Commercial "Uzagroexportbank" was established by a decree of the President of Uzbekistan dated January 24, 2017. The goals of the bank's creation are to create favorable conditions for agricultural producers and the population, financial support for exporting organizations and development of the potential for the export of fruits and vegetables.
When the bank was put up for sale, the amount of the bank's assets as of April 1, 2021 amounted to 60 billion soums (the indicator halved over the year), liabilities - 18 billion soums. The volume of the loan portfolio reached 68 billion soums, of which 37 billion soums (55.5%) were problematic (NPL).
A month before the sale, the amount of the bank's assets as of January 1, 2022 amounted to 69 billion soums (the figure decreased by 36.6% over the year), liabilities - 3 billion soums. The volume of the loan portfolio decreased to 30 billion soums, of which 17 billion soums (55.5%) are problematic.
As of October 1, the bank's loan portfolio decreased to 8 billion soums from NPL by 7 billion soums (91.9%), and by December 1 - to 6.2 billion soums from NPL by 6 billion soums (95.8%). Thus, the state could write off the bank's problem loans before its sale by creating reserves and reducing the capital (value) of the bank. In particular, if on October 1, 2021, the volume of assets was 70 billion soums, and liabilities - 4 billion soums, then today these figures have decreased to 50 billion and 2 billion, respectively.
Initially, Uzagroexportbank was bought by the Russian Sovcombank in February 2022 for $4 million, but due to US sanctions, the deal was eventually canceled in the summer.
