Uzbek Bank Credit Portfolios Expand with Rising Non-Performing Loans Impacting Sterling Outlook

In the first quarter of 2026, Uzbekistan's banking system witnessed a noticeable expansion in credit portfolios alongside an increase in non-performing loans (NPLs). This trend holds implications for British and European investors monitoring emerging market credit risks and the London market's exposure to Central Asian financial developments.

Credit Expansion and Troubled Assets in Uzbekistan's Banks

According to the Central Bank of Uzbekistan, the total credit portfolio of the country's banking sector rose by 19.3 trillion Uzbek soums, surpassing 623.3 trillion soums in Q1 2026. However, alongside this growth, the volume of non-performing loans increased by 1.8 trillion soums, reaching nearly 19.9 trillion soums. The surge in NPLs was primarily driven by state-owned banks.

State banks expanded their credit portfolios by 11.1 trillion soums during this period. Notably, Agrobank saw the largest growth at 5.44 trillion soums, followed by Milliybank (+2.63 trillion soums), Xalq Banki (+1.95 trillion soums), and Aloqabank (+1.89 trillion soums). Conversely, some banks experienced a contraction in credit portfolios, including SQB and Asakabank.

Among non-state banks, Hamkorbank, Hayot Bank, and Kapitalbank demonstrated significant credit growth, while TBC Bank and Orient Finans Bank showed declines in lending activity.

The increase in non-performing loans was concentrated mainly within state banks, which saw a rise of 1.46 trillion soums in troubled credit, with SQB, Aloqabank, and Asakabank contributing most significantly. However, some banks like Ipoteka Bank successfully reduced their NPLs by 316 billion soums. Conversely, Anor Bank and Garant Bank reported increases in their NPL ratios.

"Despite the rise in non-performing loans, the faster overall growth in the credit portfolio helped reduce the NPL ratio from 3.19% to 2.99%."

This relative improvement in NPL ratio has nuanced implications for UK and European investors with interests in Uzbekistan’s banking sector, as well as for sterling and London financial markets that monitor emerging market credit exposures and risk sentiment.

Implications for UK and European Business Interests

Uzbekistan’s financial sector is gradually attracting attention from British and European investors due to its growing economic openness and strategic location. The expansion of credit portfolios reflects underlying economic dynamism but the rising non-performing loans raise concerns about credit quality and risk management practices in state-controlled banks.

For sterling markets, fluctuations in emerging market loan performance can influence risk appetite, affecting currency valuations and capital flows. London, as a global financial hub, remains vigilant about such trends due to the city’s active role in financing emerging markets through bonds, syndicated loans, and investment funds.

British and EU financial institutions engaged in cross-border banking or investment activities must weigh the gains in Uzbekistan’s credit expansion against the potential credit risks highlighted by the rising NPL volumes. Enhanced monitoring and due diligence may be necessary to safeguard investments and manage exposure prudently.

In conclusion, while Uzbekistan’s banking sector continues to grow robustly, the associated rise in troubled assets underscores the importance of sound credit risk frameworks. This development offers both opportunities and challenges for UK and European market participants looking to capitalize on Central Asia’s emerging opportunities.