TIDM78JE
RNS Number : 7192D
Uzbek Ind & Construction Bank
23 June 2023
JSCB "UZBEK INDUSTRIAL
AND CONSTRUCTION BANK"
AND ITS SUBSIDIARIES
Consolidated Financial Statements
and Independent Auditor's Report
For the Year Ended 31 December
2022
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
TABLE OF CONTENTS
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION
AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARED 31 DECEMBER 2022
1
INDEPENT AUDITOR'S REPORT 2-8
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER
2022
Consolidated statement of financial position 9
Consolidated statement of profit or loss and other comprehensive
income
10
Consolidated statement of changes in equity 11
Consolidated statement of cash flows 12
Notes to the consolidated financial statements 13-92
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE
PREPARATION
AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
Management of Joint Stock Commercial Bank "Uzbek Industrial and
Construction Bank" ("the Bank") and its subsidiaries ("the Group")
is responsible for the preparation of the consolidated financial
statements that present fairly the financial position of the Group
as at 31 December 2022, and the related consolidated statement of
profit or loss and other comprehensive income, changes in equity
and cash flows for the year then ended, and of significant
accounting policies and notes to the consolidated financial
statements (the "consolidated financial statements") in compliance
with International Financial Reporting Standards ("IFRS").
In preparing the consolidated financial statements, management
is responsible for:
-- Properly selecting and applying accounting policies;
-- Presenting information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Providing additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's consolidated financial position and
financial performance; and
-- Making an assessment of the Group's ability to continue as a going concern.
Management is also responsible for:
-- Designing, implementing and maintaining an effective and
sound system of internal controls, throughout the Group;
-- Maintaining adequate accounting records that are sufficient
to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the
Group, and which enable them to ensure that the consolidated
financial statements of the Group comply with IFRS;
-- Maintaining accounting records in compliance with legislation of the Republic of Uzbekistan;
-- Taking such steps as are reasonably available to them to
safeguard the assets of the Group; and
-- Preventing and detecting fraud and other irregularities.
The consolidated financial statements of the Group for the year
ended 31 December 2022 were approved by the Management on 17 May
2023.
On behalf of the Management Board:
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
17 May 2023 17 May 2023
Tashkent, Uzbekistan Tashkent, Uzbekistan
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
(in millions of Uzbek Soums)
Notes 31 December 31 December
2022 2021
------------------------------------ ------ ------------ ------------
ASSETS
Cash and cash equivalents 7 7,119,489 8,196,652
Due from other banks 8 1,843,415 1,956,303
Loans and advances to customers 9 48,420,489 42,537,051
Investment securities measured
at amortised cost 10 2,678,571 1,067,512
Financial assets at fair value
through other
comprehensive income 11 42,007 48,136
Investment in associates 12 35,834 29,726
Premises, equipment and intangible
assets 13 2,082,504 1,276,363
Current income tax prepayment 30 251,647 45,778
Deferred tax asset 30 194,962 202,125
Insurance assets 26 20,336 12,964
Other assets 14 279,366 310,704
Non-current assets held for
sale 15 223,345 48,602
TOTAL ASSETS 63,191,965 55,731,916
LIABILITIES
Due to other banks 16 3,895,719 1,392,977
Customer accounts 17 15,328,819 13,561,540
Debt securities in issue 18 3,361,256 3,317,817
Other borrowed funds 19 32,241,760 30,130,776
Derivative financial liabilities 34 115,533 -
Insurance liabilities 27 117,348 84,813
Other liabilities 20 240,326 197,421
Subordinated debt 21 330,560 101,771
TOTAL LIABILITIES 55,631,321 48,787,115
EQUITY
Share capital 22 4,640,011 4,640,011
Retained earnings 2,905,010 2,284,458
Revaluation reserve of financial
assets at fair value
through other comprehensive
income 14,490 14,132
Net assets attributable to
the Bank's owners 7,559,511 6,938,601
Non-controlling interest 1,133 6,200
TOTAL EQUITY 7,560,644 6,944,801
TOTAL LIABILITIES AND EQUITY 63,191,965 55,731,916
Approved for issue and signed on behalf of the Management Board
on 17 May 2023.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARED 31 DECEMBER 2022
(in millions of Uzbek Soums, except for earnings per share which
are in Soums)
Notes 2022 2021
----------------------------------------------------- ------ ------------ ------------
Interest income calculated using the effective
interest method 24 5,069,393 4,155,398
Other similar income 24 29,198 32,024
Interest expense 24 (2,626,371) (2,067,905)
Net interest income before provision on
loans and advances to customers 2,472,220 2,119,517
Provision for credit losses on loans and
advances to customers 9 (925,158) (420,937)
Net interest income 1,547,062 1,698,580
Fee and commission income 25 443,690 386,074
Fee and commission expense 25 (126,413) (110,483)
(Loss)/gain on initial recognition on interest
bearing assets (41,514) 8,119
Gains less losses from modification of
financial assets measured at
amortised cost, that did not lead to derecognition (44 035) (52 339)
Gains less losses from financial derivatives (100 848) -
Net gain on foreign exchange translation 185,776 (4,262)
Net gain from trading in foreign currencies 337,768 170,935
Insurance operations income 26 86,724 80,881
Insurance operations expense 26 (49,065) (36,331)
Change in insurance reserves, net 27 (25 163) (32 235)
Dividend income 4,741 4,920
Other operating income 28 16,482 40,866
Recovery/(provision) for credit losses
on other assets 8,521 (34,145)
Impairment of assets held for sale 15 (46,267) (5,586)
Administrative and other operating expenses 29 (1,366,177) (1,044,146)
Share of result from associates 703 722
Profit before tax 831,985 1,071,570
Income tax expense 30 (211,433) (214,582)
PROFIT FOR THE PERIOD 620,552 856,988
Other comprehensive income:
Items that will not be subsequently reclassified
to profit or loss:
Fair value gain on equity securities at
fair value through other comprehensive
income 448 935
Tax effect (90) (187)
Other comprehensive income 358 748
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 620,910 857,736
Attributable to:
- Owners of the Bank 620,555 856,989
- Non-controlling interest (3) (1)
PROFIT FOR THE PERIOD 620,552 856,988
Attributable to:
- Owners of the Bank 620,913 857,737
- Non-controlling interest (3) (1)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 620,910 857,736
Total basic and diluted EPS per ordinary
share (expressed in UZS per share) 32 2.54 3.51
Approved for issue and signed on behalf of the Management Board
on 17 May 2023.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
JOINT STOCK COMMERCIAL BANK "UZBEK INDUSTRIAL AND CONSTRUCTION
BANK" AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2022
(in millions of Uzbek Soums)
Share Revaluation reserve Retained earnings Non-controlling Total equity
capital of interest
financial assets at
fair
value through other
comprehensive
income
1 January 2021 4,640,011 13,384 1,427,469 - 6,080,864
Profit for the period - - 856,989 (1) 856,988
Other comprehensive
income for
the period - 748 - - 748
----------------------- ---------- ---------------------- ------------------ ---------------------- -------------
Total comprehensive
income for
the period - 748 856,989 (1) 857,736
Dividends paid - - - 6,201 6,201
31 December 2021 4,640,011 14,132 2,284,458 6,200 6,944,801
Profit for the period - 620,555 - 620,555
Other comprehensive
income for
the period - 358 - - 358
Total comprehensive
income for
the period - 358 620,555 - 620,913
Non-controlling
interest arising
on acquisition of
subsidiary - - (3) (5,067) (5,070)
31 December 2022 4,640,011 14,490 2,905,010 1,133 7,560,644
Approved for issue and signed on behalf of the Management Board
on 17 May 2023.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2022
(in millions of Uzbek Soums)
Notes 2022 2021
--------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Interest received 4,702,503 3,763,742
Interest paid (3,091,478) (2,015,843)
Fee and commission received 443,690 387,712
Fee and commission paid (126,413) (110,483)
Income received from financial derivatives 68,139 -
Insurance operations income received 86,724 80,881
Insurance operations expense paid (49,065) (36,331)
Net gain from trading in foreign currencies 337,768 170,935
Other operating income received 10,756 47,066
Staff costs paid (758,767) (642,027)
Administrative and other operating expenses
paid (441,911) (331,545)
Income tax paid (410,229) (236,674)
Cash flows from operating activities before
changes in operating assets and liabilities 771,717 1,077,433
Net (increase)/decrease in:
- due from other banks (25,843) (93,429)
- loans and advances to customers (5,786,506) (3,185,279)
- investment securities measured at amortised
cost (1,601,126) (538,528)
- other assets (17,990) (13,302)
Net increase/(decrease) in:
- due to other banks 359,978 (156,390)
- customer accounts 1,780,630 1,731,312
- other liabilities (14,207) 11,955
Net cash used in operating activities (4,533,347) (1,166,228)
Cash flows from investing activities
Acquisition of financial assets at fair value
through other comprehensive income (1,077) (7,593)
Proceeds from disposal of financial assets
at fair value through other comprehensive
income 7,654 341
Acquisition of premises, equipment and intangible
assets (931,467) (536,628)
Proceeds from disposal of premises, equipment
and intangible assets 67,566 4,205
Proceeds from disposal of repossessed assets (124,078) (25,972)
Acquisition of investment in associates (5,405) (28,011)
Dividend income received 4,741 4,920
Net cash used in investing activities (982,066) (588,738)
Cash flows from financing activities
Proceeds from borrowings due to other banks 2,447,336 411,116
Repayment of borrowings due to other banks (334,155) (381,937)
Proceeds from other borrowed funds 11,148,736 11,826,214
Repayment of other borrowed funds (9,334,820) (8,391,815)
Proceeds from debt securities in issue - 10,000
Repayment of debt securities in issue (82,690) (81,310)
Proceeds from other subordinated debt 235,851 100,000
Dividends paid (1,146) 274
Net cash from financing activities 4,079,112 3,492,542
Effect of exchange rate changes on cash and
cash equivalents 359,138 857,890
Net increase/(decrease) in cash and cash
equivalents (1,077,163) 2,595,466
Cash and cash equivalents at the beginning
of the period 7 8,196,652 5,601,186
Cash and cash equivalents at the end of
the period 7 7,119,489 8,196,652
Approved for issue and signed on behalf of the Management Board
on 17 May 2023.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
1. INTRODUCTION
JSCB "Uzbek Industrial and Construction Bank" ("the Bank") was
incorporated in 1991 and is domiciled in the Republic of
Uzbekistan. It is registered in Uzbekistan to carry out banking and
foreign exchange activities and has operated under the banking
license #17 issued by the Central bank of Uzbekistan ("the CBU") on
21 December 2021 (succeeded the licenses #17 issued on 25 January
2003 and #25 issued on 29 January 2005 by the CBU for banking
operations and general license for foreign currency operations,
respectively).
Principal activity . The Bank's principal activity is commercial
banking, retail banking, operations with securities, foreign
currencies and origination of loans and guarantees. The Bank
accepts deposits from legal entities and individuals, extended
loans, and transfer payments. The Bank conducts its banking
operations from its head office in Tashkent and 87 banking service
centers within Uzbekistan as of 31 December 202 2 (31 December 20
21 : 44 branches).
The Bank participates in the state deposit insurance scheme,
which was introduced by the Uzbek Law #360-II "Insurance of
Individual Bank Deposit" on 5 April 2002. On 28 November 2008, the
President of Uzbekistan issued the Decree #PD -4057 stating that i
n case of the withdrawal of a license of a bank, the State Deposit
Insurance Fund guarantees repayment of 100% of individual deposits
regardless of the deposit amount.
As at 31 December 2022, the number of Bank's employees was 3,759
(31 December 2021: 3,841).
Registered address and place of business. 3, Shakhrisabz street,
Tashkent, 100000, Uzbekistan
At 31 December 2022 and 2021, the Bank consolidated the
following companies in these consolidated financial statements
("The Group") :
The Bank's ownership
Country 31 December 31 December Type of
of 2022 2021 operation
incorporation
------------ ------------
Name % %
Bank's direct interest
in
subsidiaries:
------------------------ ---------------- ------------ ------------ -----------------
SQB Capital, LLC Uzbekistan 100 100 Asset management
SQB Insurance, LLC Uzbekistan 100 100 Insurance
Bank's indirect
interest in
subsidiaries via
SQB Capital, LLC
SQB Securities,
LLC Uzbekistan 100 100 Asset management
SQB Construction,
LLC Uzbekistan 100 100 Construction
SQB Consulting,
LLC Uzbekistan 100 100 Consulting
"New Zomin Plaza" Uzbekistan 100 - Hoteling
LLC
Bank's indirect
interest in
subsidiaries via
SQB Construction,
LLC
"Radius Serebro Construction
and Capital LLC Uzbekistan 99.76 99 materials
"Big Peak 777 and Construction
Capital, LLC Uzbekistan 99.88 99 materials
Malik Muxammad Ali
Fayz and Capital, Construction
LLC Uzbekistan 99.99 99 materials
Parizod Mexr and Construction
Capital, LLC Uzbekistan 99.85 99 materials
Penoplast Surkhon Construction
and Capital LLC Uzbekistan 100 80 materials
Yuksalish Fayz Farovon Construction
and Capital LLC Uzbekistan 100 99 materials
Go`zal Madina Omad Uzbekistan 99.3 - Construction
LLC materials
------------------------ ---------------- ------------ ------------ -----------------
In 2021, in accordance with Presidential decree-6244 "On
additional measures to increase industrial power of the regions",
seven companies were established. All companies were consolidated
in the Group's financial statements.
The companies will serve the purpose of regions industrial power
improvement via execution of the Construction material production
projects. As of 31 December 2022, the total capital investment in
newly established subsidiaries amounted to 128 787 million UZS.
The table below represents the interest of the shareholders in
the Bank's share capital as at 31 December 2022 and 2021. The Fund
of Reconstruction and Development of the Republic of Uzbekistan is
a 100% state-owned fund. Hence, the ultimate shareholder of the
Group is the Government of Uzbekistan.
Shareholders 31 December 2022 31 December 2021
-------------------------------------------- ----------------- -----------------
The Fund of Reconstruction and Development
of the Republic of Uzbekistan 82,09% 82,09%
The Ministry of Finance of the Republic
of Uzbekistan 13,06% 13,06%
Other legal entities and individuals 4,85% 4,85%
Total 100% 100%
2. OPERATING ENVIRONMENT OF THE GROUP
Operating Environment. The Uzbekistan economy displays
characteristics of an emerging market, including but not limited
to, a low level of liquidity in debt and equity markets. Also, the
banking sector in Uzbekistan is particularly impacted by local
political, legislative, fiscal and regulatory developments. The
largest Uzbek banks are state-controlled and act as an arm of the
Government to develop the country's economy. The Government
distributes funds from the country's budget, which flow through the
banks to various government agencies, and other state and privately
owned entities.
Uzbekistan experienced the following key economic indicators in
202 2 :
-- Inflation: 1 2.2 % (202 1 : 1 0 .7%)
-- GDP growth 5 . 4 % (202 1 : 7 . 4 %).
-- Official exchange rates: 31 December 2022: USD 1 = UZS
11,225.46 (31 December 2021: USD 1 = UZS 10,837.66).
-- Central Bank refinancing rate: 14-15% (2021: 14%).
In June 2022 Standard & Poor's international rating agency
affirmed the Republic of Uzbekistan's long-term and short-term
sovereign credit rating for foreign and local currency liabilities
at the BB- level. The outlook was Stable. The agency expects that
the sanctions imposed on Russia will put pressure on Uzbekistan's
economic growth and slow down the pace of fiscal consolidation this
year, as Russia is Uzbekistan's largest trading partner. The agency
predicts that real GDP growth will average around 5% per year
starting in 2023.
The regulator pursues the inflation targeting policy aimed to
reaching 5% by the end of 2023 and averaging around that level for
an extended period. This is expected to be achieved in large part
by imposing tighter requirements on liquidity, which should narrow
down monetary base and loan portfolios of banks.
In the year end 202 2 inflation rate increased year-on-year to 1
2 .3% against 1 0 . 9 % over the same period last year.
Influence of geopolitical events in the world
In February 2022, due to the conflict between the Russian
Federation and Ukraine, numerous sanctions were announced against
the Russian Federation by most Western countries. These sanctions
are intended to have a negative economic impact on the Russian
Federation. Due to the growing geopolitical tensions, since
February 2022, there has been a significant increase in volatility
in the currency markets, as well as a volatility of UZS against the
US dollar and euro.
In order to reduce the impact of the external environment on the
economy of the Republic of Uzbekistan, on 17 March 2022, the Board
of the Central Bank of the Republic of Uzbekistan increased the CBU
refinancing rate by 3% to 17%. In June 2022 and then in July 2022,
after some decrease in the degree of influence of the external
environment on the economy, the Board of the Central Bank of
Uzbekistan decreased the CBU refinancing rate to 16% and 15%
respectively. Subsequent change in CBU refinancing rate is
disclosed in Note 39.
On 17 May 2023, due to geopolitical events around Ukraine and
Russia, the exchange rate of the US dollar against the UZS was
weakened to 11,420.03 (2021: 10,837.66).
For the purpose of managing the country risk, the Bank controls
transactions with counterparties within the limits set by the
Bank's collegial body, which are reviewed regularly. The Group
continues to assess the effect of these events and changes in
economic conditions on its operations, financial position and
financial performance.
The future effects of the current economic situation taking into
consideration the sanctions to the Russian government and the above
measures are difficult to predict, and management's current
expectations and estimates could differ from actual results.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation . These consolidated financial statements
have been prepared in accordance with International Financial
Reporting Standards ("IFRS") under the historical cost convention
except for certain financial instruments. The principal accounting
policies applied in the preparation of these consolidated financial
statements are set out below.
The Group is required to maintain its records and prepare its
financial statements for regulatory purposes in accordance with
Uzbekistan Accounting Legislation and related instructions ("UAL")
which are in the process of harmonisation to reflect IFRS. These
consolidated financial statements are based on the Group's UAL
books and records, adjusted and reclassified in order to fully
comply with IFRS.
These consolidated financial statements are presented in
millions of Uzbek Soums ("UZS"), unless otherwise indicated.
Basis of consolidation . The consolidated financial statements
incorporate the financial statements of the Bank and entities
controlled by the Bank (its subsidiaries) made up to 31 December
each year. Control is achieved when the Bank:
-- has the power over the investee;
-- is exposed, or has rights, to variable return from its involvement with the investee; and
-- has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Bank obtains
control over the subsidiary and ceases when the Bank loses control
of the subsidiary. Specifically, the results of subsidiaries
acquired or disposed of during the year are included in the
consolidated profit or loss account from the date the Bank gains
control until the date when the Bank ceases to control the
subsidiary.
Profit or loss and each component of OCI are attributed to the
owners of the Bank and to the non-controlling interests (NCI).
Total comprehensive income of the subsidiaries is attributed to the
owners of the Bank and to the NCI even if this results in the NCI
having a deficit balance.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies used
into line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members of the
Group are eliminated on consolidation, with the exception of
foreign currency gains and losses on intragroup monetary items
denominated in a foreign currency of at least one of the
parties.
NCI in subsidiaries are identified separately from the Group's
equity therein. Those interests of non-controlling shareholders
that are present ownership interests entitling their holders to a
proportionate share of net assets upon liquidation may initially be
measured at fair value or at the NCI's proportionate share of the
fair value of the acquiree's identifiable net assets. The choice of
measurement is made on an acquisition-by-acquisition basis. Other
NCI are initially measured at fair value. Subsequent to
acquisition, the carrying amount of NCI is the amount of those
interests at initial recognition plus the NCI's share of subsequent
changes in equity.
Changes in the Group's interests in subsidiaries that do not
result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group's interests and the
NCI are adjusted to reflect the changes in their relative interests
in the subsidiaries. Any difference between the amount by which the
NCI are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to the
owners of the Bank.
When the Group loses control of a subsidiary, the gain/loss on
disposal recognised in profit or loss is calculated as the
difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest
and (ii) the previous carrying amount of the assets (including
goodwill), less liabilities of the subsidiary and any NCI. All
amounts previously recognised in OCI in relation to that subsidiary
are accounted for as if the Group had directly disposed of the
related assets or liabilities of the subsidiary (i.e. reclassified
to profit or loss or transferred to another category of equity as
specified/permitted by applicable IFRSs). The fair value of any
investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial
recognition for subsequent accounting under IFRS 9 when applicable,
the cost on initial recognition of an investment in an associate or
a joint venture.
Associates. Associates are entities over which the Group has
significant influence (directly or indirectly), but not control,
generally accompanying a shareholding of between 20 and 50 percent
of the voting rights. Investments in associates are accounted for
using the equity method of accounting and are initially recognised
at cost. The carrying amount of associates includes goodwill
identified on acquisition less accumulated credit losses, if any.
Dividends received from associates reduce the carrying value of the
investment in associates. Other post-acquisition changes in Group's
share of net assets of an associate are recognised as follows: (i)
the Group's share of profits or losses of associates is recorded in
the consolidated profit or loss for the year as share of result of
associates, (ii) the Group's share of other comprehensive income is
recognised in other comprehensive income and presented separately,
(iii); all other changes in the Group's share of the carrying value
of net assets of associates are recognised in profit or loss within
the share of result of associates. However, when the Group's share
of losses in an associate equal or exceeds its interest in the
associate, including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in
the associates; unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
The Group applies the impairment requirements in IFRS 9 to
long-term loans, preference shares and similar long-term interest
that in substance form part of the investment in associate before
reducing the carrying value of the investment by a share of a loss
of the investee that exceeds the amount of the Group's interest in
the ordinary shares.
Disposals of subsidiaries, associates or joint ventures. When
the Group ceases to have control or significant influence, any
retained interest in the entity is remeasured to its fair value,
with the change in carrying amount recognised in profit or loss.
The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of
that entity, are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that
amounts previously recognised in other comprehensive income are
recycled to profit or loss.
If the ownership interest in an associate is reduced but
significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income are
reclassified to profit or loss, where appropriate.
Financial instruments - key measurement terms. Fair value is the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. The best evidence of fair value is price in
an active market. An active market is one in which transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. Fair
value of financial instruments traded in an active market is
measured as the product of the quoted price for the individual
asset or liability and the quantity held by the entity. This is the
case even if a market's normal daily trading volume is not
sufficient to absorb the quantity held and placing orders to sell
the position in a single transaction might affect the quoted price.
The price within the bid-ask spread that is most representative of
fair value in the circumstances was used to measure fair value,
which management considers is the last trading price on the
reporting date. The quoted market price used to value financial
assets is the current bid price; the quoted market price for
financial liabilities is the current asking price.
Valuation techniques such as discounted cash flow models or
models based on recent arm's length transactions or consideration
of financial data of the investees, are used to measure fair value
of certain financial instruments for which external market pricing
information is not available. Fair value measurements are analysed
by level in the fair value hierarchy as follows: (i) level one are
measurements at quoted prices (unadjusted) in active markets for
identical assets or liabilities, (ii) level two measurements are
valuations techniques with all material inputs observable for the
asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices), and (iii) level three
measurements are valuations not based on solely observable market
data (that is, the measurement requires significant unobservable
inputs). Transfers between levels of the fair value hierarchy are
deemed to have occurred at the end of the reporting period. Refer
to Note 35.
Transaction costs are incremental costs that are directly
attributable to the acquisition, issue or disposal of a financial
instrument. An incremental cost is one that would not have been
incurred if the transaction had not taken place. Transaction costs
include fees and commissions paid to agents (including employees
acting as selling agents), advisors, brokers and dealers, levies by
regulatory agencies and securities exchanges, and transfer taxes
and duties. Transaction costs do not include debt premiums or
discounts, financing costs or internal administrative or holding
costs.
Amortised cost ("AC") is the amount at which the financial
instrument was recognised at initial recognition less any principal
repayments, plus accrued interest, and for financial assets less
any allowance for expected credit losses. Accrued interest includes
amortisation of transaction costs deferred at initial recognition
and of any premium or discount to maturity amount using the
effective interest method. Accrued interest income and accrued
interest expense, including both accrued coupon and amortised
discount or premium (including fees deferred at origination, if
any), are not presented separately and are included in the carrying
values of related items in the statement of financial position.
The effective interest method is a method of allocating interest
income or interest expense over the relevant period, so as to
achieve a constant periodic rate of interest (effective interest
rate) on the carrying amount. The effective interest rate is the
rate that exactly discounts estimated future cash payments or
receipts (excluding future credit losses) through the expected life
of the financial instrument or a shorter period, if appropriate, to
the gross carrying amount of the financial instrument.
The effective interest rate discounts cash flows of variable
interest instruments to the next interest repricing date, except
for the premium or discount, which reflects the credit spread over
the floating rate specified in the instrument, or other variables
that are not reset to market rates. Such premiums or discounts are
amortised over the expected life of the instrument. The present
value calculation includes all fees paid or received between
parties to the contract that are an integral part of the effective
interest rate. For assets that are purchased or originated credit
impaired ("POCI") at initial recognition, the effective interest
rate is adjusted for credit risk, i.e. it is calculated based on
the expected cash flows on initial recognition instead of
contractual payments.
Financial instruments - initial recognition . Financial
instruments at FVTPL are initially recorded at fair value. All
other financial instruments are initially recorded at fair value
adjusted for transaction costs. Fair value at initial recognition
is best evidenced by the transaction price. A gain or loss on
initial recognition is only recorded if there is a difference
between fair value and transaction price which can be evidenced by
other observable current market transactions in the same instrument
or by a valuation technique whose inputs include only data from
observable markets. After the initial recognition, an ECL allowance
is recognised for financial assets measured at AC and investments
in debt instruments measured at FVOCI, resulting in an immediate
accounting loss.
All purchases and sales of financial assets that require
delivery within the time frame established by regulation or market
convention ("regular way" purchases and sales) are recorded at
trade date, which is the date on which the Group commits to deliver
a financial asset. All other purchases are recognised when the
entity becomes a party to the contractual provisions of the
instrument.
Financial assets - classification and subsequent measurement -
measurement categories. The Group classifies financial assets in
the following measurement categories: FVTPL, FVOCI and AC. The
classification and subsequent measurement of debt financial assets
depends on: (i) the Group's business model for managing the related
assets portfolio and (ii) the cash flow characteristics of the
asset.
Financial assets - classification and subsequent measurement -
business model. The business model reflects how the Group manages
the assets in order to generate cash flows - whether the Group's
objective is: (i) solely to collect the contractual cash flows from
the assets ("hold to collect contractual cash flows",) or (ii) to
collect both the contractual cash flows and the cash flows arising
from the sale of assets ("hold to collect contractual cash flows
and sell") or, if neither of (i) and (ii) is applicable, the
financial assets are classified as part of "other" business model
and measured at FVTPL. Please refer to Note 4.
Business model is determined for a group of assets (on a
portfolio level) based on all relevant evidence about the
activities that the Group undertakes to achieve the objective set
out for the portfolio available at the date of the assessment.
Financial assets - classification and subsequent measurement -
cash flow characteristics. Where the business model is to hold
assets to collect contractual cash flows or to hold contractual
cash flows and sell, the Group assesses whether the cash flows
represent solely payments of principal and interest ("SPPI").
Financial assets with embedded derivatives are considered in their
entirety when determining whether their cash flows are consistent
with the SPPI feature. In making this assessment, the Group
considers whether the contractual cash flows are consistent with a
basic lending arrangement, i.e. interest includes only
consideration for credit risk, time value of money, other basic
lending risks and profit margin.
Where the contractual terms introduce exposure to risk or
volatility that is inconsistent with a basic lending arrangement,
the financial asset is classified and measured at FVTPL. The SPPI
assessment is performed on initial recognition of an asset and it
is not subsequently reassessed. Refer to Note 4 for critical
judgements applied by the Group in performing the SPPI test for its
financial assets.
Financial assets - reclassification . Financial instruments are
reclassified only when the business model for managing the
portfolio as a whole change. The reclassification has a prospective
effect and takes place from the beginning of the first reporting
period that follows after the change in the business model. The
entity did not change its business model during the current and
comparative period and did not make any reclassifications.
Financial assets impairment - credit loss allowance for ECL. The
Group assesses, on a forward-looking basis, the ECL for debt
instruments measured at AC and FVOCI and for the exposures arising
from loan commitments and financial guarantee contracts. The Group
measures ECL and recognises credit loss allowance at each reporting
date. The measurement of ECL reflects: (i) an unbiased and
probability weighted amount that is determined by evaluating a
range of possible outcomes, (ii) time value of money and (iii) all
reasonable and supportable information that is available without
undue cost and effort at the end of each reporting period about
past events, current conditions and forecasts of future
conditions.
Debt instruments measured at AC are presented in the
consolidated statement of financial position net of the allowance
for ECL. For loan commitments and financial guarantees, a separate
provision for ECL is recognised as a liability in the consolidated
statement of financial position. For debt instruments at FVOCI,
changes in amortised cost, net of allowance for ECL, are recognised
in profit or loss and other changes in carrying value are
recognised in OCI as gains less losses on debt instruments at
FVOCI.
The Group applies a three stage model for impairment, based on
changes in credit quality since initial recognition. A financial
instrument that is not credit-impaired on initial recognition is
classified in Stage 1. Financial assets in Stage 1 have their ECL
measured at an amount equal to the portion of lifetime ECL that
results from default events possible within the next 12 months or
until contractual maturity, if shorter ("12 Months ECL"). If the
Group identifies a significant increase in credit risk ("SICR")
since initial recognition, the asset is transferred to Stage 2 and
its ECL is measured based on ECL on a lifetime basis, that is, up
until contractual maturity but considering expected prepayments, if
any ("Lifetime ECL"). Refer to Note 4 for a description of how the
Group determines when a SICR has occurred. If the Group determines
that a financial asset is credit-impaired, the asset is transferred
to Stage 3 and its ECL is measured as a Lifetime ECL. The Group's
definition of credit impaired assets and definition of default is
explained further. For financial assets that are purchased or
originated credit-impaired ("POCI Assets"), the ECL is always
measured as a Lifetime ECL. Note 4 provides information about
inputs, assumptions and estimation techniques used in measuring
ECL, including an explanation of how the Group incorporates
forward-looking information in the ECL models.
As an exception, for certain financial instruments, such as
credit cards, that may include both a loan and an undrawn
commitment component, the Group measures expected credit losses
over the period that the Group is exposed to credit risk, that is,
until the expected credit losses would be mitigated by credit risk
management actions, even if that period extends beyond the maximum
contractual period. This is because contractual ability to demand
repayment and cancel the undrawn commitment does not limit the
exposure to credit losses to such contractual notice period.
An ECL measurement is based on four components used by the
Group:
-- Exposure at Default (EAD) - an estimate of exposure at a
future default date, taking into account expected changes in
exposure after the reporting date, including repayments of
principal and interest, and expected drawdowns on committed
facilities.
-- Probability of Default (PD) - an estimate of the likelihood
of default to occur over a given time period.
-- Loss Given Default (LGD) - an estimate of a loss arising on
default. It is based on the difference between contractual cash
flows due and those that the lender would expect to receive,
including from any collateral. It usually expressed as a percentage
of EAD.
-- Discount Rate - a tool to discount an expected loss from the
present value at the reporting date. The discount rate represents
the effective interest rate (EIR) for the financial instrument or
an approximation thereof.
Calculation of financial assets impairment was made taking into
account the following factors:
-- In order to calculate the expected credit losses, the Group
performs loan assessment on an individual basis and on a collective
basis depending on general credit risk features.
-- Expected credit losses represent estimates of expected credit
losses weighted at probability of a default and calculated as
present value of all expected losses in amounts due. Calculations
are based on justified and verified information, which may be
received without any significant costs or efforts. Calculation of
the present value of the expected future cash flows of the secured
financial asset reflects the cash flow that may result from
foreclosure, less the cost of obtaining and selling collateral,
regardless of whether the recovery is probable or not. The
allowance is based on the Group's own experience in assessing
losses and the Management assumptions about the level of losses
likely to be recognised on assets in each category of a credit
risk, based on debt servicing capabilities and borrower's credit
track record.
-- Impairment for treasury operations (investments in debt
securities, reverse repurchase transactions, interbank loans and
deposits, correspondent account transactions, accounts receivable
under treasury transactions) is calculated taking into account the
counterparty's rating, probability of default, duration of a
transaction and the extent of loss in case of a default.
-- Assets classified at fair value through profit or loss are
not subject to impairment under IFRS 9.
The estimated credit losses for treasury operations are
estimated on an individual basis (except for individual claims in
the form of receivables).
ECL for collective assessment of credit losses
For collective assessment of credit losses, loans and advances
to customers are segmented by criteria for determining the
transition between Stages 1, 2 and 3. The presence of at least one
criterion is sufficient to lead to the change of transaction
classifications, reflecting the increase in credit risk.
Stage 1: Loans without significant increase in credit risk
(SICR)
-- All loans at initial recognition are classified into Stage 1
and remain in Stage 1 until the identification of factors that
indicate a significant increase in credit risk, except for acquired
or created loan-impaired loans.
Stage 2: Loans with significant increase in credit risk
(SICR)
-- Loans in which the maximum number of days overdue on
principal or interest ranges from 31 days to 90 days;
-- Loans in the category of "substandard" according to the
Regulation on the classification procedure of the CBU;
-- Loans that were credit-impaired (Stage 3) as at the end of
the previous quarter due to one or more transition criteria of
Stage 3, and which as at the end of the current quarter have signs
of Stage 1 or 2;
-- Loans that were credit-impaired (Stage 3) as at the end of
the previous quarter due to restructuring and repaid 25% of
principal from the date of restructuring.
-- In the absence of historical information about the number of
overdue days for accrued interest, loans for which there is an
amount of overdue interest at the end of the current quarter.
Stage 3: Financial asset is in defaul t
-- Loans for which the maximum number of overdue days on
principal or interest is more than 90 days;
-- Loans in the category of "unsatisfactory", "doubtful" and
"bad" in accordance with the Regulation on the classification
procedure of the CBU;
-- Loans that have been revised since initial recognition (loans
with the status "Restructured in the loan portfolio, including
loans for which the repayment was less than 25% of the principal
debt since the date of the last restructuring or the last revision
(except in cases of restructuring of loans, when the financial
condition of the borrower is stable and allows the borrower to
repay the debt to the Group and when restructuring occurs at the
decision of higher authorities);
-- Loans for which there is a court decision or a trial is in
progress (loans for which there are court decision dates in the
loan portfolio);
-- Presence of debt on off-balance sheet accounts for the
principal debt and accrued interest in accordance with the
Regulation on the Classification Procedure of the CBU and the
Regulation on Non-Accrual of Interest of the CBU;
-- Loans for which the contract has expired, but the borrower
has not fully repaid the debt according to the payment
schedule;
POCI: Purchased or created credit impaired financial asset.
ECL for individually significant borrowers
An asset is assessed for impairment on an individual basis if
the total debt of the borrower at the reporting date exceeds the
materiality level. The level of materiality is determined as 1% of
arithmetic average of the Group's total regulatory capital per
National accounting standards for the last two years. If the
materiality of the Group for determining an individually
significant asset increases by more than 2 times in the calculation
for the next period (fiscal year), then the materiality level for
this next period (fiscal year) shall not exceed the Group's
materiality level for the previous period (fiscal year) more than 2
times, and it will be equal to the level of materiality multiplied
by 2 (in the case of facts or circumstances that may significantly
affect the Group's estimated materiality level, which, due to these
facts or circumstances, may be at an unexpected or atypical level
for the corresponding period, for example, large profits or losses
of the Group may occur due to one-time general economic conditions
/ changes or other external conditions or non-typical operations
for the Group, in this case it is possible to normalize the
calculated amount of capital for the relevant period by excluding
from the calculation the amount of such gains / losses).
For each individually significant borrower based on the results
of the assessment at each reporting date, questionnaire with the
necessary explanations and comments is filled out to identify signs
of a significant increase in credit risk and credit impairment. The
questionnaire is completed on the basis of the loan portfolio and
the information contained in the monitoring reports, and other
information in the credit folder.
After determining whether there is evidence of a significant
increase in credit risk, as well as impairment, depending on the
results of such analysis, the Group classifies the asset in
question in one of the following stages:
Stage 1: "Loans with low credit risk"
-- All loans at initial recognition are classified in Stage 1
and remain in Stage 1 if no significant increase in the level of
credit risk has been identified or until the factors indicating an
increase in credit risk have been identified, except for loans
acquired or created credit impaired;
Stage 2: "Loans with increased credit risk"
-- Breach of contract terms, such as a delay of payment from 31 to 90 calendar days;
-- The Group has information about overdue debts in other credit
institutions (if information is available for the Group) on the
principal debt and / or the borrower's remuneration from 31 to 90
calendar days;
-- Loans in the category of "substandard" according to the
Regulation on the classification procedure of the CBU;
-- Actual or expected significant change in the operating
results of the borrower. Examples include actual or expected
decrease in revenues or margins, increased operational risks,
working capital inefficiencies, management problems, or changes in
the scale of business or organizational structure (for example,
termination of a business segment), which lead to a significant
change in the borrower's ability to repay debt liabilities. The
criteria is reduction of the financial condition of the borrower by
one class. Class of the financial condition of the borrower score
based on the calculations of economic indicators (ratios of
coverage, liquidity, autonomy, asset turnover and net sales
profitability
-- Actual or expected (based on reasonable and corroborated
information) reduction of the borrower's external credit rating by
2 or more notches from the date of issuance of the loan;
-- Reduction of financial support from the state, the parent
organization or another affiliated organization;
-- Significant deterioration in the quality or condition of the
collateral according to the data of the last monitoring report,
which is expected to reduce the economic incentive for the borrower
to make the scheduled payments stipulated by the contract or
otherwise affect the probability of a default. When the security is
a guarantee of third parties, significant financial difficulties of
the guarantor or surety;
-- Existing or projected adverse changes in commercial,
financial or economic conditions (actual or expected increase in
interest rates or actual or expected increase in unemployment) or
actual or expected adverse change in regulatory, economic or
technological conditions of the borrower's activity (for example,
decrease in demand for the borrower of the product due to changes
in technology);
-- Borrower who has no evidence of impairment or evidence of a
significant increase in credit risk at the reporting date, but who
has been classified as credit impaired (in Stage 3) based on the
calculation of expected credit loss at the previous reporting
date.
-- Expected breach of contract that could lead to the provision
of exemptions for covenants or amendments to covenants, provision
of temporary exemption from interest payments, increase in interest
rates, introduction of requirements for additional security or
guarantees or other changes to the contractual base of the
instrument;
-- Reasonable and corroborated information about one or more of the following factors:
o the presence of uncertainty in respect of continuous
operations in the auditor's report of the financial statements of
the borrower;
o involvement in legal proceedings of the borrower
(co-borrower), which may worsen its financial condition;
o violation of covenants 1 or more times within three months
before the reporting date;
Stage 3: " Credit-impaired loans"
-- Breach of contract terms, such as default or delay of payments for 90 days and more;
-- Cross-default, the Group has information about overdue debts
in other credit institutions (if the Group has information) on the
principal debt and / or interest for 90 calendar days or more;
-- Loans in the category of "unsatisfactory", "doubtful" and
"bad" in accordance with the Regulation on the classification
procedure of the CBU.
-- Presence of significant financial difficulties of the
borrower. The criteria is reduction of financial condition of the
borrower by two or more classes. The class of the financial
condition of the borrower is based on calculations of economic
indicators (ratios of coverage, liquidity, autonomy, asset turnover
and net sales margin);
-- Loans that have been revised since initial recognition (loans
with the status "Restructured in the loan portfolio, including
loans for which the repayment was less than 25% of the principal
debt since the date of the last restructuring or the last revision
(except in cases of restructuring of loans, when the financial
condition of the borrower is stable and allows the borrower to
repay the debt to the Group and when restructuring occurs at the
decision of higher authorities);
-- Lack of communication with the borrower (co-borrower), as
well as the lack of information to determine the financial
condition of the borrower (co-borrower) for the last 12 months;
-- Decrease in the external credit rating of the borrower to the
"CC" rating and below, assigned by the rating agencies Standard
& Poor's, Moody's Investors Service and Fitch;
-- Write-off of part and / or the entire amount of debt on the
principal debt and / or remuneration of the borrower during the
previous 2 years;
-- Suspension of the accrual of interest on the loan due to the
deteriorating financial condition of the borrower (non-accrual
status) in accordance with the Regulation of the CBU;
-- Availability of information about the death of the borrower (co-borrower) of an individual;
-- The borrower's appeal to the court with a statement of
recognition of its bankruptcy or the filing of a claim by a third
party to declare the borrower bankrupt in accordance with the
legislation of the Republic of Uzbekistan and loans that have a
court decision or are in court proceedings (loans that have court
decision dates in the loan portfolio);
-- Revocation of a license or other title document for the implementation of activities;
-- Disappearance of an active market for a given financial asset.
POCI: Purchased or created credit impaired financial asset
-- Purchase or creation of a financial instrument with a large
discount, which reflects the incurred credit losses;
The amount of expected credit losses for loans that are
classified in Stage 1 and in Stage 2 is determined on a collective
basis.
For each individually significant borrower in Stage 3, one of
the following repayment strategies is determined:
-- "Restructuring" strategy: restructuring the loan, revising
credit conditions and developing an action plan that can allow the
borrower to repay the loan;
-- Strategy "Realization of collateral": liquidation of a loan by selling collateral.
The choice of the most appropriate strategy is determined based
on the individual situation of the borrower, its availability and
consent to cooperation, the availability of opportunities to
restore activity, production or the possibility of eliminating the
causes that caused losses and the inability to service the debt,
the availability of funds from other business lines of the
borrower, value, condition of pledges regarding debt and other
factors.
In the event that the borrower incurs losses and the Group has
no evidence of other sources of income and funds to service the
debt, the strategy for selling collateral for the borrower is
chosen.
Presentation of allowance for ECL in the statement of financial
position. Loss allowances for ECL are presented in the statement of
financial position as follows:
-- For financial assets measured at amortized cost: as a
deduction from the gross carrying amount of the assets;
-- For debt instruments measured at FVTOCI: no loss allowance is
recognized in the statement of financial position as the carrying
amount is at fair value. However, the loss allowance is included as
part of the revaluation amount in the investments revaluation
reserve;
-- For loan commitments and financial guarantee contracts: as a provision; and
-- Where a financial instrument includes both a drawn and an
undrawn component, and the Group cannot identify the ECL on the
loan commitment component separately from those on the drawn
component: the Group presents a combined loss allowance for both
components. The combined amount is presented as a deduction from
the gross carrying amount of the drawn component. Any excess of the
loss allowance over the gross amount of the drawn component is
presented as a provision.
Financial assets - write-off. Financial assets are written-off,
in whole or in part, when the Group exhausted all practical
recovery efforts and has concluded that there is no reasonable
expectation of recovery. The write-off represents a derecognition
event. The Group may write-off financial assets that are still
subject to enforcement activity when the Group seeks to recover
amounts that are contractually due, however, there is no reasonable
expectation of recovery.
Collateral. The Group obtains collateral in respect of customer
liabilities where this is considered appropriate. The collateral
normally takes the form of a lien over the customer's assets and
gives the Group a claim on these assets for both existing and
future customer liabilities.
Financial assets - derecognition. The Group derecognises
financial assets when (a) the assets are redeemed or the rights to
cash flows from the assets otherwise expired or (b) the Group has
transferred the rights to the cash flows from the financial assets
or entered into a qualifying pass-through arrangement while (i)
also transferring substantially all risks and rewards of ownership
of the assets or (ii) neither transferring nor retaining
substantially all risks and rewards of ownership, but not retaining
control. Control is retained if the counterparty does not have the
practical ability to sell the asset in its entirety to an unrelated
third party without needing to impose restrictions on the sale.
Financial assets - modification. The Group sometimes
renegotiates or otherwise modifies the contractual terms of the
financial assets. The Group assesses whether the modification of
contractual cash flows is substantial considering, among other, the
following factors: any new contractual terms that substantially
affect the risk profile of the asset (eg profit share or
equity-based return), significant change in interest rate, change
in the currency denomination, new collateral or credit enhancement
that significantly affects the credit risk associated with the
asset or a significant extension of a loan when the borrower is not
in financial difficulties.
If the modified terms are substantially different, the rights to
cash flows from the original asset expire and the Group
derecognises the original financial asset and recognises a new
asset at its fair value. The date of renegotiation is considered to
be the date of initial recognition for subsequent impairment
calculation purposes, including determining whether a SICR has
occurred. The Group also assesses whether the new loan or debt
instrument meets the SPPI criterion. Any difference between the
carrying amount of the original asset derecognised and fair value
of the new substantially modified asset is recognised in profit or
loss, unless the substance of the difference is attributed to a
capital transaction with owners.
In a situation where the renegotiation was driven by financial
difficulties of the counterparty and inability to make the
originally agreed payments, the Group compares the original and
revised expected cash flows to assets whether the risks and rewards
of the asset are substantially different as a result of the
contractual modification. If the risks and rewards do not change,
the modified asset is not substantially different from the original
asset and the modification does not result in derecognition. The
Group recalculates the gross carrying amount by discounting the
modified contractual cash flows by the original effective interest
rate (or credit-adjusted effective interest rate for POCI financial
assets) and recognises a modification gain or loss in profit or
loss.
Financial liabilities - measurement categories. Financial
liabilities are classified as subsequently measured at AC, except
for (i) financial liabilities at FVTPL: this classification is
applied to derivatives, financial liabilities held for trading
(e.g. short positions in securities), contingent consideration
recognised by an acquirer in a business combination and other
financial liabilities designated as such at initial recognition and
(ii) financial guarantee contracts and loan commitments.
Financial liabilities - derecognition. Financial liabilities are
derecognised when they are extinguished (i.e. when the obligation
specified in the contract is discharged, cancelled or expires).
An exchange between the Group and its original lenders of debt
instruments with substantially different terms, as well as
substantial modifications of the terms and conditions of existing
financial liabilities, are accounted for as an extinguishment of
the original financial liability and the recognition of a new
financial liability. The terms are substantially different if the
discounted present value of the cash flows under the new terms,
including any fees paid net of any fees received and discounted
using the original effective interest rate, is at least 10%
different from the discounted present value of the remaining cash
flows of the original financial liability. [In addition, other
qualitative factors, such as the currency that the instrument is
denominated in, changes in the type of interest rate, new
conversion features attached to the instrument and change in loan
covenants are also considered.] If an exchange of debt instruments
or modification of terms is accounted for as an extinguishment, any
costs or fees incurred are recognised as part of the gain or loss
on the extinguishment. If the exchange or modification is not
accounted for as an extinguishment, any costs or fees incurred
adjust the carrying amount of the liability and are amortised over
the remaining term of the modified liability.
Modifications of liabilities that do not result in
extinguishment are accounted for as a change in estimate using a
cumulative catch up method, with any gain or loss recognised in
profit or loss, unless the economic substance of the difference in
carrying values is attributed to a capital transaction with
owners.
Cash and cash equivalents. Cash and cash equivalents are items
which are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. Cash and
cash equivalents include deposits with the CBU except mandatory
reserve deposits held with CBU and all interbank placements with
original maturities of less than three months. Funds restricted for
a period of more than three months on origination are excluded from
cash and cash equivalents. Cash and cash equivalents are carried at
amortised cost.
The payments or receipts presented in the statement of cash
flows represent transfers of cash and cash equivalents by the
Group, including amounts charged or credited to current accounts of
the Group's counterparties held with the Group, such as loan
interest income or principal collected by charging the customer's
current account or interest payments or disbursement of loans
credited to the customer's current account, which represents cash
or cash equivalent from the customer's perspective.
Due from other banks . Amounts due from other banks are recorded
when the Group advances money to counterparty banks with no
intention of trading the resulting unquoted non-derivative
receivable due on fixed or determinable dates. Amounts due from
other banks are carried at amortised cost.
Loans and advances to customers. Loans and advances to customers
are recorded when the Group advances money to purchase or originate
an unquoted non-derivative receivable from a customer due on fixed
or determinable dates and has no intention of trading the
receivable. Loans and advances to customers are carried at
amortised cost.
Investments in equity securities. Financial assets that meet the
definition of equity from the issuer's perspective, i.e.
instruments that do not contain a contractual obligation to pay
cash and that evidence a residual interest in the issuer's net
assets, are considered as investments in equity securities by the
Group. Investments in equity securities are measured at FVTPL,
except where the Group elects at initial recognition to irrevocably
designate an equity investments at FVOCI. The Group's policy is to
designate equity investments as FVOCI when those investments are
held for strategic purposes other than solely to generate
investment returns. When the FVOCI election is used, fair value
gains and losses are recognised in OCI and are not subsequently
reclassified to profit or loss, including on disposal. Impairment
losses and their reversals, if any, are not measured separately
from other changes in fair value. Dividends continue to be
recognised in profit or loss when the Group's right to receive
payments is established except when they represent a recovery of an
investment rather than a return on such investment.
Investments in debt securities. Based on the business model and
the cash flow characteristics, the Group classifies investments in
debt securities as carried at AC, FVOCI or FVTPL. Debt securities
are carried at AC if they are held for collection of contractual
cash flows and where those cash flows represent SPPI, and if they
are not voluntarily designated at FVTPL in order to significantly
reduce an accounting mismatch.
Debt securities are carried at FVOCI if they are held for
collection of contractual cash flows and for selling, where those
cash flows represent SPPI, and if they are not designated at FVTPL.
Interest income from these assets is calculated using the effective
interest method and recognised in profit or loss. An impairment
allowance estimated using the expected credit loss model is
recognised in profit or loss for the year. All other changes in the
carrying value are recognised in OCI. When the debt security is
derecognised, the cumulative gain or loss previously recognised in
OCI is reclassified from OCI to profit or loss.
Investments in debt securities are carried at FVTPL if they do
not meet the criteria for AC or FVOCI. The Group may also
irrevocably designate investments in debt securities at FVTPL on
initial recognition if applying this option significantly reduces
an accounting mismatch between financial assets and liabilities
being recognised or measured on different accounting bases.
Premises and equipment . Premises and equipment are stated at
cost, less accumulated depreciation and provision for impairment,
where required.
Costs of minor repairs and maintenance are expensed when
incurred. Cost of replacing major parts or components of premises
and equipment items are capitalised and the replaced part is
retired.
At the end of each reporting period the Management assesses
whether there is any indication of impairment of premises and
equipment. If any such indication exists, the Management estimates
the recoverable amount, which is determined as the higher of an
asset's fair value less costs to sell and its value in use. The
carrying amount is reduced to the recoverable amount and the
impairment loss is recognised in profit or loss for the year. An
impairment loss recognised for an asset in prior years is reversed
if there has been a change in the estimates used to determine the
asset's value in use or fair value less costs to sell.
An item of property and equipment is derecognised upon disposal
or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property and equipment is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or
loss.
Construction in progress is carried at cost, less any recognised
impairment loss. Cost includes professional fees. Such construction
in progress is classified to the appropriate categories of property
and equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended
use.
Depreciation . Depreciation of premises and equipment is
calculated using the straight-line method to allocate their cost to
their residual values over their estimated useful lives:
Useful lives in years
Building and leasehold improvements Lower of primary lease period and
33
Office and computer equipment 5-10
The residual value of an asset is the estimated amount that the
Group would currently obtain from disposal of the asset less the
estimated costs of disposal, if the asset were already of the age
and in the condition expected at the end of its useful life. The
residual value of an asset is nil if the Group expects to use the
asset until the end of its physical life. The assets' residual
values and useful lives are reviewed, and adjusted if appropriate,
at each end of the reporting period.
Intangible assets . Intangible assets with finite useful lives
carried at cost less accumulated amortization and accumulated
impairment losses. Amortization is recognised on a straight-line
basis over their estimated useful lives. The estimated useful life
and amortization method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being accounted
for on a prospective basis.
The Group's intangible assets primarily comprise capitalised
computer software. Acquired computer software licenses are
capitalised on the basis of the costs incurred to acquire and bring
them to use. All other costs associated with computer software,
e.g. its maintenance, are expensed when incurred. Capitalised
computer software is amortised on a straight line basis over
expected useful lives of five years.
Finance lease receivables. Where the Group is a lessor in a
lease which transfers substantially all the risks and rewards
incidental to ownership to the lessee, the assets leased out are
presented as a finance lease receivable and carried at the present
value of the future lease payments. Finance lease receivables are
initially recognised at commencement (when the lease term begins)
using a discount rate determined at inception (the earlier of the
date of the lease agreement and the date of commitment by the
parties to the principal provisions of the lease).
The difference between the gross receivable and the present
value represents unearned finance income. This income is recognised
over the term of the lease by applying the rate implicit in the
lease to (i) the gross book value of lease receivables in stage 1
and 2 and (ii) net carrying amount of lease receivables in stage 3
of the ECL model. Incremental costs directly attributable to
negotiating and arranging the lease are included in the initial
measurement of the finance lease receivable and reduce the amount
of income recognised over the lease term. Finance income from
leases is recorded within other similar income in profit or
loss.
Credit loss allowance is recognised in accordance with the
general ECL model. The ECL is determined in the same way as for
loans and advances measured at AC and recognised through an
allowance account to write down the receivables' net carrying
amount to the present value of expected cash flows discounted at
the interest rates implicit in the finance leases. The estimated
future cash flows reflect the cash flows that may result from
obtaining and selling the assets subject to the lease.
Repossessed collateral . Repossessed collateral represents
financial and non-financial assets acquired by the Group in
settlement of overdue loans. The assets are initially recognised at
fair value when acquired and included in other financial assets,
investment properties or inventories within other assets depending
on their nature and the Group's intention in respect of recovery of
these assets, and are subsequently remeasured and accounted for in
accordance with the accounting policies for these categories of
assets.
Non-current assets held for sale. Non-current assets and
disposal groups, which may include both non-current and current
assets, are classified in the statement of financial position as
'non-current assets held for sale' if their carrying amount will be
recovered principally through a sale transaction, including loss of
control of a subsidiary holding the assets, within twelve months
after the end of the reporting period. Assets are reclassified when
all of the following conditions are met: (a) the assets are
available for immediate sale in their present condition; (b) the
Group's Management approved and initiated an active programme to
locate a buyer; (c) the assets are actively marketed for sale at a
reasonable price; (d) the sale is expected within one year and (e)
it is unlikely that significant changes to the plan to sell will be
made or that the plan will be withdrawn. Non-current assets or
disposal groups classified as held for sale in the current period's
statement of financial position are not reclassified or
re-presented in the comparative statement of financial position to
reflect the classification at the end of the current period.
A disposal group is a group of assets (current or non-current)
to be disposed of, by sale or otherwise, together as a group in a
single transaction, and liabilities directly associated with those
assets that will be transferred in the transaction. Goodwill is
included if the disposal group includes an operation within a
cash-generating unit to which goodwill has been allocated on
acquisition.
Non-current assets are assets that include amounts expected to
be recovered or collected more than twelve months after the end of
the reporting period. If reclassification is required, both the
current and non-current portions of an asset are reclassified.
Held for sale disposal groups as a whole are measured at the
lower of their carrying amount and fair value less costs to sell.
Held for sale premises and equipment are not depreciated or
amortised. Reclassified non-current financial instruments and
deferred taxes are not subject to write down to the lower of their
carrying amount and fair value less costs to sell.
Liabilities directly associated with disposal groups that will
be transferred in the disposal transaction are reclassified and
presented separately in the statement of financial position.
Discontinued operations. A discontinued operation is a component
of the Group that either has been disposed of, or that is
classified as held for sale, and: (a) represents a separate major
line of business or geographical area of operations; (b) is part of
a single co-ordinated plan to dispose of a separate major line of
business or geographical area of operations; or (c) is a subsidiary
acquired exclusively with a view to resale. Earnings and cash flows
of discontinued operations, if any, are disclosed separately from
continuing operations with comparatives being re-presented.
Due to other banks . Due to banks are initially recognised at
fair value. Subsequently, amounts due are stated at amortised cost
and any difference between net proceeds and the redemption value is
recognised in the statement of profit or loss over the period of
the borrowings, using the effective interest method as interest
expense.
Customer accounts . Customer accounts are non-derivative
liabilities to individuals, state or corporate customers and are
carried at amortised cost.
Debt securities in issue. Debt securities in issue include bonds
and certificates of deposit issued by the Group. Debt securities
are stated at amortised cost.
Other borrowed funds . Other borrowed funds include borrowings
from government and non-government funds and financial
institutions. Other borrowed funds are carried at amortised
cost.
Subordinated debt. Subordinated debt can only be paid in the
event of a liquidation after the claims of other higher priority
creditors have been met. Subordinated debt is carried at amortised
cost.
Derivative financial instruments. Derivative financial
instruments, including foreign exchange contracts, interest rate
futures, forward rate agreements, currency and interest rate swaps,
and currency and interest rate options are carried at their fair
value.
All derivative instruments are carried as assets when fair value
is positive, and as liabilities when fair value is negative.
Changes in the fair value of derivative instruments are included in
profit or loss for the year (gains less losses on derivatives). The
Group does not apply hedge accounting.
Certain derivative instruments embedded in financial liabilities
and other non-financial contracts are treated as separate
derivative instruments when their risks and characteristics are not
closely related to those of the host contract.
Income taxes. Income taxes have been provided for in the
consolidated financial statements in accordance with legislation
enacted or substantively enacted by the end of the reporting
period. The income tax charge comprises current tax and deferred
tax and is recognised in profit or loss for the year, except if it
is recognised in other comprehensive income or directly in equity
because it relates to transactions that are also recognised, in the
same or a different period, in other comprehensive income or
directly in equity.
Current tax is the amount expected to be paid to, or recovered
from, the taxation authorities in respect of taxable profits or
losses for the current and prior periods. Taxable profits or losses
are based on estimates if the consolidated financial statements are
authorised prior to filing relevant tax returns. Taxes other than
on income are recorded within administrative and other operating
expenses.
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition (other than in a business combination)
of assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Group
is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and
interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of the
reporting period.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Uncertain tax positions. The Group's uncertain tax positions are
reassessed by the Management at the end of each reporting period.
Liabilities are recorded for income tax positions that are
determined by the Management as more likely than not to result in
additional taxes being levied if the positions were to be
challenged by the tax authorities. The assessment is based on the
interpretation of tax laws that have been enacted or substantively
enacted by the end of the reporting period, and any known court or
other rulings on such issues. Liabilities for penalties, interest
and taxes other than on income are recognised based on the
Management's best estimate of the expenditure required to settle
the obligations at the end of the reporting period.
Large-scale tax system transformations are taking place in the
Republic of Uzbekistan associated with the adoption of the Concept
for Improving the Tax Policy of the Republic of Uzbekistan. Its
main reforms are implemented in the Tax Code, other regulatory
acts, including the annual "budgetary" resolution and entered into
force on 1 January 2019.
There were significant changes introduced in tax law of the
Republic of Uzbekistan in accordance with the Presidential decree
#PD-4086 on "Forecasting the main macroeconomic budget indicators
and parameters for 2019 and budget guidelines for 2020-2021" dated
26 December 2018. Corporate income tax for credit organisations has
been set at of 20%.
Provisions for liabilities and charges. Provisions are
recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate of the obligation
can be made.
When the Group expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the
reimbursement is recognised as a separate asset, but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of profit or loss and other
comprehensive income net of any reimbursement.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is
material).
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time
is recognised as a finance cost.
Loan commitments. The Group issues commitments to provide loans.
These commitments are irrevocable or revocable only in response to
a material adverse change. Such commitments are initially
recognised at their fair value, which is normally evidenced by the
amount of fees received. This amount is amortised on a straight
line basis over the life of the commitment, except for commitments
to originate loans if it is probable that the Group will enter into
a specific lending arrangement and does not expect to sell the
resulting loan shortly after origination; such loan commitment fees
are deferred and included in the carrying value of the loan on
initial recognition. At the end of each reporting period, the
commitments are measured at (i) the remaining unamortised balance
of the amount at initial recognition, plus (ii) the amount of the
loss allowance determined based on the expected credit loss model,
unless the commitment is to provide a loan at a below market
interest rate, in which case the measurement is at the higher of
these two amounts. The carrying amount of the loan commitments
represents a liability. For contracts that include both a loan and
an undrawn commitment and where the Group cannot separately
distinguish the ECL on the undrawn loan component from the loan
component, the ECL on the undrawn commitment is recognised together
with the loss allowance for the loan. To the extent that the
combined ECLs exceed the gross carrying amount of the loan, they
are recognised as a liability.
Financial guarantees. Financial guarantees require the Group to
make specified payments to reimburse the holder of the guarantee
for a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms
of a debt instrument. Financial guarantees are initially recognised
at their fair value, which is normally evidenced by the amount of
fees received. This amount is amortised on a straight line basis
over the life of the guarantee. At the end of each reporting
period, the guarantees are measured at the higher of (i) the amount
of the loss allowance for the guaranteed exposure determined based
on the expected loss model and (ii) the remaining unamortised
balance of the amount at initial recognition. In addition, an ECL
loss allowance is recognised for fees receivable that are
recognised in the statement of financial position as an asset. Note
4 provides information about inputs, assumptions and estimation
techniques used in measuring ECL, including an explanation of how
the Group incorporates forward-looking information in the ECL
models.
Trade payable and other liabilities . Trade payables and other
liabilities are accrued when the counterparty has performed its
obligations under the contract and are carried at amortised
cost.
Share capital. Ordinary shares and non-redeemable preference
shares with discretionary dividends are both classified as equity.
Incremental costs directly attributable to the issue of new shares
are shown in equity as a deduction, net of tax, from the proceeds.
Any excess of the fair value of consideration received over the par
value of shares issued is recorded as share premium in equity.
Preference shares which carry a mandatory coupon or are
redeemable on a specific date or at the option of the shareholder
are classified as financial liabilities and are presented in other
borrowed funds. The dividends on these preference shares are
recognised as interest expense on an amortised cost basis, using
the effective interest method.
Treasury shares. Where the Group or its subsidiaries purchase
the Group's equity instruments, the consideration paid, including
any directly attributable incremental external costs, net of income
taxes, is deducted from equity attributable to the owners of the
Group until the equity instruments are reissued, disposed of or
cancelled. Where such shares are subsequently disposed of or
reissued, any consideration received is included in equity.
Dividends . Dividends are recorded in equity in the period in
which they are declared. Any dividends declared after the end of
the reporting period and before the consolidated financial
statements are authorised for issue are disclosed in the subsequent
events note. The statutory accounting reports of the Group are the
basis for profit distribution and other appropriations. Uzbek
legislation identifies retained earnings as the basis for profit
distribution.
Interest income and expense recognition. Interest income and
expense are recorded for all debt instruments on an accrual basis
using the effective interest method. This method defers, as part of
interest income or expense, all fees paid or received between the
parties to the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums or
discounts. Interest income on lease receivables calculated at
nominal interest rate is presented within 'other similar income'
line in profit or loss.
Fees integral to the effective interest rate include origination
fees received or paid by the entity relating to the creation or
acquisition of a financial asset or issuance of a financial
liability, for example fees for evaluating creditworthiness,
evaluating and recording guarantees or collateral, negotiating the
terms of the instrument and for processing transaction documents.
Commitment fees received by the Group to originate loans at market
interest rates are integral to the effective interest rate if it is
probable that the Group will enter into a specific lending
arrangement and does not expect to sell the resulting loan shortly
after origination. The Group does not designate loan commitments as
financial liabilities at FVTPL.
For financial assets that are originated or purchased
credit-impaired, the effective interest rate is the rate that
discounts the expected cash flows (including the initial expected
credit losses) to the fair value on initial recognition (normally
represented by the purchase price). As a result, the effective
interest is credit-adjusted.
Interest income is calculated by applying the effective interest
rate to the gross carrying amount of financial assets, except for
(i) financial assets that have become credit impaired (Stage 3),
for which interest revenue is calculated by applying the effective
interest rate to their AC, net of the ECL provision, and (ii)
financial assets that are purchased or originated credit impaired,
for which the original credit-adjusted effective interest rate is
applied to the AC.
If the credit risk on the financial asset classified in Stage 3
subsequently improves so that the asset is no longer
credit-impaired and the improvement can be related objectively to
an event occurring after the asset had been determined as
credit-impaired (ie the asset becomes cured), the asset is
reclassified from stage 3 and the interest revenue is calculated by
applying the EIR to the gross carrying amount. The additional
interest income, which was previously not recognised in P&L due
to the asset being in stage 3 but it is now expected to be received
following the asset's curing, is recognised as a reversal of
impairment.
Fee and commission income. Fee and commission income is
recognised over time on a straight line basis as the services are
rendered, when the customer simultaneously receives and consumes
the benefits provided by the Group's performance. Such income
includes recurring fees for account maintenance, account servicing
fees, account subscription fees, etc. Variable fees are recognised
only to the extent that management determines that it is highly
probable that a significant reversal will not occur.
Other fee and commission income is recognised at a point in time
when the Group satisfies its performance obligation, usually upon
execution of the underlying transaction. The amount of fee or
commission received or receivable represents the transaction price
for the services identified as distinct performance obligations.
Such income includes fees for arranging a sale or purchase of
foreign currencies on behalf of a customer, fees for processing
payment transactions, fees for cash settlements, collection or cash
disbursements, as well as, commissions and fees arising from
negotiating, or participating in the negotiation of a transaction
for a third party, such as the acquisition of loans, shares or
other securities or the purchase or sale of businesses. Loan
syndication fees are recognised as income when the syndication has
been completed and the Group retains no part of the loan package
for itself or retains a part at the same effective interest rate as
for the other participants.
Basis of accounting for insurance activities
Insurance operations income primarily comprises of premiums
written less provision for unearned premiums.
Premiums written. Premiums are recognized within insurance
operations income upon inception of a contract for the full
amount.
Provision for unearned premiums. The Group calculated Unearned
Premium Reserve (UPR) according to legislation requirements, where
insurance lines of business are divided into four accounting
groups. For the first accounting group, the unearned premium is
calculated separately for each insurance contract using the "pro
rata temporis" method, which is in line with IFRS. The "pro rata
temporis" method includes calculation of unearned premium in
proportion to the remaining useful life of insurance contract at
the balance sheet date. For the other accounting groups, UPR
calculated differently, not in accordance with IFRS.
Claims. Claims and claims handling expenses are charged to the
consolidated statement of profit or loss and other comprehensive
income as incurred based on the evaluated liability for
compensation payable to policyholders or third parties, net of
subrogation. Subrogation is a right to pursue third parties for
payment of some or all costs related to the claims settlement
process.
Loss provision. Loss provision represents the accumulation of
estimates for ultimate losses and includes provision for losses
reported but not settled ("RBNS") and incurred but not yet reported
("IBNR"). Estimates of claims handling expenses are included in
both RBNS and IBNR. RBNS is provided in respect of claims reported,
but not settled as at the reporting date. The IBNR is determined by
summing the IBNR estimated for each line of business. The Group
calculates IBNR of at least 10 percent of the base insurance
premium under insurance contracts for the period twelve months
prior to the reporting date, which is in accordance with the
insurance legislation (Regulation on insurance reserves of insurers
in accordance with Order of the Minister of Finance of 20 November
2008 N 107, registered by the Ministry of Justice on 15 December
2008 N 1882). Reserves for insurance contracts primarily comprises
of provision for unearned premiums and insurance loss
provisions.
Liability adequacy test. At each reporting date, liability
adequacy tests are performed to ensure the adequacy of the contract
liabilities. In performing these tests, the current best estimates
of the future contractual cash flows and claims handling and
administration expenses are used. Any deficiency is immediately
charged to the consolidated statement of comprehensive income by
subsequently establishing a provision for losses arising from the
liability adequacy tests.
Reinsurance. The Group assumes and cedes reinsurance in the
normal course of business. Ceded reinsurance contracts do not
relieve the Group from its obligations to policyholders. Amounts
recoverable from or due to reinsurers are measured consistently
with the amounts associated with the reinsured insurance contracts
and in accordance with the term of each reinsurance contract.
Reinsurance assets include balances due from reinsurance companies
for paid claims, including claims handling expenses, reinsurers'
share of loss provision and premiums ceded to the Group.
Reinsurance payables are obligations of the Group for the transfer
of reinsurance premiums to reinsurers.
The Group assesses its reinsurance assets for impairment on a
regular basis. If there is objective evidence that the reinsurance
asset is impaired, the Group reduces the carrying amount of the
reinsurance asset to its recoverable amount and recognises that
impairment loss in the consolidated statement of comprehensive
income.
Capitalisation of borrowing costs. Borrowing costs that are
directly attributable to the acquisition, construction or
production of an asset that is not carried at fair value and that
necessarily takes a substantial period of time to get ready for its
intended use or sale (a qualifying asset), form part of the cost of
that asset. Other borrowing costs are recognised as an expense
using the effective interest method. The Group capitalises
borrowing costs that would have been avoided if it had not made
capital expenditure on qualifying assets. The commencement date for
capitalisation is when (a) the Group incurs expenditures for the
qualifying asset; (b) it incurs borrowing costs; and (c) it
undertakes activities that are necessary to prepare the asset for
its intended use or sale. Capitalisation ceases when all activities
necessary to prepare the qualifying asset for its intended use or
sale are complete.
Interest or other investment income is not deducted in arriving
at the amount of borrowing costs available for capitalisation,
except where the Group obtains specific borrowings for the purpose
of acquiring a qualifying asset and has investment income on the
temporary investment of funds obtained through such specific
borrowings.
Foreign currency translation . The functional currency of the
Group, which is the currency of the primary economic environment in
which the Group operates and the presentation currency is the
national currency of the Republic of Uzbekistan, Uzbek Soum
("UZS").
Monetary assets and liabilities are translated into Group's
functional currency at the official exchange rate of the CBU at the
end of respective reporting period. Foreign exchange gains and
losses resulting from the settlement of the transactions and from
the translation of monetary assets and liabilities into Group's
functional currency at year-end official exchange rates of the CBU
are recognised in profit or loss. Non-monetary items measured at
fair value in a foreign currency, including equity investments, are
translated using the exchange rates at the date when the fair value
was determined.
Effects of exchange rate changes on non-monetary items measured
at fair value in a foreign currency are recorded as part of the
fair value gain or loss.
As at 31 December 2022, the rate of exchange used for
translating foreign currency balances was USD 1 =11,225.46 (2021:
USD 1 = UZS 10,837.66) and EUR 1 = UZS 11,961.85 (2021: EUR 1 = UZS
12,224.88 ).
Offsetting. Financial assets and liabilities are offset and the
net amount reported in the consolidated statement of financial
position only when there is a legally enforceable right to offset
the recognised amounts, and there is an intention to either settle
on a net basis, or to realise the asset and settle the liability
simultaneously.
Earnings per share. Preference shares are not redeemable, and
are considered to be participating shares. Earnings per share are
determined by dividing the profit or loss attributable to owners of
the Group by the weighted average number of participating shares
outstanding during the reporting year.
Staff costs and related contributions. Wages, salaries,
contributions to the state pension and social insurance funds, paid
annual leave and sick leave, bonuses, and non-monetary benefits are
accrued in the year in which the associated services are rendered
by the employees of the Group. The Group has no legal or
constructive obligation to make pension or similar benefit payments
beyond the payments to the statutory defined contribution
scheme.
Segment reporting . Operating segments are reported in a manner
consistent with the internal reporting provided to the Group 's
chief operating decision maker. Segments whose revenue, result or
assets are ten percent or more of all the segments are reported
separately.
Presentation of statement of financial position in order of
liquidity. The Group does not have a clearly identifiable operating
cycle and therefore does not present current and non-current assets
and liabilities separately in the statement of financial position.
Instead, assets and liabilities are presented in order of their
liquidity. Refer to Note 37 for analysis of financial instruments
by their maturity. The following table provides information on
amounts expected to be recovered or settled before and after twelve
months after the
reporting period for items that are not analysed in Note 37.
31 December 2022 31 December 2021
Amounts expected to be Amounts expected to be
recovered or settled recovered or settled
------------------------------------ ------------------------------------
Within After Total Within After Total
12 months 12 months 12 months 12 months
after the after the after the after the
reporting reporting reporting reporting
period period period period
----------------------- ----------- ----------- ---------- ----------- ----------- ----------
Assets
Investment
in associates - 35,834 35,834 - 29,726 29,726
Premises, equipment
and intangible
assets - 2,082,504 2,082,504 - 1,276,363 1,276,363
Deferred tax
asset - 194,962 194,962 - 202,125 202,125
Insurance assets - 20,336 20,336 - 12,964 12,964
Other assets - 279,366 279,366 - 356,482 356,482
Non-current
assets held
for sale 223,345 - 223,345 48,602 - 48,602
Liabilities
Insurance liabilities - 117,348 117,348 - 84,813 84,813
Other liabilities - 240,326 240,326 - 197,421 197,421
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Group's consolidated financial statements
requires the Management to make estimates and judgments that affect
the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of income and expenses
during the reporting year. The Management evaluates its estimates
and judgements on an ongoing basis. The Management bases its
estimates and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under
different assumptions or conditions. The following estimates and
judgments are considered important to the portrayal of the Group's
financial condition.
Critical accounting judgements
Business model assessment. The business model drives
classification of financial assets. Management applied judgement in
determining the level of aggregation and portfolios of financial
instruments when performing the business model assessment. When
assessing sales transactions, the Group considers their historical
frequency, timing and value, reasons for the sales and expectations
about future sales activity. Sales transactions aimed at minimising
potential losses due to credit deterioration are considered
consistent with the "hold to collect" business model. Other sales
before maturity, not related to credit risk management activities,
are also consistent with the "hold to collect" business model,
provided that they are infrequent or insignificant in value, both
individually and in aggregate. The Group assesses significance of
sales transactions by comparing the value of the sales to the value
of the portfolio subject to the business model assessment over the
average life of the portfolio. In addition, sales of financial
asset expected only in stress case scenario, or in response to an
isolated event that is beyond the Group's control, is not recurring
and could not have been anticipated by the Group, are regarded as
incidental to the business model objective and do not impact the
classification of the respective financial assets.
The "hold to collect and sell" business model means that assets
are held to collect the cash flows, but selling is also integral to
achieving the business model's objective, such as, managing
liquidity needs, achieving a particular yield, or matching the
duration of the financial assets to the duration of the liabilities
that fund those assets.
The residual category includes those portfolios of financial
assets, which are managed with the objective of realising cash
flows primarily through sale, such as where a pattern of trading
exists. Collecting contractual cash flow is often incidental for
this business model.
Significant increase of credit risk. As explained in Note 3, ECL
are measured as an allowance equal to 12-month ECL for Stage 1
assets, or lifetime ECL assets for Stage 2 or Stage 3 assets. An
asset moves to Stage 2 when its credit risk has increased
significantly since initial recognition. In assessing whether the
credit risk of an asset has significantly increased the Group takes
into account qualitative and quantitative reasonable and
supportable forward-looking information.
For treasury operations, the Group calculates ECL on a financial
asset based not only on the current estimates of the credit quality
of the counterparty/issuer at the reporting date, but also taking
into account possible deterioration of the financial condition due
to the adverse macroeconomic factors of the counterparty's/issuer's
environment in the future. In particular, the level of ECL for
treasury operations is affected by the rating outlook (positive,
stable, negative) assigned by international rating agencies, which
affects the probability of default ("PD").
For loans to customers, the calculation of ECL takes into
account the possible estimated effects of changes in macroeconomic
parameters on forecasted cash flows, migration of collective loans
and collateral coverage.
Key sources of estimation uncertainty
The key inputs used for measuring ECL are:
-- Probability of default (PD);
-- Loss given default (LGD); and
-- Exposure at default (EAD).
Probability of default. PD constitutes a key input in measuring
ECL. PD for loans is an estimate of the likelihood of default over
a given time horizon, the calculation of which includes historical
data, assumptions and expectations of future conditions.
PD for treasury operations is determined according to the
Default Study from international rating agencies (S&P, Fitch,
Moody's), which publish tabular data with the values of the
probabilities of default.
The probabilities of default are maintained up to date and are
updated on a periodic basis as the default statistics are
updated.
Loss Given Default. LGD is an estimate of the loss arising on
default. It is based on the difference between the contractual cash
flows due and those that the lender would expect to receive, taking
into account cash flows from collateral. LGD is an estimate of the
loss arising on default. It is based on the difference between the
contractual cash flows due and those that the lender would expect
to receive, taking into account cash flows from collateral and
integral credit enhancements.
LGD for treasury operations is determined according to the
Default Study data from international rating agencies (S&P,
Fitch, Moody's) and depends on the type of debt on the financial
asset: senior secured/unsecured, subordinated, sovereign. In
addition, LGD may be adjusted if collateral is provided for the
asset, as well as if there are indications of impairment for the
financial asset (Stage 2 or Stage 3).
LGD for collectively assessed loans is calculated based on an
estimate of the recoverability of debt in case of the pledged
collateral sale with a discount period that corresponds to the
pledged collateral implementation terms.
Exposure at Default. EAD is an estimate of the exposure at a
future default date, taking into account expected changes in the
exposure after the reporting date, including repayments of
principal and interest, and expected drawdowns on committed
facilities. The Group's modelling approach for EAD reflects
expected changes in the balance outstanding over the lifetime of
the loan exposure that are permitted by the current contractual
terms. The Group uses EAD models that reflect the characteristics
of the portfolios.
If probability of default (PD) increased by 10% for the whole
loan portfolio then ECL would have increased by 18% to UZS
3,397,720 million as of 31 December 2022. If LGD increased by 10%
for the whole loan portfolio then ECL would have increased by 22%
to UZS 3,517,218 million.
Establishing groups of assets with similar credit risk
characteristics . When ECLs are measured on a collective basis, the
financial instruments are grouped on the basis of shared risk
characteristics. The Group monitors the appropriateness of the
credit risk characteristics on an ongoing basis to assess whether
they continue to be similar. This is required in order to ensure
that should credit risk characteristics change there is appropriate
re-segmentation of the assets.
The Group measures ECL on an individual basis, or on a
collective basis for portfolios of loans that share similar risk
characteristics. The measurement of the loss allowance is based on
the present value of the asset's expected cash flows using the
asset's original EIR, regardless of whether it is measured on an
individual basis or a collective basis.
Models and assumptions used. The Group uses various models and
assumptions in measuring fair value of financial assets as well as
in estimating ECL. Judgement is applied in identifying the most
appropriate model for each type of asset, as well as for
determining the assumptions used in these models, including
assumptions that relate to key drivers of credit risk.
Recoverability of deferred tax assets. The Management of the
Group is confident that no adjustment against deferred tax assets
at the reporting date is considered necessary, because it is more
than likely that the deferred tax asset will be fully realized. The
Group is profitable and there is a forecast of profits over the
coming periods over which the current timing differences will
unwind.
Other borrowed funds. The Group obtains long term financing from
government, state and international financial institutions at
interest rates at which such institutions ordinarily lend in
emerging markets and which may be lower than rates at which the
Group could source the funds from local lenders. As a result of
this financing, the Group is able to advance funds to specific
customers at advantageous rates. The Management has considered
whether gains or losses should arise on initial recognition of
these instruments and its judgment is that these funds are at the
market rates and no initial recognition gains or losses should
arise. In making this judgment the Management also considered that
these instruments are a separate market sector.
Loans and advances to customers . The Management has considered
gains or losses arisen on initial recognition for loan lending to
Group customers where the lending rate is below the market interest
rate.
Fair value measurement and valuation process. In estimating the
fair value of a financial asset or a liability, the Group uses
market-observable data to the extent it is available. Where such
Level 1 inputs are not available, the Group uses valuation models
to determine the fair value of its financial instruments.
The Group incorporates forward-looking information into a
measurement of ECL when there is a statistically proven correlation
between the macro-economic variables and defaults. As at the
reporting date the Group has obtained quarterly values for
macroeconomic variables: export, import, GDP, CPI, current account
balances, unemployment rates, aligned them with quarterly default
rates across all loan portfolios and performed statistical tests
for correlation considering different time lags. The Management
analysed forward-looking information and assessed that effect of
macro is not significant. The Management updates its statistical
tests for correlation as at each reporting date.
5. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The following amendments became effective from 1 January
2022:
Proceeds before intended use, Onerous contracts - cost of
fulfilling a contract, Reference to the Conceptual Framework -
narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual
Improvements to IFRSs 2018-2020 - amendments to IFRS 1, IFRS 9,
IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual
periods beginning on or after 1 January 2022).
-- The amendment to IAS 16 prohibits an Group from deducting
from the cost of an item of PPE any proceeds received from selling
items produced while the Group is preparing the asset for its
intended use. The proceeds from selling such items, together with
the costs of producing them, are now recognised in profit or loss.
An Group will use IAS 2 to measure the cost of those items. Cost
will not include depreciation of the asset being tested because it
is not ready for its intended use. The amendment to IAS 16 also
clarifies that an Group is 'testing whether the asset is
functioning properly' when it assesses the technical and physical
performance of the asset. The financial performance of the asset is
not relevant to this assessment. An asset might therefore be
capable of operating as intended by management and subject to
depreciation before it has achieved the level of operating
performance expected by management.
-- The amendment to IAS 37 clarifies the meaning of 'costs to
fulfil a contract'. The amendment explains that the direct cost of
fulfilling a contract comprises the incremental costs of fulfilling
that contract; and an allocation of other costs that relate
directly to fulfilling. The amendment also clarifies that, before a
separate provision for an onerous contract is established, an Group
recognises any impairment loss that has occurred on assets used in
fulfilling the contract, rather than on assets dedicated to that
contract.
-- IFRS 3 was amended to refer to the 2018 Conceptual Framework
for Financial Reporting, in order to determine what constitutes an
asset or a liability in a business combination. Prior to the
amendment, IFRS 3 referred to the 2001 Conceptual Framework for
Financial Reporting. In addition, a new exception in IFRS 3 was
added for liabilities and contingent liabilities. The exception
specifies that, for some types of liabilities and contingent
liabilities, an Group applying IFRS 3 should instead refer to IAS
37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without
this new exception, an Group would have recognised some liabilities
in a business combination that it would not recognise under IAS 37.
Therefore, immediately after the acquisition, the Group would have
had to derecognise such liabilities and recognise a gain that did
not depict an economic gain. It was also clarified that the
acquirer should not recognise contingent assets, as defined in IAS
37, at the acquisition date.
-- The amendment to IFRS 9 addresses which fees should be
included in the 10% test for derecognition of financial
liabilities. Costs or fees could be paid to either third parties or
the lender. Under the amendment, costs or fees paid to third
parties will not be included in the 10% test.
-- Illustrative Example 13 that accompanies IFRS 16 was amended
to remove the illustration of payments from the lessor relating to
leasehold improvements. The reason for the amendment is to remove
any potential confusion about the treatment of lease
incentives.
-- IFRS 1 allows an exemption if a subsidiary adopts IFRS at a
later date than its parent. The subsidiary can measure its assets
and liabilities at the carrying amounts that would be included in
its parent's consolidated financial statements, based on the
parent's date of transition to IFRS, if no adjustments were made
for consolidation procedures and for the effects of the business
combination in which the parent acquired the subsidiary. IFRS 1 was
amended to allow entities that have taken this IFRS 1 exemption to
also measure cumulative translation differences using the amounts
reported by the parent, based on the parent's date of transition to
IFRS. The amendment to IFRS 1 extends the above exemption to
cumulative translation differences, in order to reduce costs for
first-time adopters. This amendment will also apply to associates
and joint ventures that have taken the same IFRS 1 exemption.
-- The requirement for entities to exclude cash flows for
taxation when measuring fair value under IAS 41 was removed. This
amendment is intended to align with the requirement in the standard
to discount cash flows on a post-tax basis.
The application of the amendments had no significant impact on
the Group's consolidated financial statements.
New Accounting Pronouncements
Certain new standards and interpretations have been issued that
are mandatory for the annual periods beginning on or after 1
January 2023 or later, and which the Group has not early
adopted.
IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and
effective for annual periods beginning on or after 1 January 2023).
IFRS 17 replaces IFRS 4, which has given companies dispensation to
carry on accounting for insurance contracts using existing
practices. As a consequence, it was difficult for investors to
compare and contrast the financial performance of otherwise similar
insurance companies. IFRS 17 is a single principle-based standard
to account for all types of insurance contracts, including
reinsurance contracts that an insurer holds. The standard requires
recognition and measurement of groups of insurance contracts at:
(i) a risk-adjusted present value of the future cash flows (the
fulfilment cash flows) that incorporates all of the available
information about the fulfilment cash flows in a way that is
consistent with observable market information; plus (if this value
is a liability) or minus (if this value is an asset) (ii) an amount
representing the unearned profit in the group of contracts (the
contractual service margin). Insurers will be recognising the
profit from a group of insurance contracts over the period they
provide insurance coverage, and as they are released from risk. If
a group of contracts is or becomes loss-making, an Group will be
recognising the loss immediately.
Group is currently assessing the impact of the new standard on
its financial statements. Potential impact on insurance products
embedded in loans and similar instruments is also under
consideration.
1Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25
June 2020 and effective for annual periods beginning on or after 1
January 2023). The amendments include a number of clarifications
intended to ease implementation of IFRS 17, simplify some
requirements of the standard and transition. The amendments relate
to eight areas of IFRS 17, and they are not intended to change the
fundamental principles of the standard. The following amendments to
IFRS 17 were made:
-- Effective date: The effective date of IFRS 17 (incorporating
the amendments) has been deferred by two years to annual reporting
periods beginning on or after 1 January 2023; and the fixed expiry
date of the temporary exemption from applying IFRS 9 in IFRS 4 has
also been deferred to annual reporting periods beginning on or
after 1 January 2023.
-- Expected recovery of insurance acquisition cash flows: An
Group is required to allocate part of the acquisition costs to
related expected contract renewals, and to recognise those costs as
an asset until the Group recognises the contract renewals. Entities
are required to assess the recoverability of the asset at each
reporting date, and to provide specific information about the asset
in the notes to the financial statements.
-- Contractual service margin attributable to investment
services : Coverage units should be identified, considering the
quantity of benefits and expected period of both insurance coverage
and investment services, for contracts under the variable fee
approach and for other contracts with an 'investment-return
service' under the general model. Costs related to investment
activities should be included as cash flows within the boundary of
an insurance contract, to the extent that the Group performs such
activities to enhance benefits from insurance coverage for the
policyholder.
-- Reinsurance contracts held - recovery of losses: When an
Group recognises a loss on initial recognition of an onerous group
of underlying insurance contracts, or on addition of onerous
underlying contracts to a group, an Group should adjust the
contractual service margin of a related group of reinsurance
contracts held and recognise a gain on the reinsurance contracts
held. The amount of the loss recovered from a reinsurance contract
held is determined by multiplying the loss recognised on underlying
insurance contracts and the percentage of claims on underlying
insurance contracts that the Group expects to recover from the
reinsurance contract held. This requirement would apply only when
the reinsurance contract held is recognised before or at the same
time as the loss is recognised on the underlying insurance
contracts
-- Other amendments: Other amendments include scope exclusions
for some credit card (or similar) contracts, and some loan
contracts; presentation of insurance contract assets and
liabilities in the statement of financial position in portfolios
instead of groups; applicability of the risk mitigation option when
mitigating financial risks using reinsurance contracts held and
non-derivative financial instruments at fair value through profit
or loss; an accounting policy choice to change the estimates made
in previous interim financial statements when applying IFRS 17;
inclusion of income tax payments and receipts that are specifically
chargeable to the policyholder under the terms of an insurance
contract in the fulfilment cash flows; and selected transition
reliefs and other minor amendments.
Transition option for insurers applying IFRS 17 - Amendments to
IFRS 17 (issued on 9 December 2021 and effective for annual periods
beginning on or after 1 January 2023). The amendment to the
transition requirements in IFRS 17 provides insurers with an option
aimed at improving the usefulness of information to investors on
initial application of IFRS 17. The amendment relates to insurers'
transition to IFRS 17 only and does not affect any other
requirements in IFRS 17. The transition requirements in IFRS 17 and
IFRS 9 apply at different dates and will result in the following
one-time classification differences in the comparative information
presented on initial application of IFRS 17: accounting mismatches
between insurance contract liabilities measured at current value
and any related financial assets measured at amortised cost; and if
an Group chooses to restate comparative information for IFRS 9,
classification differences between financial assets derecognised in
the comparative period (to which IFRS 9 will not apply) and other
financial assets (to which IFRS 9 will apply). The amendment will
help insurers to avoid these temporary accounting mismatches and,
therefore, will improve the usefulness of comparative information
for investors. It does this by providing insurers with an option
for the presentation of comparative information about financial
assets. When initially applying IFRS 17, entities would, for the
purpose of presenting comparative information, be permitted to
apply a classification overlay to a financial asset for which the
Group does not restate IFRS 9 comparative information. The
transition option would be available, on an
instrument-by-instrument basis; allow an Group to present
comparative information as if the classification and measurement
requirements of IFRS 9 had been applied to that financial asset,
but not require an Group to apply the impairment requirements of
IFRS 9; and require an Group that applies the classification
overlay to a financial asset to use reasonable and supportable
information available at the transition date to determine how the
Group expects that financial asset to be classified applying IFRS
9.
Deferred tax related to assets and liabilities arising from a
single transaction - Amendments to IAS 12 (issued on 7 May 2021 and
effective for annual periods beginning on or after 1 January 2023).
The amendments to IAS 12 specify how to account for deferred tax on
transactions such as leases and decommissioning obligations. In
specified circumstances, entities are exempt from recognising
deferred tax when they recognise assets or liabilities for the
first time. Previously, there had been some uncertainty about
whether the exemption applied to transactions such as leases and
decommissioning obligations - transactions for which both an asset
and a liability are recognised. The amendments clarify that the
exemption does not apply and that entities are required to
recognise deferred tax on such transactions. The amendments require
companies to recognise deferred tax on transactions that, on
initial recognition, give rise to equal amounts of taxable and
deductible temporary differences. The Group is currently assessing
the impact of the amendments on its financial statements.
Classification of liabilities as current or non-current -
Amendments to IAS 1 (issued on 23 January 2020 and effective for
annual periods beginning on or after 1 January 2023). These narrow
scope amendments clarify that liabilities are classified as either
current or non-current, depending on the rights that exist at the
end of the reporting period. Liabilities are non-current if the
Group has a substantive right, at the end of the reporting period,
to defer settlement for at least twelve months. The guidance no
longer requires such a right to be unconditional. Management's
expectations whether they will subsequently exercise the right to
defer settlement do not affect classification of liabilities. The
right to defer only exists if the Group complies with any relevant
conditions as of the end of the reporting period. A liability is
classified as current if a condition is breached at or before the
reporting date even if a waiver of that condition is obtained from
the lender after the end of the reporting period. Conversely, a
loan is classified as non-current if a loan covenant is breached
only after the reporting date. In addition, the amendments include
clarifying the classification requirements for debt a company might
settle by converting it into equity. 'Settlement' is defined as the
extinguishment of a liability with cash, other resources embodying
economic benefits or an Group's own equity instruments.
There is an exception for convertible instruments that might be
converted into equity, but only for those instruments where the
conversion option is classified as an equity instrument as a
separate component of a compound financial instrument. The Group is
currently assessing the impact of the amendments on its financial
statements.
Classification of liabilities as current or non-current,
deferral of effective date - Amendments to IAS 1 (issued on 15 July
2020 and effective for annual periods beginning on or after 1
January 2023). The amendment to IAS 1 on classification of
liabilities as current or non-current was issued in January 2020
with an original effective date 1 January 2022. However, in
response to the Covid-19 pandemic, the effective date was deferred
by one year to provide companies with more time to implement
classification changes resulting from the amended guidance. The
Group is currently assessing the impact of the amendments on its
financial statements.
Amendments to IAS 8: Definition of Accounting Estimates (issued
on 12 February 2021 and effective for annual periods beginning on
or after 1 January 2023). The amendment to IAS 8 clarified how
companies should distinguish changes in accounting policies from
changes in accounting estimates.
The Group is currently assessing the impact of the amendments on
its financial statements.
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
Accounting policies (issued on 12 February 2021 and effective for
annual periods beginning on or after 1 January 2023). IAS 1 was
amended to require companies to disclose their material accounting
policy information rather than their significant accounting
policies. The amendment provided the definition of material
accounting policy information. The amendment also clarified that
accounting policy information is expected to be material if,
without it, the users of the financial statements would be unable
to understand other material information in the financial
statements. The amendment provided illustrative examples of
accounting policy information that is likely to be considered
material to the Group's financial statements. Further, the
amendment to IAS 1 clarified that immaterial accounting policy
information need not be disclosed. However, if it is disclosed, it
should not obscure material accounting policy information. To
support this amendment, IFRS Practice Statement 2, 'Making
Materiality Judgements' was also amended to provide guidance on how
to apply the concept of materiality to accounting policy
disclosures. The Group is currently assessing the impact of the
amendments on its financial statements.
Unless otherwise described above, the new standards and
interpretations are not expected to affect significantly the
Group's consolidated financial statements.
6. SEGMENT REPORTING
Operating segments are components of the Group that engage in
business activities that may earn revenues or incur expenses, whose
operating results are regularly reviewed by the chief operating
decision makers (CODM) and for which discrete financial information
is available. The CODM of the group is the Management Board. The
Management Board regularly uses financial information based on IFRS
for operational decision-making and resource allocation.
(a) Description of products and services from which each reportable segment derives its revenue
The Group is organized on the basis of two main business
segments - corporate banking which represents direct debit
facilities, current accounts, deposits, overdrafts, loan and other
credit facilities, foreign currency and derivative products and
retail banking which represents private banking services, private
customer current accounts, savings, deposits and debit cards,
consumer loans.
(b) Information about reportable segment profit or loss, assets, and liabilities
Segment information for the reportable segments for the period
ended 31 December 2022 is set out below:
31 December 2022
---------------------------------------
Corporate Individuals Total
-------------------------------------- ------------ ------------ -----------
Assets
Cash and cash equivalents 7,004,220 115,269 7,119,489
Loans and advances to customers 42,913,084 5,507,405 48,420,489
Due from other banks 1,843,415 - 1,843,415
Investment securities measured
at amortised cost 2,678,571 - 2,678,571
Total reportable segment assets 54,439,290 5,622,674 60,061,964
-------------------------------------- ------------ ------------ -----------
Liabilities
Due to other banks 3,895,719 - 3,895,719
Customer accounts 11,097,447 4,231,372 15,328,819
Other borrowed funds 32,232,397 9,363 32,241,760
Debt securities in issue 3,361,256 - 3,361,256
Total reportable segment liabilities 50,586,819 4,240,735 54,827,554
-------------------------------------- ------------ ------------ -----------
Segment information for the reportable segments for the year
ended 31 December 2021 is set out below:
31 December 2021
--------------------------------------
Corporate Individuals Total
-------------------------------------------------- ----------- ------------ -----------
Assets
Cash and cash equivalents 8,138,305 58,347 8,196,652
Loans and advances to customers 38,370,977 4,166,074 42,537,051
Due from other banks 1,956,303 - 1,956,303
Investment securities measured at amortised cost 1,067,512 - 1,067,512
Total reportable segment assets 49,533,097 4,224,421 53,757,518
-------------------------------------------------- ----------- ------------ -----------
Liabilities
Due to other banks 1,392,977 - 1,392,977
Customer accounts 10,257,754 3,303,786 13,561,540
Other borrowed funds 30,120,024 10,752 30,130,776
Debt securities in issue 3,317,817 - 3,317,817
Total reportable segment liabilities 45,088,572 3,314,538 48,403,110
-------------------------------------------------- ----------- ------------ -----------
The cash management is performed by Treasury Department to
support liquidity of the Bank as a whole.
2022
----------------------------------------
Corporate Individuals Total
-------------------------------------- ------------ ------------ ------------
Interest income
Interest on Loans and advances to
customers 3,874,358 670,526 4,544,884
Interest on balances Due from other
banks 278,921 - 278,921
Interest on investment securities
measured at amortised cost 274,786 - 274,786
Interest expense
Interest on balances Due to other
banks (71,274) - (71,274)
Interest on Customer accounts (373,743) (414,107) (787,850)
Interest on Other borrowed funds (1,532,566) - (1,532,566)
Interest on Debt securities in issue (218,324) - (218,324)
Interest on subordinated debt (16,357) - (16,357)
Segment results 2,215,801 256,419 2,472,220
-------------------------------------- ------------ ------------ ------------
2021
----------------------------------------
Corporate Individuals Total
-------------------------------------------------------------- ------------ ------------ ------------
Interest income
Interest on Loans and advances to customers 3,311,860 578,566 3,890,426
Interest on balances Due from other banks 142,770 - 142,770
Interest on investment securities measured at amortised cost 154,226 - 154,226
Interest expense
Interest on balances Due to other banks (70,794) - (70,794)
Interest on Customer accounts (252,500) (317,863) (570,363)
Interest on Other borrowed funds (1,219,611) - (1,219,611)
Interest on Debt securities in issue (201,107) - (201,107)
Interest on subordinated debt (6,030) - (6,030)
Segment results 1,858,814 260,703 2,119,517
-------------------------------------------------------------- ------------ ------------ ------------
(c) Reconciliation of income and expenses, assets, and
liabilities for reportable segments:
31 December 31 December
2022 2021
----------------------------------------- -------------- ---------------
Total reportable segment assets 60,061,964 53,757,518
Financial assets at fair value
through other comprehensive income 42,007 48,136
Investment in associates 35,834 29,726
Premises, equipment and intangible
assets 2,082,504 1,276,363
Current income tax prepayment 251,647 45,778
Deferred tax asset 194,962 202,125
Insurance assets 20,336 12,964
Other assets 279,366 310,704
Non-current assets held for sale 223,345 48,602
Total assets 63,191,965 55,731,916
Total reportable segment liabilities 54,827,554 48,403,110
Derivative financial liabilities 115,533 -
Insurance liabilities 117,348 84,813
Other liabilities 240,326 197,421
Subordinated debt 330,560 101,771
Total liabilities 55,631,321 48,787,115
2022 2021
---------------------------------------------- ------------ ------------
Segment results 2,472,220 2,119,516
Provision for credit losses on loans
and advances to customers (925,158) (420,937)
(Loss)/gain on initial recognition
on interest bearing assets (41,514) 8,119
Gains less losses from modification
of financial assets measured at amortised
cost, that did not lead to derecognition (44,035) (52,338)
Fee and commission income 443,690 386,074
Fee and commission expense (126,413) (110,483)
Gains less losses from financial derivatives (100,848) -
Net gain on foreign exchange translation 185,776 (4,262)
Net gain from trading in foreign currencies 337,768 170,935
Insurance operations income 86,724 80,881
Insurance operations expense (49,065) (36,331)
Change in insurance reserves, net (25,163) (32,235)
Dividend income 4,741 4,920
Other operating income 16,482 40,866
Provision for credit losses on other
assets 8,521 (34,145)
Impairment of assets held for sale (46,267) (5,586)
Administrative and other operating
expenses (1,366,177) (1,044,146)
Share of result from associates 703 722
Profit before tax 831,985 1,071,570
Income tax expense (211,433) (214,582)
PROFIT FOR THE PERIOD FROM CONTINUING
OPERATIONS 620,552 856,988
PROFIT FOR THE PERIOD 620,552 856,988
---------------------------------------------- ------------ ------------
7. CASH AND CASH EQUIVALENTS
31 December 31 December
2022 2021
---------------------------------------- ------------ ------------
Correspondent accounts and placements
with other banks
with original maturities of less than
three months 4,280,246 5,154,254
Cash on hand 1,522,206 861,313
Cash balances with the CBU (other than
mandatory reserve deposits) 1,318,006 2,181,792
Less: Allowance for expected credit
losses (969) (707)
Total cash and cash equivalents 7,119,489 8,196,652
Cash balances with the CBU are maintained at a level to ensure
compliance with the CBU liquidity ratio. The credit quality of cash
and cash equivalents at 31 December 2022 is as follows:
Cash balances Correspondent accounts Total
with the CBU and placements with
(other than other banks with
mandatory reserve original maturities
deposits) of less than three
months
------------------------------ ------------------- ----------------------- ----------
- Central Bank of Uzbekistan 1,318,006 - 1,318,006
- Rated AA- to A+ - 4,089,923 4,089,923
- Rated Baa - 37,114 70,606
- Rated Ba - 70,606 37,114
- Unrated - 82,603 82,603
Less: Allowance for expected
credit losses (28) (941) (969)
Total cash and cash
equivalents,
excluding cash on hand 1,317,978 4,279,305 5,597,283
As at 31 December 2022 cash and cash equivalents balances with
Russian banks are classified as "Unrated", under the category
Correspondent accounts and placements with other banks with
original maturities of less than three months, since their rating
was withdrawn by all rating agencies.
As at 31 December 2022 for the purpose of ECL measurement cash
and cash equivalents balances are included in Stage 1 except for
balances with Russian banks which are included in Stage 2. Refer to
Note 31 for the ECL movement.
The credit rating is based on the rating agency Moody's (if
available) or the rating agencies Standard & Poor's and Fitch,
which are converted to the nearest equivalent value on the Moody's
rating scale.
The credit quality of cash and cash equivalents at 31 December
2021 is as follows:
Cash balances with the CBU Correspondent accounts and Total
(other than mandatory reserve placements with other banks with
deposits) original maturities of less than
three months
---------------------------------- --------------------------------- --------------------------------- ------------
- Central bank of Uzbekistan 2,181,792 - 2,181,792
- Rated AA to A- - 4,022,030 4,022,030
- Rated Baa - 56,186 56,186
- Rated Ba - 1,076,038 1,076,038
Less: Allowance for expected
credit losses (50) (657) (707)
Total cash and cash equivalents,
excluding cash on hand 2,181,742 5,153,597 7,335,339
As at 31 December 2021 for the purpose of ECL measurement cash
and cash equivalents balances are included in
Stage 1 except for balances with Russian banks which are included in Stage 2.
Interest rate analysis of cash and cash equivalents is disclosed
in Note 37. Information on related party balances is disclosed in
Note 38.
8. DUE FROM OTHER BANKS
31 December 31 December
2022 2021
-------------------------------------------- ------------ ------------
Placements with other banks with original
maturities of more than three months 1,659,444 1,688,653
Mandatory cash balances with CBU 192,572 184,209
Restricted cash 25,597 118,888
- -
-------------------------------------------- ------------ ------------
- -
Less: Allowance for expected credit losses (34,198) (35,447)
Total due from other banks 1,843,415 1,956,303
Mandatory deposits with the CBU include non-interest-bearing
reserves against client deposits. The Group does not have the right
to use these deposits for the purpose of funding its
activities.
Restricted cash represents balances on correspondent accounts
with foreign banks placed by the Group on behalf of its customers.
The Group does not have the right to use these funds for the
purpose of funding its own activities.
Analysis by credit quality of due from other banks outstanding
at 31 December 2022 is as follows:
Mandatory cash balances with Placements with other banks Restricted cash Total
CBU with original maturities of
more than three months
---------------------- ------------------------------- ------------------------------- ---------------- ----------
- Central Bank
of Uzbekistan 192,572 - - 192,572
- Rated A- to A+ - 1,566 - 1,566
- Rated BBB+ - - 25,597 25,597
- Rated BB- - 1,114,311 - 1,114,311
- Rated B+ - 406,549 - 406,549
- Rated B1 - 43,560 - 43,560
- Rated B3 - 7,500 - 7,500
- Rated B - 48,033 - 48,033
- Rated B- - 3,906 - 3,906
- Unrated - 34,019 - 34,019
Less: Allowance
for expected credit
losses (125) (34,052) (21) (34,198)
Total due from
other banks 192,447 1,625,392 25,576 1,843,415
As at 31 December 2022 for the purpose of ECL measurement due
from other banks balances are included in Stage 1 except for
balances with Private Joint Stock Commercial Bank "Hi-Tech Bank"
and Private Joint Stock Commercial Bank "Turkiston" which are
included in Stage 3. Due from other banks balances with those banks
classified as "Unrated" as at 31 December 2022. Refer to Note 31
for the ECL movement.
Analysis by credit quality of due from other banks outstanding
at 31 December 2021 is as follows:
Mandatory cash balances Placements with other Restricted cash Total
with CBU banks with original
maturities of more than
three months
---------------------------- --------------------------- --------------------------- ---------------- ------------
- Central Bank of
Uzbekistan 184,209 - - 184,209
- Rated A- to A+ - - - -
- Rated BBB+ - - 117,257 117,257
- Rated Ba2 - - - -
- Rated BB- - 1,119,053 - 1,119,053
- Rated B+ - - - -
- Rated B1 - 101,141 - 101,141
- Rated B2 - 2,641 - 2,641
- Rated B3 - 2,662 - 2,662
- Rated B - 418,386 - 418,386
- Rated B- - 36,419 - 36,419
- Rated C - 8,351 1,631 9,982
Less: Allowance for
expected credit losses - (35,406) (41) (35,447)
---------------------------- --------------------------- --------------------------- ---------------- ------------
Total due from other banks 184,209 1,653,247 118,847 1,956,303
---------------------------- --------------------------- --------------------------- ---------------- ------------
As at 31 December 2021, for the purpose of ECL measurement due
from banks balances are included in Stage 1. Refer to Note 31 for
the ECL movement
The credit rating is based on the rating agency Moody's (if
available) or the rating agencies Standard & Poor's and Fitch,
which are converted to the nearest equivalent value on the Moody's
rating scale.
Refer to Note 35 for the disclosure of the fair value of due
from banks and interest rate analysis is disclosed in Note 37.
Information on related party balances is disclosed in Note 38.
9. LOANS AND ADVANCES TO CUSTOMERS
The Bank uses the following classification of loans:
-- Loans to state and municipal organisations - loans issued to
clients wholly owned by the Government of the Republic of
Uzbekistan and budget organisations;
-- Corporate loans - loans issued to clients other than
government entities and private entrepreneurs;
-- Loans to individuals - loans issued to individuals for
consumption purposes, for the purchase of residential houses and
flats and loans issued to private entrepreneurs without forming
legal entity.
Loans and advances to customers comprise:
31 December 2022 31 December 2021
---------------------------------------------- ----------------- -----------------
Corporate loans 31,362,398 25,902,022
State and municipal organisations 14,368,999 14,278,451
Loans to individuals 5,566,991 4,349,321
Total loans and advances to customers, gross 51,298,388 44,529,794
Less: Allowance for expected credit losses (2,877,899) (1,992,743)
Total loans and advances to customers 48,420,489 42,537,051
As at 31 December 2022, the Group granted loans to 15 (31
December 2021: 13) borrowers in the amount of UZS 17,320,728
million (31 December 2021: UZS 15,615,941 million), which
individually exceeded 10% of the Group's equity.
As at 31 December 2022, finance lease receivables include three
lease agreements for the total amount of UZS 353,622 million (31
December 2021: UZS 527,297 million) with one-year grace period for
repayment of principal amounts. The finance lease receivables were
presented under the Corporate Loans classification for the purpose
of disclosure.
The table below represents loans and advances to customer's
classification by stages:
31 December 2022 31 December 2021
---------------------------------------------- ----------------- -----------------
Originated loans to customers 51,117,332 44,273,101
Overdrafts 181,056 256,693
Total loans and advances to customers, gross 51,298,388 44,529,794
Stage 1 39,971,908 32,680,532
Stage 2 7,542,437 9,071,322
Stage 3 3,784,043 2,777,940
Total loans and advances to customers, gross 51,298,388 44,529,794
Less: Allowance for expected credit losses (2,877,899) (1,992,743)
Total loans and advances to customers 48,420,489 42,537,051
The following tables discloses the changes in the credit loss
allowance and gross carrying amount for loans and advances to
corporate customers between the beginning and the end of the
reporting period:
Credit Loss Allowance Gross Carrying Amount
------------------------------------------------ ---------------------------------------------------------
Stage Stage Stage 1 Stage Stage
Stage 1 2 3 2 3
State and municipal Lifetime Lifetime TOTAL 12-month Lifetime Lifetime TOTAL
organisations 12-month ECL ECL ECL ECL ECL ECL
As at 1 January 2022 111,428 - 5,037 116,465 14,246,280 - 32,171 14,278,451
Movements with impact
on credit loss
allowance
charge for the period:
Changes in the gross
carrying
amount
- Transfer from stage 1 (13,250) 13,250 - - (1,843,922) 1,843,922 - -
- Transfer from stage 2 - - - - - - - -
- Transfer from stage 3 - - - - - - - -
- Changes in EAD and
risk
parameters * (362,789) 259,008 7,372 (96,409) (11,784,984) (148,981) (2,562) (11,936,527)
New assets issued or
acquired 392,033 - - 392,033 14,368,999 - - 14,368,999
Matured or derecognized
assets (except for
write
off) (25,878) - (3,018) (28,896) (2,641,140) - (17,145) (2,658,285)
Total movements with
impact
on credit loss
allowance
charge for the period (9,884) 272,258 4,354 266,728 (1,901,047) 1,694,941 (19,707) (225,813)
Movements without
impact
on credit loss
allowance
charge for the period:
Recovery of assets
previously
written off - - - - - - - -
Written off assets - - - - - - - -
Foreign exchange
differences 7,325 1,515 - 8,840 270,083 46,278 - 316,361
Loss allowance for ECL
and Gross Carrying as
at
31 December 2022 108,869 273,773 9,391 392,033 12,615,316 1,741,219 12,464 14,368,999
------------- ------------ ----------- ---------------
Credit Loss Allowance Gross Carrying Amount
----------------------------------------------------- ----------------------------------------------------------
Stage Stage Stage Stage Stage Stage
1 2 3 1 2 3
12-month Lifetime Lifetime TOTAL 12-month Lifetime Lifetime TOTAL
Corporate loans ECL ECL ECL ECL ECL ECL
As at 1 January 2022 193,862 481,544 1,017,625 1,693,031 14,556,470 8,884,835 2,460,717 25,902,022
Movements with impact on
credit loss allowance
charge
for the period:
Changes in the gross
carrying
amount
- Transfer from stage 1 (28,739) 13,434 15,305 - (2,131,550) 995,508 1,136,042 -
- Transfer from stage 2 185,461 (283,968) 98,507 - 3,460,426 (4,828,537) 1,368,111 -
- Transfer from stage 3 103,450 197,158 (300,608) - 275,721 610,152 (885,873) -
- Changes in EAD and risk
parameters * (1,814,340) (46,402) 1,441,444 (419,298) (20,107,255) 1,928,731 269,946 (17,908,578)
New assets issued or
acquired 1,704,220 - - 1,704,220 30,343,916 - - 30,343,916
Matured or derecognized
assets
(except for write off) (61,493) (96,278) (360,987) (518,758) (4,688,413) (1,997,998) (630,241) (7,316,652)
Total movements with
impact
on credit loss allowance
charge for the period 88,559 (216,056) 893,661 766,164 7,152,845 (3,292,144) 1,257,985 5,118,686
Movements without impact
on credit loss allowance
charge for the period:
Recovery of assets
previously
written off - - 35,235 35,235 - - 35,235 35,235
Written off assets - - (127,371) (127,371) - - (127,371) (127,371)
Foreign exchange
differences 29,946 8,377 20,898 59,221 307,339 80,058 46,429 433,826
Loss allowance for ECL
and
Gross Carrying as at 31
December
2022 312,367 273,865 1,840,048 2,426,280 22,016,654 5,672,749 3,672,995 31,362,398
------------- -------------- ------------ -------------
Credit Loss Allowance Gross Carrying Amount
---------------------------------------------------- ------------------------------------------------------
Stage Stage Stage Stage Stage Stage
1 2 3 1 2 3
12-month Lifetime Lifetime TOTAL 12-month Lifetime Lifetime TOTAL
Loans to individuals ECL ECL ECL ECL ECL ECL
As at 1 January 2022 34,193 10,554 138,500 183,247 3,877,782 186,487 285,052 4,349,321
Movements with impact on
credit loss allowance
charge
for the period:
Changes in the gross
carrying
amount
- Transfer from stage 1 (1,013) 629 384 - (114,848) 71,340 43,508 -
- Transfer from stage 2 6,766 (8,061) 1,295 - 114,386 (137,357) 22,971 -
- Transfer from stage 3 39,595 20,221 (59,816) - 92,739 36,548 (129,287) -
- Changes in EAD and risk
parameters * (105,336) (13,278) 14,856 (103,758) (3,655,048) 453 11,501 (3,643,094)
New assets issued or
acquired 59,584 - - 59,584 5,566,639 - - 5,566,639
Matured or derecognized
assets
(except for write off) (4,777) (1,327) (57,456) (63,560) (541,712) (29,002) (119,234) (689,948)
Total movements with
impact
on credit loss allowance
charge for the period (5,181) (1,816) (100,737) (107,734) 1,462,156 (58,018) (170,541) 1,233,597
Movements without impact
on credit loss allowance
charge for the period:
Recovery of assets
previously
written off - - 48,120 48,120 - - 48,120 48,120
Written off assets - - (64,047) (64,047) - - (64,047) (64,047)
Foreign exchange
differences - - - - - - - -
Loss allowance for ECL and
Gross Carrying as at 31
December
2022 29,012 8,738 21,836 59,586 5,339,938 128,469 98,584 5,566,991
*The line "Changes in EAD and risk parameters" under columns
related to Gross Carrying Amount represents changes in the gross
carrying amount of loans issued in prior periods which have not
been fully repaid during 2022 and transfers of new issued loans
between stages.
*The line "Changes in EAD and risk parameters" under columns
related to Credit Loss Allowance represents changes in risk
parameters (PD, LGD), changes in EAD and adjustment of ECL due to
transfer to new stages, as well as transfers of ECL on new loans
originated during the reporting period from Stage 1 to other
stages. The information on transfers above reflects the migration
of loans from their initial stage (or the stage as at the beginning
of the reporting date) to the stage they were in as at the
reporting date. This information does not reflect the intermediate
stage that the loans could be assigned to throughout the reporting
period.
The following table discloses the changes in the credit loss
allowance and gross carrying amount for loans and advances to
corporate customers between the 1 January 2021 and 31 December
2021:
Column1 Credit Loss Allowance Column5 Gross Carrying Amount
---------------------------------------------- -----------------------------------------------------
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
State and municipal 12-month Lifetime Lifetime TOTAL 12-month Lifetime Lifetime TOTAL
organisations ECL ECL ECL ECL ECL ECL
------------
As at 1 January 2021 57,409 61,835 9,713 128,957 7,866,977 6,658,143 37,412 14,562,532
Movements with impact on
credit loss allowance
charge for the period:
Changes in the gross
carrying amount
- Transfer from stage 1 (19) - 19 - (25,941) - 25,941 -
- Transfer from stage 2 51,435 (51,435) - - 5,327,666 (5,327,666) - -
- Transfer from stage 3 1,309 - (1,309) - 1,674 - (1,674) -
- Changes in EAD and risk
parameters * (22,458) (1,260) 4,413 (19,305) (1,104,933) (73,172) (14,545) (1,192,650)
New assets issued or
acquired 27,164 - - 27,164 3,258,046 - - 3,258,046
Matured or derecognized
assets (except for write
off) (4,990) (10,400) (7,799) (23,189) (1,307,340) (1,330,477) (34,563) (2,672,380)
Total movements with
impact on credit loss
allowance charge for the
period 52,441 (63,095) (4,676) (15,330) 6,149,172 (6,731,315) (24,841) (606,984)
Movements without impact
on credit loss allowance
charge for the period:
Recovery of assets
previously written off - - - - - - - -
Written off assets - - - - - - - -
Foreign exchange
differences 1,578 1,260 - 2,838 230,131 73,172 19,600 322,903
Loss allowance for ECL and
Gross Carrying as at 31
December 2021 111,428 - 5,037 116,465 14,246,280 - 32,171 14,278,451
Column1 Credit Loss Allowance Column5 Gross Carrying Amount
-------------------------------------------------------------- --------------------------------------------------------------------
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Corporate loans 12-month ECL Lifetime Lifetime TOTAL 12-month Lifetime Lifetime TOTAL
ECL ECL ECL ECL ECL
As at 1 January 2021 113,170 134,583 1,302,461 1,550,214 14,751,901 4,950,505 2,235,765 21,938,171
Movements with impact on credit loss
allowance charge for the period:
Changes in the gross carrying amount
- Transfer from stage 1 (29,292) 20,152 9,140 - (3,863,755) 2,686,846 1,176,909 -
- Transfer from stage 2 31,101 (59,515) 28,414 - 934,919 (1,699,391) 764,472 -
- Transfer from stage 3 75,976 761,008 (836,984) - 112,400 1,230,420 (1,342,820) -
- Changes in EAD and risk parameters* (252,694) (377,789) 1,082,857 452,374 (4,168,431) 2,608,458 538,287 (1,021,686)
New assets issued or acquired 273,146 - - 273,146 9,933,457 - - 9,933,457
Matured or derecognized assets (except for
write off) (21,367) (11,064) (263,708) (296,139) (3,218,934) (915,822) (577,873) (4,712,629)
Total movements with impact on credit loss
allowance charge for the period 76,870 332,792 19,719 429,381 (270,344) 3,910,511 558,975 4,199,142
Movements without impact on credit loss
allowance charge for the period:
Recovery of assets previously written off - - 5,707 5,707 - - 5,707 5,707
Written off assets - - (346,110) (346,110) - - (346,110) (346,110)
Foreign exchange differences 3,822 14,169 35,848 53,839 74,913 23,819 6,380 105,112
Loss allowance for ECL and Gross Carrying as
at 31 December 2021 193,862 481,544 1,017,625 1,693,031 14,556,470 8,884,835 2,460,717 25,902,022
Column1 Credit Loss Allowance Column5 Gross Carrying Amount
-------------------------------------------------------------- --------------------------------------------------------------------
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Loans to individuals 12-month ECL Lifetime Lifetime TOTAL 12-month ECL Lifetime Lifetime TOTAL
ECL ECL ECL ECL
As at 1 January 2021 21,179 19,047 183,318 223,544 3,582,749 361,561 417,660 4,361,970
Movements with impact on credit loss
allowance charge for the period:
Changes in the gross carrying amount
- Transfer from stage 1 (1,278) 616 662 - (215,002) 103,543 111,459 -
- Transfer from stage 2 11,377 (15,290) 3,913 - 217,446 (285,998) 68,552 -
- Transfer from stage 3 53,719 19,413 (73,132) - 124,708 45,260 (169,968) -
- Changes in EAD and risk parameters* (70,210) (12,026) 138,413 56,177 (374,211) (8,641) 58,303 (324,549)
New assets issued or acquired 23,930 - - 23,930 1,303,052 - - 1,303,052
Matured or derecognized assets (except for
write off) (4,524) (1,206) (67,491) (73,221) (760,960) (29,238) (153,771) (943,969)
Total movements with impact on credit loss
allowance charge for the period 13,014 (8,493) 2,365 6,886 295,033 (175,074) (85,425) 34,534
Movements without impact on credit loss
allowance charge for the period:
Recovery of assets previously written off - - 1,270 1,270 - - 1,270 1,270
Written off assets - - (48,453) (48,453) - - (48,453) (48,453)
Foreign exchange differences - - - - - - - -
Loss allowance for ECL and Gross Carrying as
at 31 December 2021 34,193 10,554 138,500 183,247 3,877,782 186,487 285,052 4,349,321
Economic sector risk concentrations within the loans and
advances to customer are as follows:
Column1 31 December 2022 Column2 31 December 2021 Column3
----------------- -------- ----------------- --------
Amount % Amount %
------------------------------ ----------------- -------- ----------------- --------
Manufacturing 18,207,559 36% 15,849,755 30%
Oil and gas & chemicals 10,885,326 21% 10,704,331 25%
Individuals 5,566,991 11% 4,349,321 11%
Trade and Services 5,554,150 11% 4,441,329 11%
Agriculture 3,460,679 7% 3,745,481 9%
Energy 3,114,928 6% 2,176,801 8%
Transport and communication 2,883,334 6% 2,367,542 5%
Construction 1,625,421 2% 895,234 1%
Total loans and advances
to customers, gross 51,298,388 100% 44,529,794 100%
Less: Allowance for expected
credit losses (2,877,899) (1,992,743)
Total loans and advances
to customers 48,420,489 42,537,051
------------------------------ ----------------- -------- ----------------- --------
As at 31 December 2022, the Group granted loans to 13 (31
December 2021: 13) borrowers in the amount of UZS 15,844,779
million (31 December 2021: UZS 15,615,941 million), which
individually exceeded 10% of the Group's equity.
Information about loans and advances to individuals as at 31
December 2022 and 2021 are as follows:
Column1 31 December 2022 31 December 2021
------------------------------ ------------------- ------------------
Mortgage 3,685,578 3,314,059
Car Loan 982,316 448,949
Microloan 744,719 464,727
Consumer Loans 73,449 110,161
Other 80,929 11,425
Total loans and advances
to individuals, gross 5,566,991 4,349,321
Less: Allowance for expected
credit losses (59,586) (183,247)
Total loans and advances
to individuals 5,507,405 4,166,074
Information about collateral as at 31 December 2022 are as
follows:
State and Corporate Loans 31 December
municipal loans to 2022
31 December 2022 organisations individuals
-------------------------------------- --------------- ------------ ------------- ------------
Loans with other credit enhancement:
Letter of surety 2,458,999 12,094,239 1,351,316 15,904,554
State guarantee 6,840,288 - - 6,840,288
Loans collateralised by:
Real estate 134,311 8,750,980 3,227,074 12,112,365
Equipment 700,259 5,169,125 1,049 5,870,433
Inventory and receivables 2,662,393 1,558,028 - 4,220,421
Insurance policy 9,271 3,254,185 632,134 3,895,590
Cash deposits 1,092,147 454 - 1,092,601
Vehicles 49,579 387,457 173,130 610,166
Equity securities 136,818 147,925 - 284,743
Not collateralised 284,934 5 182,288 467,227
Total loans and advances
to customers, gross 14,368,999 31,362,398 5,566,991 51,298,388
Less: Allowance for expected
credit losses (392,033) (2,426,280) (59,586) (2,877,899)
Total loans and advances
to customers 13,976,966 28,936,118 5,507,405 48,420,489
-------------------------------------- --------------- ------------ ------------- ------------
Information about collateral as at 31 December 2021 are as
follows:
31 December 2021 State and Corporate Loans to 31 December
municipal loans individuals 2021
organisations
---------------------------------------------- --------------- ------------ ------------- ------------
Loans with other credit enhancement:
Letter of surety 2,504,049 8,983,059 599,578 12,086,687
State guarantee 7,314,269 - - 7,314,269
Loans collateralised by
Real estate 136,130 7,334,729 2,844,909 10,315,768
Equipment 679,990 4,459,284 - 5,139,274
Inventory and receivables 2,213,930 1,657,871 181,651 4,053,451
Insurance policy 11,817 3,040,375 263,635 3,315,826
Cash deposits 993,410 22,440 3,246 1,019,096
Vehicles 88,134 404,264 135,967 628,365
Equity securities 150,973 - - 150,973
Not collateralised 185,749 - 320,336 506,085
Total loans and advances to customers, gross 14,278,451 25,902,022 4,349,321 44,529,794
Less: Allowance for expected credit losses (116,465) (1,693,031) (183,247) (1,992,743)
Total loans and advances to customers 14,161,986 24,208,991 4,166,074 42,537,051
Analysis by credit quality of loans to State and municipal
organisations, Corporate and Individual customers that are
collectively and individually assessed for impairment as at 31
December 2022 are as follows :
31 December 2022 State and Corporate Loans Total
municipal loans to individuals
organisations
-------------------------------- --------------- ------------ ---------------- ------------
Loans assessed for impairment
on a collective basis (gross)
Not past due loans 14,280,484 27,311,705 5,241,219 46,833,408
Past due loans - - -
- less than 30 days overdue 20,850 557,948 167,139 745,937
- 31 to 90 days overdue 67,665 728,294 69,456 865,415
- 91 to 180 days overdue - 353,762 52,258 406,020
- 181 to 360 days overdue - 652,342 36,394 688,736
- over 360 days overdue - 38,160 525 38,685
Total loans assessed for
impairment on a collective
basis, gross 14,368,999 29,642,211 5,566,991 49,578,201
Loans individually determined
to be impaired (gross):
Restructured loans - 1,720,187 - 1,720,187
Not past due loans - 176,655 - 176,655
Past due loans - - - -
1-30 days - - - -
31-90 days - - - -
91-180 days - 1,095,776 - 1,095,776
181-360 days - 447,756 - 447,756
Total loans individually
determined to be impaired,
gross - 1,720,187 - 1,720,187
- Impairment provisions for
individually impaired loans - (964,455) - (964,455)
- Impairment provisions
assessed on a collective
basis (392,033) (1,461,825) (59,586) (1,913,444)
Less: Allowance for expected
credit losses (392,033) (2,426,280) (59,586) (2,877,899)
Total loans and advances
to customers 13,976,966 28,936,118 5,507,405 48,420,489
-------------------------------- --------------- ------------ ---------------- ------------
Analysis by credit quality of loans to State and municipal
organisations, Corporate and Individual customers that are
collectively and individually assessed for impairment as at 31
December 2021 are as follows:
31 December 2021 State and municipal Corporate loans Loans to individuals Total
organisations
------------------------------- ------------------------------ ---------------- --------------------- ------------
Loans assessed for impairment
on a collective basis (gross)
Not past due loans 14,246,999 23,156,242 3,840,673 41,243,914
Past due loans
- less than 30 days overdue 27,616 949,697 185,401 1,162,714
- 31 to 90 days overdue 2,471 539,388 87,801 629,660
- 91 to 180 days overdue - 271,438 72,755 344,193
- 181 to 360 days overdue 1,365 376,143 128,524 506,032
- over 360 days overdue - 40,486 34,167 74,653
Total loans assessed for
impairment on a collective
basis, gross 14,278,451 25,333,394 4,349,321 43,961,166
Loans individually determined
to be impaired (gross):
Restructured loans - 568,628 - 568,628
Not past due loans - 422,936 - 422,936
Past due loans
1-30 days - - - -
31-90 days - 72,759 - 72,759
91-180 days - 72,933 - 72,933
181-360 days - - - -
Total loans individually
determined to be impaired,
gross - 568,628 - 568,628
- Impairment provisions for
individually impaired loans - (182,745) - (182,745)
- Impairment provisions
assessed on a collective
basis (116,465) (1,510,286) (183,247) (1,809,998)
Less: Allowance for expected
credit losses (116,465) (1,693,031) (183,247) (1,992,743)
Total loans and advances to
customers 14,161,986 24,208,991 4,166,074 42,537,051
------------------------------- ------------------------------ ---------------- --------------------- ------------
The credit quality of loans to customers carried at amortized
cost is as follows at 31 December 2022:
Stage 1 Stage Stage Total
2 3
------------
(12-months (lifetime (lifetime
ECL) ECL for ECL for
SICR) credit
31 December 2022 im-paired)
------------------------------------ ----------- ---------- ------------ ------------
Corporate loans
Standard 22,016,653 4,294,785 222,219 26,533,657
Substandard - 1,377,965 818,208 2,196,173
Unsatisfactory - - 464,900 464,900
Doubtful - - 969,171 969,171
Loss - - 1,198,497 1,198,497
Gross carrying amount 22,016,653 5,672,750 3,672,995 31,362,398
Credit loss allowance (312,366) (273,866) (1,840,048) (2,426,280)
Carrying amount 21,704,287 5,398,884 1,832,947 28,936,118
State and municipal organisations
Standard 12,615,317 1,369,382 - 13,984,699
Substandard - 371,837 12,463 384,300
Unsatisfactory - - - -
Doubtful - - - -
Loss - - - -
Gross carrying amount 12,615,317 1,741,219 12,463 14,368,999
Credit loss allowance (108,870) (273,773) (9,390) (392,033)
Carrying amount 12,506,447 1,467,446 3,073 13,976,966
Loans to individuals
Standard 5,339,939 68,124 16,071 5,424,134
Substandard - 60,345 29,409 89,754
Unsatisfactory - - 25,563 25,563
Doubtful - - 19,748 19,748
Loss - - 7,792 7,792
Gross carrying amount 5,339,939 128,469 98,583 5,566,991
Credit loss allowance (29,013) (8,738) (21,835) (59,586)
Carrying amount 5,310,926 119,731 76,748 5,507,405
------------------------------------ ----------- ---------- ------------ ------------
The credit quality of loans to customers carried at amortized
cost is as follows at 31 December 2021:
Stage Stage Stage Total
1 2 3
------------
(12-months (lifetime (lifetime
ECL) ECL for ECL for
SICR) credit
31 December 2021 impaired)
------------------------------------ ----------- ---------- ----------- ------------
Corporate loans
14 556
Standard 470 6 984 900 138 149 21 679 519
Substandard - 1 899 935 741 772 2 641 707
Unsatisfactory - - 890 792 890 792
Doubtful - - 187 119 187 119
Loss - - 502 886 502 886
14 556 8 884 2 460
Gross carrying amount 470 835 718 25 902 022
(1 017
Credit loss allowance (193 862) (481 544) 625) (1 693 031)
14 362 8 403 1 443
Carrying amount 608 291 093 24 208 991
------------------------------------ ----------- ---------- ----------- ------------
State and municipal organisations
14 246
Standard 280 - 4 414 14 250 694
Substandard - - - -
Unsatisfactory - - 22 256 22 256
Doubtful - - 4 136 4 136
Loss - - 1 365 1 365
14 246
Gross carrying amount 280 - 32 171 14 278 451
Credit loss allowance (111 428) - (5 037) (116 465)
14 134
Carrying amount 852 - 27 134 14 161 986
------------------------------------ ----------- ---------- ----------- ------------
Loans to individuals
Standard 3 877 782 106 616 49 809 4 034 207
Substandard - 79 871 55 966 135 837
Unsatisfactory - - 40 105 40 105
Doubtful - - 34 015 34 015
Loss - - 105 158 105 158
3 877
Gross carrying amount 782 186 487 285 053 4 349 321
Credit loss allowance (34 193) (10 554) (138 500) (183 247)
3 843
Carrying amount 589 175 933 146 553 4 166 074
------------------------------------ ----------- ---------- ----------- ------------
The extent to which collateral and other credit enhancements
mitigate credit risk for financial assets carried at amortised cost
that are credit impaired, is presented by disclosing collateral
values separately for (i) those assets where collateral and other
credit enhancements are equal to or exceed carrying value of the
asset ("over-collateralised assets") and (ii) those assets where
collateral and other credit enhancements are less than the carrying
value of the asset ("under-collateralised assets").
The effect of collateral on credit impaired assets at 31
December 2022 and 31 December 2021 are as follows.
Over-collateralised Under-collateralised
---------------------------------------- -----------------------------------------
Carrying Value of Value of Collateral Carrying Value of Value of Collateral
the Assets the Assets
------------------------------- ------------------ -------------------- ------------------- --------------------
Credit Impaired Assets
Loans to Corporate and State
Companies carried at AC
Trade and services 251,869 775,301 400,798 2,316
Agriculture 170,326 571,935 275,837 3,056
Manufacturing 757,899 1,787,140 413,792 2,855
Construction 79,906 193,305 136,579 14,393
Transport and communication 37,049 82,936 49,562 -
Oil and gas & Chemicals 8,193 36,424 1,103,649 -
Loans to Individuals carried
at AC
Mortgage 64,479 96,001 22,584 4,548
Car Loan - - 3,665 -
Microloan - - 4,137 -
Consumer Loans 428 1,044 2,171 -
Other - - 998 -
Student Loan 50 329 72 -
Total 1,370,199 3,544,415 2,413,844 27,168
31 December 2021
Under-collateralised
-------------------------------------
Carrying Value Value of Collateral
of the Assets
------------------------------ --------------- --------------------
Credit Impaired Assets
Loans to Corporate and State
Companies carried at AC
Manufacturing 1 180 611 625 964
Agriculture 472 300 210 571
Trade 278 063 187 710
Services 229 670 81 102
Oil and gas & Chemicals 142 065 120 948
Construction 129 769 68 944
Transport and communication 60 411 44 826
Loans to Individuals carried
at AC
Mortgage 212 408 165 451
Microloan 28 729 2
Consumer Loans 26 616 2 917
Car Loan 16 346 6 768
Other 953 348
Total 2,777,941 1,515,551
------------------------------ --------------- --------------------
The components of net investment in finance lease as at 31
December 2022 and 2021 are as follows:
Column1 31 December 2022 31 December 2021
Not later than one year 111,869 165,948
From one year to five years 267,085 351,752
Minimum lease payments 378,954 517,700
Less: unearned finance income (40,019) (67,402)
338,935 450,298
Less: Allowance for expected credit
losses (5,769) (8,002)
Net investment in finance lease 333,166 442,296
Current portion 87,809 125,532
Long-term portion 245,357 316,764
Net investment in finance lease 333,166 442,296
As at 31 December 2022, finance lease receivables include three
lease agreements for the total amount of UZS 353,622 million (31
December 2021: UZS 527,297 million) with one-year grace period for
repayment of principal amounts.
Refer to Note 35 for the disclosure of the fair value of loans
and advances to customers. Interest rate analysis of loans
and advances to customers is disclosed in Note 37. Information
on related party balances is disclosed in Note 38.
10. INVESTMENT SECURITIES MEASURED AT AMORTISED COST
Currency Annual coupon/ EIR % Maturity date 31 December 2022 31 December 2021
interest rate % month/year
------------------- ---------- ------------------ -------- ----------------- ----------------- -----------------
Jan 2023 - Jul
Government Bonds USD/UZS 5 - 18 8 - 19 2032 2,069,871 289,361
Jan 2023 - Feb
CBU Bonds UZS 16 - 17 17 - 18 2023 610,315 771,384
June 2023 - July
Corporate bonds UZS 20 - 22 20 - 23 2026 8,435 8,400
Less: Allowance for expected
credit losses (10,050) (1,633)
Total investment securities
measured at amortised cost 2,678,571 1,067,512
At 31 December 2022, the Group holds government bonds of the
Ministry of Finance of the Republic of Uzbekistan in the quantity
of 2,015,770 (31 December 2021: 288,970) with nominal value of UZS
1,000,000 and in the quantity of 50 with nominal value of USD
200,000 and coupon rate of 5-18 % p.a. (31 December 2021: 14-16%
p.a.).
At 31 December 2022, the Group holds bonds of the CBU in the
amount of UZS 610,315 million at 16% p.a. coupon rate.
At 31 December 2022, the Group holds 1 156 Corporate bonds of
Uzmetkombinat with nominal value of UZS 5,000,000 maturity date
June 2023 and annual coupon rate 22,03% .
At 31 December 2022, the subsidiary PSB Insurance LLC holds
corporate bonds of JSCB "Asia Alliance Bank" in quantity 2,500 with
nominal value of UZS 1,000,000 and coupon rate of CBU refinancing
rate (14%) + 4% p.a. The maturity date of the bonds is July
2026.
CBU Government Corporate Total
31 December 2022 Bonds Bonds Bonds
------------------------------ -------- ----------- ---------- ----------
Neither past due nor
impaired
- Rated BB- 610,315 2,069,871 - 2,680,186
- Rated B2 - - 2,610 2,610
- Unrated - - 5,825 5,825
Less: Allowance for expected
credit losses (570) (9,394) (86) (10,050)
Total investment securities
measured at amortised
cost 609,745 2,060,477 8,349 2,678,571
CBU Government Corporate Bonds Total
31 December 2021 Bonds Bonds
-------------------------------------------------------- -------- ----------- ---------------- ----------
Neither past due nor impaired
- Rated BB- 289,361 771,384 5,789 1,066,534
- Rated B2 - - 2,611 2,611
- Unrated - - - -
Less: Allowance for expected credit losses (1,071) (453) (109) (1,633)
Total investment securities measured at amortised cost 288,290 770,931 8,291 1,067,512
The credit rating is based on the rating agency Moody's (if
available) or the rating agencies Standard & Poor's and Fitch,
which are converted to the nearest equivalent value on the Moody's
rating scale.
As at 31 December 2022 and 31 December 2021, for the purpose of
ECL measurement investment in debt securities measured at amortised
cost balances are included in Stage 1. There were no transitions
between stages in 2022. Refer to Note 31 for the ECL measurement
approach.
Refer to Note 35 for the disclosure of the fair value of
investment securities measured at amortised cost. Interest rate
analysis of investment securities measured at amortised cost is
disclosed in Note 37. Information on related party balances is
disclosed in Note 38.
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
Column1 Ownership 31 December 31 December
2022 2021
---------------------------------------- ---------- ------------ ------------
Visa Inc. 0,0% 13,460 13,613
JSC "Mortgage Refinancing Company
of Uzbekistan" 8,0% 8,788 8,000
JSC "Republican Currency Exchange" 11,1% 7,375 6,109
JSC "O'zbekiston pochtasi" 4,4% 5,648 7,500
JSC "Qurilishmashlizing" 6,5% 4,493 5,842
LLC "Credit Information Analytical
Center" 3,2% 2,120 1,695
Other 3,0% 123 265
LLC "Yagona Umumrespublika Protsessing
Markazi" 0,0% - 2,530
LLC "Credit information Service
CRIF" 0,0% - 2,081
JSC "Tashkent" Stock Exchange 0,0% - 501
Total financial assets at FVTOCI 42,007 48,136
Financial assets at FVTOCI as at December 2022, other than Visa
Inc., include equity securities registered in Uzbekistan and not
actively traded. The Group elects at initial recognition to
irrevocably designate the above disclosed equity investments at
FVTOCI which is in line with the Group accounting policy.
As at 31 December 2022 and 2021, Visa Inc. is measured using
level 1 hierarchy and investment securities other than Visa Inc.
are measured using level 3 hierarchy of fair value measurement.
Starting from 1 January 2018, the fair value of the financial
assets at fair value through other comprehensive income was
determined as the present value of future dividends by assuming
dividend growth rate of zero per annum. The management built its
expectation based on previous experience of dividends received on
financial assets at fair value through other comprehensive income
over multiple years, and accordingly calculated the value using the
average rate of return on investments. The Management believes that
this approach accurately reflects the fair value of these
securities. A significant unobservable input used in determining
the fair value of financial assets at FVTOCI is WACC. The higher
the EACC the lower the fair Value of the financial assets at
FVTOCI.
Investments to which the dividends valuation approach is not
appliable, i.e. dividends were not paid during the period,
management may use the Assets based valuation approach focused on
the investment company's net assets value (NAV), or fair market
value of its total assets minus its total liabilities, to determine
what would cost to recreate the business. The Management believes
that such approach accurately reflects the fair value of these
securities
As at 31 December 2022 and 2021, none of the financial assets at
FVTOCI were pledged.
The table below represents the movement of financial instruments
at FVTOCI for the year ended 31 December 2022 and 31 December
2021:
Column1 31 December Additions Disposal FV Adjustments 31 December
2021 2022
Financial assets
at FVTOCI 48,136 1,077 (7,654) 448 42,007
------------------ ------------ ---------- --------- --------------- ------------
Column1 31 December 2020 Additions Disposal FV Adjustments 31 December 2021
Financial assets at FVTOCI 38,024 7,593 (341) 2,860 48,136
---------------------------- ----------------- ---------- --------- --------------- -----------------
12. INVESTMENT IN ASSOCIATES
Principal 31 December 31 December
Name activity 2022 2021
--------------------- ------------------ --------------- ------------ ------- ------------ ---------
LLC "Khorezm
Invest Project" Asset management Uzbekistan 34% 35,534 34% 29,726
"Kattaqurgon
Business Services"
LLC Asset management Uzbekistan 33% 300 0% -
Total investment
in associates 35,834 29,726
31 December 2022 LLC "Khorezm
Invest Project" "Kattaqurgon Business Services" LLC Total associates
------------------------------------------ ----------------- ------------------------------------ -----------------
Current assets 13,341 4,908 18,249
Non-current assets 91,544 238 91,782
Current liabilities (371) (4,246) (4,617)
- -
------------------------------------------ ----------------- ------------------------------------ -----------------
- - -
Revenue 11,190 - 11,190
Net (loss)/ profit for the year 2,151 (89) 2,062
- -
------------------------------------------ ----------------- ------------------------------------ -----------------
- -
Total comprehensive (loss)/ income for
the year 2,151 (89) 2,062
Net assets of the associate 104,513 900 105,413
Proportion of the Group's ownership
interest 34% 33%
Carrying amount of the Group's Interest
in Associate 35,534 300 35,834
31 December 2021 LLC "Khorezm Invest Project"
------------------------------------------------------ -----------------------------
Current assets 34,635
Non-current assets 53,041
Current liabilities (244)
-
------------------------------------------------------ -----------------------------
-
Revenue (3,961)
Net (loss)/ profit for the year 2,140
-
------------------------------------------------------ -----------------------------
-
Total comprehensive (loss)/ income for the year 2,140
Net assets of the associate 87,431
Proportion of the Group's ownership interest 34%
Carrying amount of the Group's Interest in Associate 29,726
13. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
Column1 Buildings Office Construction Total Intangible Total
and Premises and computer in progress premises assets
equipment and equipment
---------------------------- -------------- -------------- ------------- --------------- ----------- ----------
Carrying amount
as at 31 December
2020 200,008 254,211 265,766 719,985 27,247 747,232
Additions - 115,163 462,375 577,538 28,458 605,996
Disposals (net
of depreciation) (29) (1,555) (2,023) (3,607) (598) (4,205)
Transfers 84,334 (64,914) (30,719) (11,299) 11,299 -
Depreciation/amortization
charge (9,915) (61,343) - (71,258) (1,402) (72,660)
Carrying amount
as at 31 December
2021 274,398 241,562 695,399 1,211,359 65,004 1,276,363
Cost as at
31 December 2021 327,798 442,618 695,399 1,465,815 76,284 1,542,099
Accumulated
depreciation
/ amortization (53,400) (201,056) - (254,456) (11,280) (265,736)
Carrying amount
as at 31 December
2021 274,398 241,562 695,399 1,211,359 65,004 1,276,363
Additions 14,853 41,409 853,696 909,958 15,560 925,518
Capitalised borrowing
costs - - 38,340 38,340 - 38,340
Disposals (net
of depreciation) (1,306) (4,152) (61,328) (66,786) (780) (67,566)
Transfers 3,998 1,608 (6,081) (475) 475 -
Depreciation/amortization
charge (11,376) (73,964) - (85,340) (4,811) (90,151)
Carrying amount
as at 31 December
2022 280,567 206,463 1,520,026 2,007,056 75,448 2,082,504
Cost as at
31 December 2022 345,343 481,483 1,520,026 2,346,852 91,539 2,438,391
Accumulated
depreciation/amortisation (64,776) (275,020) - (339,796) (16,091) (355,887)
Carrying amount
as at 31 December
2022 280,567 206,463 1,520,026 2,007,056 75,448 2,082,504
The increase in PPE was mainly driven by increase in
construction in progress. In 2019, the Group has arranged a
contract with construction company Shanghai Construction Group Co.
Ltd on design and construction of the Headquarters for Group in the
amount of USD 136.5 million. As at 31 December 2022, in accordance
with the contract, the Group invested USD 126.391 million
(equivalent to UZS 1,549,652 million) of which UZS 1,354,601
million was recorded in construction in progress.
In 2022, the Group has recognized the borrowing cost related to
the commission and interest fee on loan borrowed from Credit Suisse
for Tashkent city office construction funding in the amount of UZS
38,340 million (2021; UZS 5,165 million).
As at 31 December 2022 and 31 December 2021, premises and
equipment of the Group were not pledged.
14. OTHER ASSETS
31 December 2022 31 December 2021
------------------------------------- ----------------- -----------------
Other financial assets
Commission income receivable 18,186 9,386
Security deposit on money transfer
systems 5,403 10,017
Other receivables 1,612 1,057
Less: Allowance for expected credit
losses (453) (211)
Total other financial assets 24,748 20,249
Other non-financial assets
Prepayment for construction of
building 126,664 171,256
Prepaid expenses and advances 82,532 95,299
Tax settlements, other than income
tax 13,221 4,116
Prepayments for equipment and
property 19,506 7,305
Inventory 11,130 7,108
Repossessed collateral 617 770
Other 948 4,601
- -
------------------------------------- ----------------- -----------------
- -
Less: Provision for impairment - -
Total other non-financial assets 254,618 290,455
Total other assets 279,366 310,704
As at 31 December 2022, the prepayment for construction of
building comprises prepayment to Shanghai Construction company in
the amount of UZS 35,255 million (equivalent USD 3.701 million) (31
December 2021: UZS 107,131 million (equivalent USD 9.88 million)
for construction of Head office in Tashkent city in accordance with
the Decree of Cabinet of Ministers #961 dated 27 November 2018. The
construction works have started on 20 June 2019 and the completion
of the project has been extended until the end of 2023.
15. NON-CURRENT ASSETS HELD FOR SALE
Column1 31 December 2022 31 December 2021
--------------------------------------- ----------------- -----------------
Repossessed assets:
- Buildings held for sale 177,688 48,602
- Equipment held for sale 45,657 -
Total repossessed assets 223,345 48,602
Total non-current assets (or disposal
groups) held for sale 223,345 48,602
As of 31 December 2022, buildings held for sale include the
repossessed property of nine clients on the amount of UZS 178,234
million (two clients repossessed property on the amount of UZS
44,247 million in 2021). In December 2022 and 2021, the Group's
management approved and initiated active customer search programs
within one year. The assets received were measured at the lower of
their carrying amount and fair value less costs to sell. As of 31
December 2022, an impairment of reacquired assets classified as
held for sale was recognized in the amount of UZS 50,010 million
(31 December 2021: UZS 9,868 million).
16. DUE TO OTHER BANKS
Column1 31 December 2022 31 December 20212
---------------------------------------------------------------- ----------------- ------------------
Short term placements of other banks 1,750,362 613,405
Long term placements of other banks 1,617,476 492,583
Correspondent accounts and overnight placements of other banks 527,881 286,989
Total due to other banks 3,895,719 1,392,977
Term deposits of other banks increased due to attracting 200
mln. USD (2,172,050 million equivalent UZS) deposit from
Gazprombank Russia.
Refer to Note 35 for the disclosure of the fair value of due to
other banks. Interest rate analysis of due to other banks is
disclosed in Note 37. Information on related party balances is
disclosed in Note 38.
17. CUSTOMER ACCOUNTS
Column1 31 December 2022 31 December 2021
-------------------------------- ---------------------- -----------------
State and public organisations
- Current/settlement accounts 3,844,463 4,148,013
- Term deposits 3,614,656 3,019,115
Other legal entities
- Current/settlement accounts 2,814,593 2,378,852
- Term deposits 823,735 711,774
Individuals
- Current/demand accounts 1,305,546 949,191
- Term deposits 2,925,826 2,354,595
Total customer accounts 15,328,819 13,561,540
Economic sector concentrations within customer accounts are as
follows:
31 December 2022 31 December
2021
----------------- ----- ------------ -----
Amount % Amount %
------------------------- ----------------- ----- ------------ -----
Individuals 4,231,372 28% 3,303,786 24%
Public administration 3,503,390 23% 3,120,451 23%
Oil and gas 2,393,554 16% 2,615,793 19%
Manufacturing 2,051,712 13% 1,592,246 12%
Energy 1,097,149 7% 768,794 6%
Trade 976,760 6% 291,532 2%
Finance 314,223 2% 631,942 5%
Services 276,907 2% 336,840 2%
Construction 198,880 1% 299,667 2%
Engineering 93,099 1% 135,083 1%
Transportation 76,367 1% 52,233 1%
Mining 29,234 0% 48,056 0%
Communication 28,527 0% 261,931 2%
Medicine 26,524 0% 17,679 0%
Agriculture 21,842 0% 79,929 1%
Other 9,279 0% 5,578 0%
Total customer accounts 15,328,819 100% 13,561,540 100%
As at 31 December 2022, the Group had two (31 December 2021:
two) customers with a total balance
UZS 4,965,415 million UZS (31 December 2021: 4,208,043 million),
which individually exceeded 10% of the Group's equity.
Significant change in balances of Individuals is associated with
application "Joyda", which allows the Group's clients to place or
withdraw their funds online. Such mobile application is getting
popular and the Group's number of clients is significantly
increasing.
Information on related party balances is disclosed in Note
38.
18. DEBT SECURITIES IN ISSUE
Column1 31 December 2022 31 December 2021
------------------------------------------------- --------------------------------------------
Amount Nominal interest, % Maturity, year Amount Nominal interest, % Maturity,
year
-------------- ---------- -------------------- --------------- ---------- -------------------- ----------
Eurobonds 3,361,256 5.75 2019-2024 3,235,127 5.75 2019-2024
Certificates
of deposit - - - 58,749 14-16 2021-2024
Bonds - - - 23,941 14-16 2020-2022
Total debt
securities
issued 3,361,256 3,317,817
In December 2019, the Group has issued Eurobonds in London Stock
Exchange with nominal value of USD 300,000 thousand with a discount
of USD 3,198 thousand and five years maturity. Amortized cost of
Eurobonds equivalent to UZS 3,361,256 million represent the present
value of future cash payments discounted using effective interest
rate of 6.193%.
The present value calculation includes all costs directly
associated with the issuance and form an integral part of the
effective interest rate.
The debt securities issued do not stipulate financial covenants
except for Eurobonds, which stipulate the Group is required to
comply with certain financial covenants, non-compliance of which
may give the lender a right to demand repayment.
As of 31 December 2022, the Group was in compliance with all
Eurobond covenants .
19. OTHER BORROWED FUNDS
Column1 31 December 2022 31 December 2021
------------------------------------------------------- ----------------- -----------------
International financial institutions
China EXIMBANK 4,921,786 5,102,508
CREDIT Suisse 3,521,090 2,912,645
International Bank of Reconstruction and Development 2,099,169 1,430,444
Landesbank Baden--Wuerttemberg 1,716,009 833,390
Commerzbank AG 1,476,741 1,480,096
Cargill Financial Services International Inc 1,213,728 -
European Bank for Reconstruction and Development 1,099,941 1,112,670
Daryo Finance B.V. 965,102 965,082
MFT XXI LLC 903,254 -
AK Bars Bank 869,491 291,701
International Finance Corporation 848,223 1,603
ICBC (London) plc 663,986 1,482,801
Asian Development Bank 622,999 631,199
Raiffeisen Bank International AG 614,692 495,013
International Development Association of World Bank 580,063 592,900
China Development Bank 559,158 715,507
Citibank Europe PLC 525,606 -
UniCredit 446,184 216,711
Banca Popolare di Sondrio 409,978 -
OPEC Fund for International Development 382,293 131,115
Japan International Cooperation Agency (JICA) 359,992 347,869
Promsvyazbank PJSC 350,846 1,122,664
European Investment Bank 334,728 -
Halyk Savings Bank of Kazakhstan JSC 219,417 74,637
Turk EXIMBANK 157,741 218,224
Citibank N.A. ADGM 114,146 442,321
Baobab Securities Limited 112,088 166,135
JPMorgan Chase 89,495 67,802
Jusan Bank 68,280 -
Sberbank Kazakhstan / JSC Bereke bank 62,308 7,183
Korea EXIMBANK 54,837 94,936
Vitabank PJSC 50,907 -
AKA Ausfuhrkredit-Gesellschaft mbH 50,721 195,044
ODDO BHF 40,179 28,247
KfW IPEX-Bank 36,973 48,516
Gazprombank 33,249 255,774
The Export-Import Bank of the Republic of China 29,321 35,699
John Deere 17,286 29,389
International Fund for Agricultural Development 1,934 2,138
Russia EXIMBANK - 986,473
VTB BANK EUROPE - 990,079
Credit Bank of Moscow - 472,254
Sberbank Europe AG - 108,598
OJSB Transcapitalbank - 108,402
PJSC Sovcombank - 44,692
European Merchant Bank UAB - 25,066
Financial institutions of Uzbekistan - -
Long term borrowings from Ministry of Finance 3,524,840 3,498,702
Fund for Reconstruction and Development of Uzbekistan 1,289,092 1,778,851
Uzbekistan Mortgage Refinancing Company (UzMRC) 416,619 225,058
Export Promotion Agency under MIFT 233,949 174,623
KDB Bank Uzbekistan 103,780 93,197
Young Entrepreneurs Support Fund under MIFT 28,003 7,538
Preference Shares 9,363 10,752
Khokimiyat of Tashkent Region 6,471 5,793
Long term borrowings from CBU - 63,314
Other 5,702 5,421
Total other borrowed funds 32,241,760 30,130,776
On 25 July 2022 the Group has signed EUR 100 mln. Loan agreement
with Cargill financial Services International Inc. Under the loan
agreement the Group is responsible for the Loan solely to be
directed to finance the exportation and/or importation of various
commodities and goods, from/to the Republic of Uzbekistan to/from
various countries by the Groups' clients. The maturity of Loan
agreement is 5 years.
On 27 July 2022 the Group has signed USD 50 mln convertible loan
facility with European Bank for Reconstruction and Development
(EBRD). The attraction of this loan facility creates additional
opportunities to realize the goals set by the Groups' Strategy for
the years 2021-2023.
On 22 August 2022, IFC has disbursed USD 75 mln under the
convertible loan agreement, signed on 20 September 2021. Loan has
maturity of 5 years with bullet repayment of principal and
semi-annual interest repayments.
On 8 June 2022 the Group and Mashreqbank PSC has signed an
Agreement on attracting the Credit line facility in the amount of
USD 15 mln. The facility is to be used to finance the purchase of
oil and gas products and spare parts for engine production. The
maturity period of the loan is 12 months.
On 6 June 2022 the Group has received the Trade finance from
Banca Popolare Di Sondrio in the amount of USD 2.7 mln with the
purpose of the Group client's working capital replenishment.
On 11 May 2022 the Group and Citibank Europe PLC has signed
Continuing Agreement for reimbursement of Trade advances. In year
2022 the amount of USD 42.6 mln were called by the Group.
As of 31 December 2022 and throughout the year then ended, the
Group was in compliance with all covenants on the above loan
facilities.
The maturity analysis is disclosed in Note 35 Refer for
disclosure of the fair value of other borrowed funds and Note 38
for information on related party balances.
20. OTHER LIABILITIES
31 December 31 December
Column1 2022 2021
--------------------------------------- -------------- --------------
Other financial liabilities
Trade payables 118,611 102,958
Provision for Bank's guarantees
and letters of credit 27,040 43,203
Payable to other creditors 21,998 6,562
Dividends payable 1,886 3,032
Total other financial liabilities 169,535 155,755
Other non-financial liabilities
Taxes payable other than income
tax 64,769 25,408
Payable to employees 2,306 1,070
Unearned income 707 1,366
Other 3,009 13,822
Total other non-financial liabilities 70,791 41,666
Total other liabilities 240,326 197,421
As at 31 December 2022, trade payables comprise payables on
amount of UZS 41,653 million (2021:UZS 61,906 million) to Shanghai
Construction Group building the Tashkent City office for the Group
in accordance to construction contract terms and conditions.
The Group pays income tax on a consolidated basis as a single
tax payer at a single rate of 20%. Thus income tax payable and
prepayment for income tax are presented on a net basis as at 31
December 2022.
21. SUBORDINATED DEBT
The first Subordinated debt issued by Fund for Reconstruction
and Development of Uzbekistan of UZS 100,000 million on 9 April
2021 carries an interest rate of 10,3 % and matures on 15 April
2041.
The second Subordinated debt issued by Fund for Reconstruction
and Development of Uzbekistan of USD 20,381 million on 18 August
2021 carries an interest rate of 5,7 % and matures on 16 July 2027.
The debt ranks after all other creditors' claims are fully settled
in the case of liquidation.
Currency Maturity date Nominal interest rate % Effective 31 December
interest 2022
Column1 rate %
Subordinated debt of
Fund for Reconstruction and Development
of Uzbekistan UZS 2041 10% 10,3% 101,989
USD 2027 5% 5,7% 228,571
Total subordinated debt 330,560
Subordinated debt as at 31 December 2021 presented below:
Column1 Currency Maturity Nominal Effective 31 December
date interest interest 2021
rate % rate %
Subordinated debt
of
Fund for Reconstruction
and Development of 15 April
Uzbekistan UZS 2041 9% 9.22% 101,771
Total subordinated
debt 101,771
Refer to Note 35 for the disclosure of the fair value of
subordinated debt and Note 38 for information on related party
balances.
22. SHARE CAPITAL
Column1 Number of Ordinary and preference shares Share premium Treasury shares Total
outstanding shares
1 January 2020 243,922 4,640,011 - - 4,640,011
31 December 2021 243,922 4,640,011 - - 4,640,011
31 December 2022 243,922 4,640,011 - - 4,640,011
As at 31 December 2022 and 2021, the total authorised number of
ordinary shares is 243,552 million with a par value of UZS 19 per
share. Each share carries one vote. Dividends on preference shares
will not be less than dividends on ordinary shares.
The number of ordinary shares issued but not fully paid in 2022
was nil (31 December 2021: nil).
23. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
ACTIVITIES
The table below sets out movement in the Group's liabilities
from financing activities for each of periods presented. The items
of these liabilities are those that are reported as financing
activities in the consolidated statement of cash flows.
Column1 Liabilities from financing activities Total
In million Other borrowed funds Debt securities issue Due to other banks Subordinated debt
Uzbekistan Soums
Net debt at
1 January 2021 25,683,457 3,273,048 1,496,004 - 30,452,509
Proceeds from the
issue 11,826,214 10,000 411,116 100,000 12,347,330
Redemption (8,391,815) (81,310) (381,937) - (8,855,062)
Foreign currency
translation 992,957 126,637 22,932 - 1,142,526
Other non-cash
movements 19,963 (10,558) (155,138) 1,771 (143,962)
Net debt at
31 December 2021 30,130,776 3,317,817 1,392,977 101,771 34,943,341
Proceeds from the
issue 11,148,736 - 2,447,336 235,851 13,831,923
Redemption (9,334,820) (82,690) (334,155) - (9,751,665)
Foreign currency
translation 364,227 117,466 59,113 - 540,806
Other non-cash
movements (67,159) 8,663 330,448 (7,062) 264,890
Net debt at 31
December 2022 32,241,760 3,361,256 3,895,719 330,560 39,829,295
24. INTEREST INCOME AND EXPENSE
2022 2021
Interest income calculated using the effective interest method
Interest income on assets recorded at amortised cost comprises:
Interest on loans and advances to customers 4,515,686 3,858,402
Interest on investment securities measured at amortised cost 278,921 142,770
Interest on balances due from other banks 274,786 154,226
Total interest income calculated using the effective interest method 5,069,393 4,155,398
Other similar income
Finance lease receivables 29,198 32,024
Total other similar income 29,198 32,024
Interest expense
Interest expense on liabilities recorded at amortised cost comprises:
Interest on other borrowed funds (1,532,566) (1,219,611)
Interest on customer accounts (787,850) (570,363)
Interest on debt securities in issue (218,324) (201,107)
Interest on balances due to other banks (71,274) (70,794)
Interest on subordinated debt (16,357) (6,030)
Total interest expense (2,626,371) (2,067,905)
Net interest income before provision on loans and advances to customers 2,472,220 2,119,517
The change in interest income on loan and advances to customers
is associated with the increase in the Group's loan portfolio
during the year 2022.
Significant change in interest income on investment securities
measured at amortized cost is associated with the significant
investments made by the Group in bonds of Ministry of Finance
during the year 2022.
Significant change in interest expense on other borrowed funds
is associated with the attraction of additional funds from local
and international financial institutions. Significant change in
interest expense on balances due to other banks is associated with
increased balance payable by the Group to local banks towards
borrowings received.
25. FEE AND COMMISSION INCOME AND EXPENSE
Column1 2022 2021
---------- ----------
Fee and commission income
Settlement transactions 286,724 220,904
International money transfers 118,598 56,071
Guarantees issued 30,371 30,058
Letters of credit 5,225 10,368
Foreign currency exchange 2,730 64,946
Other 42 3,727
Total fee and commission income 443,690 386,074
Fee and commission expense
Settlement transactions (58,280) (60,567)
Foreign currency exchange (36,117) (13,217)
Transactions with plastic cards (23,716) (31,877)
Cash collection (4,985) (2,760)
Other (3,315) (2,062)
Total fee and commission expense (126,413) (110,483)
Net fee and commission income 317,277 275,591
26. INSURANCE OPERATIONS INCOME AND EXPENSE
2022 2021
Insurance Re-insurance Total Insurance Re-insurance Total 4
Insurance operations income
Loan insurance 37,172 7,239 44,411 35,305 5,357 40,662
Property insurance 24,624 3,648 28,272 24,135 4,332 28,467
Civil liability insurance 1,389 2,310 3,699 581 1,159 1,740
Obligatory insurance of third party liability of
motor vehicle owners (OMTPL) 1,167 364 1,531 1,214 40 1,254
Accident insurance 168 22 190 781 8 789
Insurance from other financial risks 8,364 257 8,621 7,938 31 7,969
Total insurance operations income 72,884 13,840 86,724 69,954 10,927 80,881
, ,
Insurance operations expense
Loan insurance (20,194) (8,222) (28,416) (15,242) (5,668) (20,910)
Property insurance (7,567) (4,873) (12,440) (8,826) (280) (9,106)
Obligatory insurance of third party liability of
motor vehicle owners (OMTPL) (1,637) - (1,637) (664) (515) (1,179)
Civil liability insurance (764) (297) (1,061) (783) - (783)
Accident insurance (112) - (112) (270) - (270)
Insurance from other financial risks (5,399) - (5,399) (4,083) - (4,083)
, ,
Total insurance operations expense (35,673) (13,392) (49,065) (29,868) (6,463) (36,331)
, ,
, ,
Net insurance operations income 37,211 448 37,659 40,086 4,464 44,550
27. CHANGE IN INSURANCE RESERVES, NET
Insurance reserve Reinsurance reserve Change in insurance reserves, net
31 December 2020 44,887 5,544 (26,103)
Unearned premium reserve 30,759 5,745 (24,742)
Reserves for incurred but not reported
losses 9,168 1,675 (7,493)
31 December 2021 84,814 12,964 (58,338)
Unearned premium reserve 19,566 5,124 (14,443)
Reserves for incurred but not reported
losses 12,968 2,248 (10,721)
31 December 2022 117,348 20,336 (83,502)
28. OTHER OPERATING INCOME
Column1 Column2 2022 2021
------
Fines and penalties 5,681 -
Gain on disposal of inventory 4,386 32,706
Income from rent of POS terminals 385 790
Other 6,030 7,370
Total other operating income 16,482 40,866
The gain on disposal of inventory mainly arises from sale of
property by SQB Construction .
29. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
2022 2021
Staff costs 760,003 607,612
Social security costs 83,726 68,335
Total staff costs 843,729 675,947
Depreciation and amortisation 90,151 72,660
Charity expenses 74,503 56,517
Loss on sale or disposal of held for sale
assets 55,778 210
Taxes other than income tax 55,286 30,029
Security services 53,625 41,210
Membership fees 44,299 26,390
Communication and software maintenance 25,850 11,243
Stationery and other low value items 22,336 28,167
Repair and maintenance of buildings 20,592 11,021
Rent expenses 12,281 9,971
Legal and audit fees 11,885 8,394
Travel expenses 9,986 7,040
Advertising expenses 9,043 9,286
Consultancy fee 8,482 7,785
Utilities expenses 5,612 5,844
Representation and entertainment 4,907 2,617
Fuel 3,688 2,230
Medical, dental and hospitalization 236 1,079
Other operating expenses 13,908 36,506
Total administrative and other operating
expenses 1,366,177 1,044,146
Significant change in staff costs is associated with the overall
increase of salary rates as well as due to increase in bonuses and
other stimulation payments.
The increase in membership fees is mainly driven by increase in
fees payable to the State Fund for Guarantee of Deposits.
The increase in loss on sale or disposal of held for sale assets
is due to the recognized loss on fixed assets given free of charge
(valued at UZS 48 457 mln) to "State asset management agency"
according to resolution of the Cabinet of Ministers No. 75 of
February 17, 2022 and Central bank No. 296 of April 4, 2022. These
properties consisted of non-residential buildings park in the
Jizzakh region and poultry farms that were repossessed from
borrowers due to non-payment of loans.
30. INCOME TAXES
Column1 2022 2021
IFRS profit before tax 831,985 1,071,570
Theoretical tax charge at the applicable statutory
rate - 20% (2021: 20%) 166,397 214,314
- Non deductible expenses (employee compensation,
representation and other non-deductible expenses) 115,077 21,865
- Tax exempt income (58,902) (28,251)
- Other (11,139) 6,654
Income tax expense 211,433 214,582
Net income tax benefit relating to loss for the
period from discontinued operations - -
Net income tax expense relating to the components
of other comprehensive income 90 572
Income tax expense through profit or loss and
other comprehensive income 211,523 215,154
Reconciliation between the expected and the actual taxation
charge is provided below:
Column1 2022 2021
Current income tax expense 204,538 250,804
Deferred tax (benefit)/expense:
- Deferred tax (benefit)/expense 7,074 (35,078)
- Deferred tax expense relating to the components
of other comprehensive income 90 572
Total income tax expense through profit or loss
and other comprehensive income 211,523 215,154
"Tax rate differences" comprises of tax effects from reduction
of standard income tax rate to encourage the banks to increase the
share of long-term loans to customers in the total loan
portfolio.
Tax exempt income includes interest income on government bonds
and the CBU bonds.
Differences between IFRS and Uzbekistan statutory taxation
regulations give rise to certain temporary differences between the
carrying amount of certain assets and liabilities for financial
reporting purposes and for their tax bases. The tax effect of the
movements on these temporary differences is detailed below, and is
recorded at the rate of 20% (2021: 20%).
The prepaid income tax increase is due to the excess of the
created by Group provision mainly toward the Loans and advances to
customers the over the minimum provision requirement by CBU
rules.
2022 (Debited)/ credited to Charged to other 31 December 2021
Column1 profit or loss comprehensive income
Tax effect of deductible/(taxable)
temporary differences
Cash and cash equivalents 194 53 - 141
Due from other banks 174,609 174,082 - 527
Loans and advances to customers 199,689 3,327 - 196,362
Financial assets at fair value through
other comprehensive income (3,622) - (90) (3,533)
Property, equipment and intangible assets 6,496 10,979 - (4,483)
Investments in associates and subsidiaries (1,299) 597 - (1,896)
Investment securities measured at
amortised cost 1,244 792 - 452
Other assets 50,291 34,133 - 16,158
Non-current assets held for sale (44,669) (34,948) - (9,721)
Due to other banks (207,482) (207,482) - -
Debt securities in issue (1,642) 559 - (2,201)
Other borrowed funds (12,831) (8,840) - (3,990)
Derivative financial liabilities 23,107 23,107 - -
Other liabilities 12,030 (2,300) - 14,330
Subordinated debt (1,152) (1,131) - (21)
Net deferred tax asset/(liability) 194,962 (7,074) (90) 202,125
Recognised deferred tax asset 467,659 247,627 - 227,969
Recognised deferred tax liability (272,698) (254,702) (90) (25,844)
Net deferred tax asset 194,962 (7,074) (90) 202,125
31. ALLOWANCES FOR IMPAIRMENT LOSSES
The tables below analyse information about the changes in the
EAD amount of financial assets excluding loans and advances to
customers, commitments and other non-financial assets during 2022
and 2021:
Column1 Other financial Cash and cash Due from other Banks Investment Letters of Credit and Guarantees Column6
assets (Note 14) equivalents (Note (Note 8) securities (Note 33)
Column2 7) Column3 at olumn4
amortised Column5
cost (Note
10)
Stage 2 Stage 3 Stage 1 Stage 2 Stage 1 Stage 3 Stage 1 Stage 1 Stage 2 Stage 3 TOTAL
Lifetime Lifetime 12-month 12-month 12-month Lifetime 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL ECL ECL
Gross amount
as at 1 January
2022 19,964 496 8,197,359 1,958,937 32,813 1,069,145 3,675,699 897,480 155 15,852,048
- Transfer from
stage 1 - - (64,631) 64,631 - - - (2,165) 33 2,132 -
- Transfer from
stage 2 (1) 1 - - - - - - - -
- Transfer from
stage 3 237 (237) - - - - - - - -
- Changes due
to modifications
that
did not result in
derecognition (3,846) - (1,242,983) 17,972 - - - (669,247) - (1,114) (1,899,218)
New assets issued
or acquired 12,952 92 35,791 - 1,464,313 - 2,557,202 2,811,511 254,054 19,617 7,155,532
Matured or
derecognized
assets (except
for write off) (4,200) (257) (72,311) - (1,613,343) - (937,957) (2,026,349) (897,480) (155) (5,552,052)
Foreign exchange
differences - - 184,630 - 33,689 1,204 231 (4,609) - 1 215,146
Gross amount
as at 31 December
2022 25,106 95 7,037,855 82,603 1,843,596 34,017 2,688,621 3,784,840 254,087 20,636 15,771,456
Column1 Other financial Cash and Due from other Investment Letters of Credit and Column6
assets cash Banks (Note 8) securities Guarantees
(Note 14) equivalents Column3 at (Note 33)
Column2 (Note 7) amortised Column4
cost (Note Column5
10)
Stage 2 Stage Stage 1 Stage Stage Stage 1 Stage 1 Stage Stage TOTAL
3 1 3 2 3
Lifetime Lifetime 12-month 12-month Lifetime 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL ECL
Gross amount
as at 1
January
2021 15,779 1,838 5,601,347 1,877,621 - 541,911 2,367,521 850,710 - 11,256,727
- Transfer
from
stage 1 - - - (31,731) 31,731 - (42,601) 42,601 -
- Transfer
from
stage 2 (81) 81 - - - - 15,017 (15,017) - -
- Transfer
from
stage 3 806 (806) - - - - - - - -
- Changes due
to
modifications
that
did not
result
in
derecognition (2,790) (6) - - - - (357,043) 148,820 - (211,018)
New assets
issued
or acquired 17,384 69 2,839,884 1,023,303 - 1,014,946 2,011,365 503,762 - 7,410,713
Matured or
derecognized
assets
(except
for write
off) (11,135) (680) (3,557) (714,632) - (489,645) (1,147,617) (632,717) - (2,999,983)
Foreign
exchange
differences - - (240,315) (195,625) 1,082 1,933 (2,022) (860) - (435,807)
------------
Gross amount
as at 31
December
2021 19,964 496 8,197,359 1,958,937 32,813 1,069,145 2,844,620 897,300 - 15,020,633
The tables below analyse information about the changes in the
ECL amount of financial assets, commitments and other non-financial
assets during 2022 and 2021:
Column1 Other Cash and Due from Investment Contingencies Column5 Column6
financial cash equivalents other securities (Note 33)
assets (Note 7) Banks at amortised
(Note (Note 8) cost (Note
14) 10)
Stage 2 Stage 3 Stage 1 Stage Stage 1 Stage 3 Stage 1 Stage 1 Stage 2 Stage 3 TOTAL
2
Lifetime Lifetime 12-month 12-month 12-month Lifetime 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL ECL ECL
--------- --------- --------- -------------- --------- ---------
Loss allowance
for ECL
as at 1
January
2022 184 27 707 14,779 20,668 1,633 29,233 13,970 - 81,201
--------- --------- --------- -------------- --------- ---------
- Transfer
from
stage 1 - - (3) 3 - - - (1) - 1 -
- Transfer
from
stage 2 - - - - - - - - - - -
- Transfer
from
stage 3 13 (13) - - - - - - - - -
- Changes due
to
modifications
that
did not
result
in
derecognition 32 - (615) 844 136 1,409 (461) 745 - - 2,090
New assets
issued
or acquired 283 7 1 - 10,607 - 9,523 12,707 3,217 2,640 38,985
Matured or
derecognized
assets
(except
for write
off) (66) (14) (1) - (13,440) - (645) (21,460) (13,970) - (49,596)
Foreign
exchange
differences - - 33 - 39 - - (42) - - 30
Loss allowance
for ECL as at
31 December
2022 446 7 122 847 12,121 22,077 10,050 21,182 3,217 2,641 72,710
Column1 Other Column2 Cash and Due from Column3 Investment Letters of Column4 Column5 Column6 Other
financial cash other securities Credit and non-financial
assets equivalents Banks at Guarantees assets
(Note 14) (Note 7) (Note 8) amortised (Note 33)
cost (Note
10)
Stage 2 Stage 3 Stage 1 Stage 1 Stage 3 Stage 1 Stage 1 Stage 2 Stage 3 TOTAL
Lifetime Lifetime 12-month 12-month Lifetime 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL ECL
Loss allowance for
ECL
as at 1 January
2021 306 1,103 161 18,429 - 1,689 15,651 7,194 - 44,533 1,639
- Transfer from
stage 1 - - - (4,149) 4,149 - (358) 358 - - -
- Transfer from
stage 2 (2) 2 - - - - 55 (55) - - -
- Transfer from
stage 3 550 (550) - - - - - - - - -
- Changes due
to modifications
that
did not result in
derecognition (629) (171) 52 (1,536) 16,519 (331) (2,462) 8,514 - 19,956 (1,639)
New assets issued
or acquired 144 4 602 7,935 - 1,540 6,640 2,833 - 19,698 -
Matured or
derecognized
assets (except
for write off) (185) (361) (116) (6,854) - (1,266) (7,496) (4,823) - (21,101) -
Foreign exchange
differences - - 8 954 - - (27) (51) - 884 -
Loss allowance for
ECL
as at 31 December
2021 184 27 707 14,779 20,668 1,633 12,003 13,970 - 63,971 -
32. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net
profit attributable to ordinary shares by the weighted average
number of ordinary shares.
The Group has no dilutive potential ordinary shares; therefore,
the diluted earnings per share equal basic earnings per share.
According to the charter of the Group, and as described in Note
22, dividend payments per ordinary share cannot exceed the
dividends per share on preferred shares for the same period and the
minimum dividends payable to the owners of preference shares
comprise not less than 20%. Therefore, net profit for the period is
allocated to the ordinary shares and the preferred shares in
accordance with their legal and contractual dividend rights to
participate in undistributed earnings.
Column1 2022 2021
Profit for the year attributable to ordinary shareholders 620,552 856,988
Earnings used in calculation of earnings per ordinary share from continuing operations 620,552 856,988
Weighted average number of ordinary shares for the purpose of basic and diluted earnings per
share 243,922 243,922
Basic and diluted EPS per ordinary share in UZS 2.54 3.51
Total basic and diluted earnings per ordinary share (expressed in UZS per share) 2.54 3.51
33. COMMITMENTS AND CONTINGENCIES
Legal proceedings . From time to time and in the normal course
of business, claims against the Group are received. On the basis of
its own estimates and both internal and external professional
advice the Management is of the opinion that no material losses
will be incurred in respect of claims and accordingly no provision
has been made in these consolidated financial statements.
Tax legislation . Uzbek tax, currency and customs legislation is
subject to varying interpretations, and changes, which can occur
frequently. The Management's interpretation of such legislation as
applied to the transactions and activity of the Group may be
challenged by the relevant regional and state authorities. Recent
events within Uzbekistan suggest that the tax authorities may be
taking a more assertive position in their interpretation of the
legislation and assessments, and it is possible that transactions
and activities that have not been challenged in the past, may be
challenged. As a result, significant additional taxes, penalties
and interest may be assessed. Fiscal periods remain open to review
by the authorities in respect of taxes for five calendar years
preceding the year of review. Under certain circumstances reviews
may cover longer periods.
The Management believes that its interpretation of the relevant
legislation is appropriate and the Bank's tax, currency legislation
and customs positions will be sustained. Accordingly, as at 31
December 2022, no provision for potential tax liabilities had been
recorded (2021: Nil). The Group estimates that it has no potential
obligations from exposure to other than remote tax risks.
Capital expenditure commitments. As at 31 December 2022 and 31
December 2021, the Group had contractual capital expenditure
commitments for the total amount of UZS 315,253 million and UZS
1,033,849 million in respect of premises and equipment,
respectively.
Credit related commitments . The primary purpose of these
instruments is to ensure that funds are available to a customer as
required. Guarantees and standby letters of credit, which represent
irrevocable assurances that the Group will make payments in the
event that a customer cannot meet its obligations to third parties,
carry the same credit risk as loans. Documentary and commercial
letters of credit, which are written undertakings by the Group on
behalf of a customer authorising a third party to draw drafts on
the Group up to a stipulated amount under specific terms and
conditions, are collateralised by the underlying shipments of goods
to which they relate or cash deposits and therefore carry less risk
than a direct borrowing. Commitments to extend credit represent
unused portions of authorisations to extend credit in the form of
loans, guarantees or letters of credit. With respect to credit risk
on commitments to extend credit, the Group is potentially exposed
to loss in an amount equal to the total unused commitments.
However, the likely amount of loss is less than the total unused
commitments since most commitments to extend credit are contingent
upon customers maintaining specific credit standards. The Group
monitors the term to maturity of credit related commitments because
longer-term commitments generally have a greater degree of credit
risk than shorter-term commitments.
Column1 31 December 2022 31 December 2021
Guarantees issued 1,933,385 1,834,214
Letters of credits, post-financing with commencement after reporting period end 1,050,576 1,508,819
Letters of credit, non post-financing 682,811 398,886
Undrawn credit lines 392,791 831,415
Total gross credit related commitments 4,059,563 4,573,334
Less - Cash held as security against letters of credit and guarantees (669,149) (275,863)
Less - Provision for expected credit losses (27,040) (43,203)
Total credit related commitments 3,363,374 4,254,268
The total outstanding contractual amount of letters of credit,
guarantees issued and undrawn credit lines does not necessarily
represent future cash requirements as these financial instruments
may expire or terminate without being funded.
34. DERIVATIVE FINANCIAL INSTRUMENTS
The table below sets out fair values, at the end of the
reporting period, of currencies receivable or payable under foreign
exchange forward and swap contracts entered into by the Group. The
table reflects gross positions before the netting of any
counterparty positions (and payments) and covers the contracts with
settlement dates after the end of the respective reporting period.
The contracts are short term in nature:
31 December 31 December
2022 2021
Contracts Contracts Contracts Contracts
with positive with negative with positive with negative
fair value fair value fair value fair value
Foreign exchange swaps:
fair values, at the end
of the reporting period,
of
- RUB receivable on settlement
(+) - 872,823 - -
- USD payable on settlement
(-) - (230,138) - -
- UZS payable on settlement
(-) - (758,218) - -
Net fair value of foreign - (115,533) - -
exchange swaps
Foreign exchange derivative financial instruments entered into
by the Group are generally traded in an over-the-counter market
with professional market counterparties on standardised contractual
terms and conditions. Derivatives have potentially favourable
(assets) or unfavourable (liabilities) conditions as a result of
fluctuations in market interest rates, foreign exchange rates or
other variables relative to their terms. The aggregate fair values
of derivative financial assets and liabilities can fluctuate
significantly from time to time.
35. FAIR VALUE OF FINANCIAL INSTRUMENTS
IFRS defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at a measurement date.
Fair value measurements are analysed by level in the fair value
hierarchy as follows:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
The Management applies judgement in categorising financial
instruments using the fair value hierarchy. If a fair value
measurement uses observable inputs that require significant
adjustment, that measurement is a Level 3 measurement. The
significance of a valuation input is assessed against the fair
value measurement in its entirety.
Financial assets and financial liabilities are classified in
their entirety based on the lowest level of input that is
significant to the fair value measurements. The Management's
assessment of the significance of a particular input to the fair
value measurement requires judgment, and may affect the valuation
of the assets and liabilities being measured and their placement
within the fair value hierarchy.
The Group considers that the accounting estimate related to the
valuation of financial instruments where quoted markets prices are
not available is a key source of estimation uncertainty because:
(i) it is highly susceptible to changes from year to year, as it
requires the Management to make assumptions about interest rates,
volatility, exchange rates, the credit rating of the counterparty,
valuation adjustments and specific features of transactions and
(ii) the impact that recognising a change in the valuations would
have on the assets reported on the consolidated statement of
financial position, as well as, the related profit or loss reported
on the consolidated statement of profit or loss, could be material
.
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting year. The
following table gives information about how the fair values of
these financial assets and financial liabilities are determined (in
particular, the valuation technique(s) and inputs used).
Column1 Fair value as at Column3 Column4 Column5 Column6
Financial 31 December 31 December Fair value Valuation Significant Relationship of
assets/ 2022 2021 hierarchy model(s) and unobservable unobservable
financial key input(s) input(s) inputs to fair
liabilities value
Equity
securities at
FVTOCI
Quoted bid
prices in an
- Visa Inc. 13,460 13,613 Level 1 active market. N/A N/A
- Other 28,547 34,523 Level 3 Discounted cash Discount rate The greater
flows. Discount discount- the
rate estimated smaller fair
based on WACC value
The fair value of the equity instruments at fair value through
other comprehensive income disclosed in Note 11 was determined as
the present value of future dividends by assuming dividend growth
rate of zero per annum. The Management built its expectation based
on previous experience of dividends received on financial assets at
fair value through other comprehensive income over multiple years,
and accordingly calculated the value of using the average rate of
return on investments. A significant unobservable input used in
determining the fair value of equity securities at FVTOCI is the
Group's WACC. The higher the WACC the lower the fair value of the
equity securities at FVTOCI. The Management believes that this
approach accurately reflects the fair value of these securities,
given they are not traded. Such financial instruments were
categorised as Level 3.
Investments to which the dividends valuation approach is not
applicable, i.e. dividends were not paid during the period,
Management may use the Assets based valuation approach focused on
the investment company's net assets value (NAV), or fair market
value of its total assets minus its total liabilities, to determine
what would cost to recreate the business. The Management believes
that such approach accurately reflects the fair value of these
securities.
Below is presented the fair value of financial assets and
financial liabilities that are not measured at fair value on a
recurring basis (but fair value disclosures are required). Except
as detailed in the following table, the Management considers that
the carrying amounts of financial assets and financial liabilities
recognised in the consolidated financial statements approximate
their fair values.
Column1 31 December 2022 31 December 2021
Carrying value Fair value Carrying value Fair value
Loans and advances to customers 48,420,489 46,278,898 42,537,051 39,773,366
Due from other banks 1,843,415 1,785,429 1,956,303 1,726,508
Debt securities in issue
- Eurobonds (Note 18) 3,361,256 3,039,068 3,317,817 3,280,385
Other borrowed funds 32,241,760 34,012,003 30,130,776 31,751,605
Subordinated debt 330,560 325,161 101,771 97,338
Column1 31 December 2022
Level 1 Level 2 Level 3 Total
Loans and advances
to customers - - 46,278,898 46,278,898
Due from other banks - 1,785,429 - 1,785,429
Debt securities
in issue
- Eurobonds (Note
18) 3,039,068 - - 3,039,068
Other borrowed funds - - 34,012,003 34,012,003
Subordinated debt - 325,161 - 325,161
31 December 2021
Level 1 Level 2 Level 3 Total
Loans and advances
to customers - 39,773,366 39,773,366
Due from other banks - 1,726,508 - 1,726,508
Debt securities
in issue
- Eurobonds (Note18) 3,280,385 - - 3,280,385
Other borrowed funds - - 31,751,605 31,751,605
Subordinated debt - - 97,338 97,338
The fair values of the financial assets and financial
liabilities included in the level 2 and level 3 categories above
have been determined in accordance with generally accepted pricing
models based on a discounted cash flow analysis, with the most
significant inputs being the discount rate that reflects the credit
risk of counterparties.
For those financial instruments where interest rates were not
directly available in the CBU's Statistical bulletin, the
Management uses discounted cash flow model by applying market
interest rates based on the rates of the deals concluded towards
the end of the reporting period. Due to the absence of an active
market or observable inputs for instruments with characteristics
similar to the Bank's financial instruments , the Management
considered the latest rates as the most appropriate input from all
available data for calculation of the fair value of financial
assets and financial liabilities . Therefore, these long-term
financial instruments that are not measured at fair value on a
recurring basis but where fair value disclosures are required, are
categorised within Level 3.
36. CAPITAL RISK MANAGEMENT
Under the current capital requirements set by the CBU, banks
have to maintain ratios of:
-- Ratio of regulatory capital to risk weighted assets
("Regulatory capital ratio") above a prescribed minimum level of
13% (31 December 2021: 13%). Actual ratio as at 31 December 2022:
15.3% (31 December 2021: 15.8%);
-- Ratio of Group's tier 1 capital to risk weighted assets
("Capital adequacy ratio") above a prescribed minimum level of 10%
(31 December 2021: 10%). Actual ratio as at 31 December 2022: 12.1%
(31 December 2021: 11.9%); and
-- Ratio of Group's tier 1 capital to total assets less
intangibles ("Leverage ratio") above a prescribed minimum level of
6% (31 December 2021: 6%). Actual ratio as at 31 December 2022:
10.3% (31 December 2021: 10%).
The Group and the Bank have complied with all externally imposed
capital requirements throughout 2022 and 2021.
Total capital is based on the Group's reports prepared under
Uzbekistan Accounting Legislation and related instructions and
comprises:
Column1 31 December 2022 31 December 2021
Tier 1 capital 7,223,851 6,223,703
Less: Deductions from capital (249,725) (149,023)
Tier 1 capital adjusted 6,974,126 6,074,680
Tier 2 capital 1,874,573 2,024,893
Total regulatory Capital 8,848,699 8,099,573
Regulatory capital consists of Tier 1 capital, which comprises
share capital, share premium, preference shares, retained earnings
excluding current year profit and less intangible assets. The other
component of regulatory capital is Tier 2 capital, which includes
current year profit.
37. RISK MANAGEMENT POLICIES
The risk management function within the Group is carried out in
respect of financial risks, operational risks and legal risks.
Financial risk comprises market risk (including currency risk,
interest rate risk and other price risk), credit risk and liquidity
risk. The primary objectives of the financial risk management
function are to establish risk limits, and then ensure that
exposure to risks stays within these limits. The operational and
legal risk management functions are intended to ensure proper
functioning of internal policies and procedures, in order to
minimize operational and legal risks.
Credit risk . The Group takes on exposure to credit risk which
is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an
obligation. Exposure to credit risk arises as a result of the
Group's lending and other transactions with counterparties giving
rise to financial assets.
Clients of the Group are segmented into five rating classes. The
Group's rating scale, which is shown below, reflects the range of
default probabilities defined for each rating class. This means
that, in principle, exposures migrate between classes as the
assessment of their probability of default changes.
Group's internal ratings scale :
Timely repayment of these loans is not in doubt. The borrower is
a financially stable company, which has an adequate capital level,
high level profitability and sufficient cash flow to meet its all
existing obligations, including present debt. When estimating the
reputation of the borrower such factors as the history of previous
repayments, marketability of collateral (movable and immovable
property guarantee) are taken into consideration.
"Sub-standard" loans are loans, secured with a reliable source
of secondary repayment (guarantee or collateral). On the whole, the
financial situation of borrower is stable, but some unfavorable
circumstances or tendencies are in the present, which raise doubts
on the ability of the borrower to repay on time. "Standard" loans
with insufficient information in the credit file or missed
information on collateral could be also classified as
"sub-standard" loans.
Unsatisfactory loans have obvious deficiencies, which make for
doubtful repayment of the loan on the conditions, envisaged by the
initial agreement. As for "unsatisfactory" loans, the primary
source of repayment is not sufficient and the Group has to seek
additional loan repayment sources, which in case of non-repayment
is a sale of collateral.
Doubtful loans are those loans, which have all the weaknesses
inherent in those classified as "unsatisfactory" with the added
characteristic that the weakness makes collection or liquidation in
full, on the basis of currently existing facts, conditions and
values, highly questionable.
Loans classified as "loss" are considered uncollectible and have
such little value that their continuance as bankable assets of the
Group is not warranted. This classification does not mean that the
loans have absolutely no likelihood of recovery, but rather means
that it is not practical or desirable to defer writing off these
essentially worthless assets even though partial recovery may be
effected in the future and the Group should make efforts on
liquidation such debts through selling collateral or should apply
all forces for its repayment.
Risk limits control and mitigation policies . The Group manages,
limits and controls concentrations of credit risk wherever they are
identified - in particular, to individual counterparties and
groups, and to industries.
The Group structures the levels of credit risk it undertakes by
placing limits on the amount of risk accepted in relation to one
borrower, or groups of borrowers, and to geographical and industry
segments. Such risks are monitored on a revolving basis and subject
to an annual or more frequent review, when considered necessary.
Limits on the level of credit risk by product, industry sector and
by country are approved quarterly by the Group's Council.
Where appropriate, and in the case of most loans, the Group
obtains collateral and corporate and personal guarantee. However, a
significant portion of loans is personal lending, where no such
facilities can be obtained. Such risks are monitored on a
continuous basis and subject to annual or more frequent
reviews.
Exposure to credit risk is managed through regular analysis of
the ability of borrowers and potential borrowers to meet interest
and capital repayment obligations and by changing these lending
limits where appropriate. Some other specific control and
mitigation measures are outlined below.
(a) Limits . The Group manages and controls credit risk by
setting limits on the amount of risk it is willing to accept for
individual counterparties and for geographical and industry
concentrations, and by monitoring exposures in relation to such
limits.
Loan applications, along with financial analysis of loan
applicant which includes liquidity, profitability, interest
coverage and debt service coverage ratios, originated by the
relevant client relationship managers are passed on to the relevant
credit committee or Bank Council for approval of credit limit.
(b) Collateral . The Group employs a range of policies and
practices to mitigate credit risk. The most traditional of these is
the taking of security for funds advances, which is common
practice. The Group implements guidelines on the acceptability of
specific classes of collateral or credit risk mitigation.
Collateral before being accepted by the Group is thoroughly
analysed and physically verified, where applicable. Debt
securities, treasury and other eligible bills are generally
unsecured.
The principal collateral types for loans and advances as well as
finance lease receivables are:
- State guarantees
- Cash deposits;
- Motor vehicle;
- Inventory;
- Letter of surety;
- Residential house;
- Equipment;
- Building; and
- Other assets
(c) Concentration of risks of financial assets with credit risk
exposure . The Group's Management focuses on concentration
risk:
- The maximum risk to single borrower or group of affiliated
borrowers shall not exceed 25 percent of the Group's tier 1
capital;
- Total amount of unsecured credits to single borrower or group
of affiliated borrowers shall not exceed 5 percent of Group's tier
1 capital;
- Total amount of all large credits shall not exceed Group's
tier 1 capital by more than 8 times; and
- Total loan amount to related party shall not exceed Group's tier 1 capital.
The Bank is required to prepare and submit stand-alone financial
information of the Bank to the Central Bank of Uzbekistan on a
monthly basis. The consolidated financial statements are prepared
under IFRS only once in a year.
In order to monitor credit risk exposures, weekly reports are
produced by the credit department's officers based on a structured
analysis focusing on the customer's business and financial
performance, which includes overdue balances, disbursements and
repayments, outstanding balances and maturity of loan and as well
as grade of loan and collateral. Any significant exposures against
customers with deteriorating creditworthiness are reported to and
reviewed by the Management daily. The Management monitors and
follows up past due balances.
Impairment and provisioning policies . The internal and external
rating systems described above focus on credit-quality mapping from
the inception of the lending and investment activities. In
contrast, impairment provisions are recognised for financial
reporting purposes only for losses incurred at the balance sheet
date based on objective evidence of impairment. Due to the
different methodologies applied, the amount of incurred credit
losses provided for in the financial statements are usually lower
than the amount determined from the expected loss model that is
used for internal operational management and banking regulation
purposes.
The Group's policy requires the review of individual financial
assets that are above certain materiality thresholds at least
annually or more regularly when individual circumstances require.
Impairment allowances on individually assessed accounts are
determined by an evaluation of the incurred loss at balance-sheet
date on a case-by-case basis, and are applied to all individually
significant accounts. The assessment normally encompasses
collateral held (including re-confirmation of its enforceability)
and the anticipated receipts for that individual account.
Collectively assessed impairment allowances are provided for:
(i) portfolios of homogenous assets that are individually below
materiality thresholds; and (ii) individual financial assets in
stage 1 and 2 that are above certain materiality thresholds, by
using the available empirical data, experienced judgment and
statistical techniques.
The Group monitors the term to maturity of off balance sheet
contingencies because longer term commitments generally have a
greater degree of credit risk than short-term commitments.
Commitments to extend credit represent unused portions of credit
in the form of loans, guarantees or letters of credit. The credit
risk on off-balance sheet financial instruments is defined as a
probability of losses due to the inability of counterparty to
comply with the contractual terms and conditions. With respect to
credit risk on commitments to extend credit, the Group is
potentially exposed to a loss in an amount equal to the total
unused commitments.
However, the likely amount of the loss is less than the total
unused commitments since most commitments to extend credit are
contingent upon customers maintaining specific credit standards.
The Group applies the same credit policy to the contingent
liabilities as it does to the balance sheet financial instruments,
i.e. the one based on the procedures for approving the grant of
loans, using limits to mitigate the risk, and current
monitoring.
Maximum exposure of credit risk. The Group 's maximum exposure
to credit risk varies significantly and is dependent on both
individual risks and general market economy risks.
The Group 's maximum exposure to credit risk under contingent
liabilities and commitments to extend credit, in the event of
non-performance by the other party where all counterclaims,
collateral or security prove valueless, is represented by the
contractual amounts of those instruments.
Off-balance sheet risk. The Group applies fundamentally the same
risk management policies for off-balance sheet risks as it does for
its on-balance sheet risks. In the case of commitments to lend,
customers and counterparties will be subject to the same credit
management policies as for loans and advances. Collateral may be
sought depending on the strength of the counterparty and the nature
of the transaction.
Market risk . The Group takes on exposure to market risks.
Market risks arise from open positions in interest rate, currency
and equity products, all of which are exposed to general and
specific market movements. The Group manages its market risk
through risk-based limits established by the Bank Supervisory Board
on the value of risk that may be accepted. The risk-based limits
are subject to review by the Bank Council on a quarterly basis.
Overall Group's position is split between Corporate and Retail
banking positions. The exposure of Corporate and Retail banking
operations to market risk is managed through the system of limits
monitored by the Treasury Department on a daily basis. However, the
use of this approach does not prevent losses outside of these
limits in the event of more significant market movements.
Currency risk . The Group takes on exposure to the effect of
fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows. In respect of currency risk,
the Council sets limits on the level of exposure by currency and in
total for both overnight and intra-day positions, which are
monitored daily. The Group's Treasury Department measures its
currency risk by matching financial assets and liabilities
denominated in same currency and analyses effect of actual annual
appreciation/depreciation of that currency against Uzbekistan Soum
to the profit and loss of the Group.
The Group measures its currency risk by:
- Net position on each currency should not exceed 10% of Group's total equity;
- Total net position on all currencies should not exceed 15% of Group's total equity.
The table below summarises the Group's exposure to foreign
currency exchange rate risk at the end of reporting period:
31 December 2022 USD EUR Other currencies UZS Total
Cash and cash equivalents 5,576,148 94,127 189,044 1,260,170 7,119,489
Due from other banks 838,355 6,024 21,120 977,916 1,843,415
Loans and advances to customers 21,925,729 8,583,707 - 17,911,053 48,420,489
Investment securities measured at amortised cost 107,199 - - 2,571,372 2,678,571
Other financial assets 9,237 8,323 7,188 - 24,748
Total monetary assets 28,456,668 8,692,181 217,352 22,720,511 60,086,712
Due to other banks 3,538,540 27,555 30,687 298,937 3,895,719
Customer accounts 5,774,731 591,341 94,249 8,868,498 15,328,819
Debt securities in issue 3,361,256 - - - 3,361,256
Other borrowed funds 16,224,230 8,399,150 869,491 6,748,889 32,241,760
Other financial liabilities 120,472 2,713 401 45,949 169,535
Subordinated debt 330,560 330,560
Derivative financial liabilities 230,138 - (872,823) 758,218 115,533
Total monetary liabilities 29,249,367 9,020,759 122,005 17,051,051 55,443,182
Net Balance sheet position (792,699) (328,578) 95,347 5,669,460 4,643,530
Other currencies category includes Russian Rouble, Japanese Yen,
British Pound, Swiss Franc. Other borrowed funds as exposure to
Russian Rouble in the amount of UZS 869,491 millions. Bank hedged
its currency risk by entering currency swaps. Information on
derivative financial instruments is disclosed in Note 34.
31 December 2021 USD EUR Other UZS Total
currencies
----------- ----------- -----------
Cash and cash equivalents 5,058,478 480,056 130,815 2,527,303 8,196,652
Due from other banks 843,913 43,387 65,131 1,003,872 1,956,303
Loans and advances to customers 20,739,057 6,883,573 3,305 14,911,116 42,537,051
Investment securities measured
at
amortised cost - - - 1,067,512 1,067,512
Other financial assets 10,766 6,175 3,308 - 20,249
Total monetary assets 26,652,214 7,413,191 202,559 19,509,803 53,777,767
Due to other banks 1,012,647 44,171 - 336,159 1,392,977
Customer accounts 6,411,546 424,540 114,676 6,610,778 13,561,540
Debt securities in issue 3,235,127 - - 82,690 3,317,817
Other borrowed funds 16,014,520 7,179,169 3,443 6,933,644 30,130,776
Other financial liabilities 101,305 399 4 54,047 155,755
Subordinated debt 101,771 101,771
Total monetary liabilities 26,775,145 7,648,279 118,123 14,119,089 48,660,636
Net Balance sheet position (122,931) (235,088) 84,436 5,390,714 5,117,131
Changes of the possible movement of the currency rates from 2022
to 2021 were associated with the increase in the volatility of the
exchange rate. The following table presents sensitivities of profit
and loss to reasonably possible changes in exchange rates applied
at the end of reporting period, with all other variables held
constant:
Column1 As at 31 December 2022 As at 31 December 2021
Impact on profit or loss Impact on profit or loss
US Dollars strengthening by 20% (31 December 2021: 20%) (112,512) (24,586)
US Dollars weakening by 20% (31 December 2021: 20%) 112,512 24,586
EUR strengthening by 20% (31 December 2021: 20%) (65,716) (47,018)
EUR weakening by 20% (31 December 2021: 20%) 65,716 47,018
The above sensitivity analysis include limitations in terms of
the use of hypothetical market movements to demonstrate potential
risk that only represent the Group's view of possible near-term
market changes, based on historical change in foreign currency
rates, and which cannot be predicted with any certainty.
The exposure was calculated only for monetary balances
denominated in currencies other than the functional currency of the
Group. Impact on equity would be the same as impact on statement of
profit or loss and other comprehensive income.
Interest rate risk . The Group takes on exposure to the effects
of fluctuations in the prevailing levels of market interest rates
on its financial position and cash flows. Interest margins may
increase as a result of such changes but may reduce or create
losses in the event that unexpected movements arise.
The Management monitors on a daily basis and sets limits on the
level of mismatch of interest rate repricing that may be
undertaken.
The table below summarises the Group's exposure to interest rate
risks. The table presents the aggregated amounts of the Group's
financial assets and liabilities at carrying amounts, categorised
by the earlier of contractual interest repricing or maturity
dates.
31 December 2022 Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
less than 1 months months years years
month
Assets
Cash and cash
equivalents 331,322 - - - - - 331,322
Due from
other banks 22,804 36,985 373,780 46,882 807,174 335,996 1,623,621
Loans and
advances
to customers 3,182,423 9,429,527 6,737,701 11,968,398 8,457,511 7,898,041 47,673,601
Investment
securities
measured
at amortised
cost 584,851 1,122,044 230,799 676,119 2,437 41,041 2,657,291
Total % bearing
financial
assets 4,121,400 10,588,556 7,342,280 12,691,399 9,267,122 8,275,078 52,285,835
Liabilities
Due to other
banks 310,398 842,350 561,817 1,548,270 36,516 20,703 3,320,054
Customer
accounts 300,128 669,716 2,483,990 2,325,567 500,722 1,011,186 7,291,309
Debt securities
in issue - - - 3,345,658 - - 3,345,658
Other borrowed
funds 654,138 5,775,378 4,517,187 6,175,899 6,173,839 8,034,683 31,331,124
Derivative
financial
liabilities - 115,533 - - - - 115,533
Subordinated
debt - - - - 241,691 87,097 328,788
Total financial
%
bearing
liabilities 1,264,664 7,402,977 7,562,994 13,395,394 6,952,768 9,153,669 45,732,466
Net interest
sensitivity gap 2,856,736 3,185,579 (220,714) (703,995) 2,645,376 (878,591) 6,553,369
31 December 2021 Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
less than 1 months months years years
month
Assets
Cash and cash
equivalents 650,234 - - - 650,234 - 1,300,468
Due from
other banks 14,083 24,092 446,058 208,950 257,745 374,560 1,325,488
Loans and
advances
to customers 2,301,142 7,688,643 5,408,590 11,541,556 7,905,947 7,638,652 42,484,530
Investment
securities
measured
at amortised
cost 442,290 493,401 - 125,664 2,442 - 1,063,797
Total % bearing
financial
assets 3,407,749 8,206,136 5,854,648 11,876,170 8,816,368 8,013,212 46,174,283
Liabilities
Due to other
banks 164,573 433,506 2,469 40,078 401,151 41,480 1,083,257
Customer
accounts 310,218 1,818,168 1,350,402 1,802,731 216,880 717,595 6,215,994
Debt securities
in issue 3,002 8,600 70,000 3,211,014 - - 3,292,616
Other borrowed
funds 514,743 3,323,382 4,698,344 12,384,059 2,849,198 5,584,698 29,354,424
Subordinated
debt - - - - 3,226 96,774 100,000
Total financial
%
bearing
liabilities 992,536 5,583,656 6,121,215 17,437,882 3,470,455 6,440,547 40,046,291
Net interest
sensitivity gap 2,415,213 2,622,480 (266,567) (5,561,712) 5,345,913 1,572,665 6,127,992
As at 31 December 2022, if interest rates at that date had been
165 basis points lower (2021: 165 basis points lower) with all
other variables held constant, profit for the year would have been
UZS 115,505 million higher (2021: UZS 114,093 million higher).
If interest rates had been 165 basis points higher (2021: 165
basis points higher), with all other variables held constant,
profit would have been UZS 115,505 million lower (2021: UZS 114,093
million lower).
The Group monitors interest rates for its financial instruments.
The table below summarizes interest rates based on reports reviewed
by key management personnel:
Other price risk . The Group is exposed to prepayment risk
through providing loans, including mortgages, which give the
borrower the right to early repay the loans. The Group's current
year profit or loss and equity at the current reporting date would
not have been significantly impacted by changes in prepayment rates
because such loans are carried at amortised cost and the prepayment
right is at or close to the amortised cost of the loans and
advances to customers. The Group has no significant exposure to
equity price risk.
Geographical risk concentration . The geographical concentration
of the Group's financial assets and liabilities
at 31 December 2022 is set out below:
31 December 2022 Uzbekistan OECD Non-OECD Russia Total
Assets
Cash and cash equivalents 2,910,840 4,126,893 - 81,756 7,119,489
Due from other banks 1,816,272 27,143 - - 1,843,415
Loans and advances to customers 48,420,489 - - - 48,420,489
Investment securities measured at amortised cost 2,678,571 - - - 2,678,571
Financial assets at fair value through other
comprehensive income 28,545 13,462 - - 42,007
Other financial assets 18,814 5,934 - - 24,748
Total financial assets 55,873,531 4,173,432 - 81,756 60,128,719
Liabilities
Due to other banks 847,982 27,245 153,461 2,867,031 3,895,719
Customer accounts 15,265,614 46,040 17,165 - 15,328,819
Debt securities in issue - 3,361,256 - - 3,361,256
Other borrowed funds 5,617,819 17,818,782 6,597,414 2,207,745 32,241,760
Derivative financial liabilities - 115,533 - - 115,533
Other financial liabilities 49,005 2,253 118,277 - 169,535
Subordinated debt 330,560 - - - 330,560
Total financial liabilities 22,110,980 21,371,109 6,886,317 5,074,776 55,443,182
Net balance sheet position 33,762,551 (17,197,677) (6,886,317) (4,993,020) 4,685,537
Credit related commitments (Note 33) 3,363,374 - - - 3,363,374
The geographical concentration of the Group's financial assets
and liabilities at 31 December 2021 is set out below:
31 December 2021 Uzbekistan OECD Non-OECD Russia Total
Assets
Cash and cash equivalents 4,007,434 4,124,590 - 64,628 8,196,652
Due from other banks 1,837,456 117,215 1,632 - 1,956,303
Loans and advances to customers 42,537,051 - - - 42,537,051
Investment securities measured at amortised cost 1,067,512 - - - 1,067,512
Financial assets at fair value through other
comprehensive
income 34,523 13,613 - - 48,136
Other financial assets 10,270 9,979 - - 20,249
Total financial assets 49,494,246 4,265,397 1,632 64,628 53,825,903
Liabilities
Due to other banks 1,050,532 271,622 70,410 413 1,392,977
Customer accounts 13,171,330 - 390,210 - 13,561,540
Debt securities in issue 82,690 3,235,127 - - 3,317,817
Other borrowed funds 5,863,247 13,976,515 7,009,055 3,281,959 30,130,776
Other financial liabilities 54,452 - 101,303 - 155,755
Subordinated debt 101,771 - - - 101,771
Total financial liabilities 20,324,022 17,483,264 7,570,978 3,282,372 48,660,636
Net balance sheet position 29,170,224 (13,217,867) (7,569,346) (3,217,744) 5,165,267
Credit related commitments (Note 33) 4,254,268 - - - 4,254,268
Liquidity risk . Liquidity risk is defined as the risk that an
entity will encounter difficulty in meeting obligations associated
with financial liabilities. The Group is exposed to daily calls on
its available cash resources from overnight deposits, current
accounts, maturing deposits, loan draw downs, guarantees. The Group
does not maintain cash resources to meet all of these needs as
experience shows that a minimum level of reinvestment of maturing
funds can be predicted with a high level of certainty. Liquidity
risk is managed by the Resources Management Committee of the
Group.
The Group seeks to maintain a stable funding base comprising
primarily amounts due to other banks, corporate and retail customer
deposits and invest the funds in inter-bank placements of liquid
assets, in order to be able to respond quickly and smoothly to
unforeseen liquidity requirements.
The liquidity management of the Group requires considering the
level of liquid assets necessary to settle obligations as they fall
due; maintaining access to a range of funding sources; maintaining
funding contingency plans and monitoring balance sheet liquidity
ratios against regulatory requirements. The Group calculates
liquidity ratios on a monthly basis in accordance with the
requirement of the CBU. These ratios are calculated using figures
based on National Accounting Standards.
The Treasury Department receives information about the liquidity
profile of the financial assets and liabilities. The Treasury
Department then provides for an adequate portfolio of short-term
liquid assets, largely made up of short-term liquid trading
securities, deposits with banks and other inter-bank facilities, to
ensure that sufficient liquidity is maintained within the Group as
a whole.
The daily liquidity position is monitored and regular liquidity
stress testing under a variety of scenarios covering both normal
and more severe market conditions is performed by the Treasury
Department.
When the amount payable is not fixed, the amount disclosed is
determined by reference to the conditions existing at the reporting
date. Foreign currency payments are translated using the spot
exchange rate at the statement of financial position date.
The undiscounted maturity analysis of financial instruments at
31 December 2022 is as follows:
31 December Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
2022 less than 1 months months years years
month
Liabilities
Due to other
banks 894,464 894,628 612,651 1,629,691 46,904 21,655 4,099,993
ustomer
accounts 8,351,445 1,178,018 2,881,680 2,695,357 861,706 1,812,813 17,781,019
Debt
securities in
issue 31,940 79,058 96,978 3,523,803 - - 3,731,779
Other borrowed
funds 1,159,307 6,366,823 4,994,038 7,332,836 6,986,453 9,730,021 36,569,478
Derivative
financial
liabilities - 115,533 - - - - 115,533
Other
financial
liabilities 169,535 - - - - - 169,535
Subordinated
debt - 10,753 10,686 42,938 283,601 148,111 496,089
Undrawn credit
lines 390,446 - - - - - 390,446
Guarantees
issued 1,686,922 - - - - - 1,686,922
Letters of
credit 55,328 1,213,958 16,720 - - - 1,286,006
Total
potential
future
payments
for financial
obligations 12,739,387 9,858,771 8,612,753 15,224,625 8,178,664 11,712,600 66,326,800
The undiscounted maturity analysis of financial instruments at
31 December 2021 is as follows:
31 December Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
2021 less than 1 months months years years
month
Liabilities
Due to other
banks 473,736 460,908 28,335 142,257 437,562 48,173 1,590,971
Customer
accounts 7,628,416 1,989,658 2,312,751 917,524 219,074 721,434 13,788,857
Debt
securities in
issue 20,964 120,246 174,614 3,593,482 - - 3,909,306
Other borrowed
funds 664,752 4,185,661 5,449,195 13,934,192 3,305,437 6,493,697 34,032,934
Other
financial
liabilities 155,755 - - - - - 155,755
Subordinated
debt - - - 18,025 21,472 164,089 203,586
Undrawn credit
lines 831,415 - - - - - 831,415
Guarantees
issued 1,676,260 - - - - - 1,676,260
Letters of
credit 35,013 1,622,819 48,777 60,264 - - 1,766,873
Total
potential
future
payments
for financial
obligations 11,486,311 8,379,292 8,013,672 18,665,744 3,983,545 7,427,393 57,955,957
Liquidity requirements to support calls under guarantees and
standby letters of credit are considerably less than the amount of
the commitment disclosed in the above maturity analysis, because
the Group does not generally expect the third party to draw funds
under the agreement.
The total outstanding contractual amount of commitments to
extend credit as included in the above maturity table does not
necessarily represent future cash requirements, since many of these
commitments will expire or terminate without being funded.
The table below shows the maturity analysis of non-derivative
financial assets at their carrying amounts and based on their
contractual maturities, except for assets that are readily saleable
if it should be necessary to meet cash outflows on financial
liabilities. Such financial assets are included in the maturity
analysis based on their expected date of disposal. Impaired loans
are included at their carrying amounts net of impairment
provisions, and based on the expected timing of cash inflows.
The Group does not use the above undiscounted maturity analysis
to manage liquidity. Instead, the Group monitors expected
maturities which may be summarised as follows at 31 December
2022:
31 December Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
2022 less than 1 months months years years
month
Assets
Cash and cash
equivalents 7,119,489 - - - - - 7,119,489
Due from other
banks 217,021 36,985 399,357 46,882 807,174 335,996 1,843,415
Loans and
advances to
customers 3,263,577 9,559,364 6,856,191 12,254,893 8,530,568 7,955,896 48,420,489
Investment
securities
measured at
amortised
cost 606,131 1,122,044 230,799 676,119 2,437 41,041 2,678,571
Financial
assets at
fair value
through other
comprehensive
income - - - 42,007 - - 42,007
Other
financial
assets 24,748 - - - - - 24,748
Total
financial
assets 11,230,966 10,718,393 7,486,347 13,019,901 9,340,179 8,332,933 60,128,719
Liabilities
Due to other
banks 882,171 842,350 562,950 1,548,270 39,275 20,703 3,895,719
Customer
accounts 8,266,679 756,711 2,467,866 2,325,921 500,459 1,011,183 15,328,819
Debt
securities in
issue 15,598 - - 3,345,658 - - 3,361,256
Other borrowed
funds 1,048,485 5,951,679 4,629,458 6,232,075 6,230,015 8,150,048 32,241,760
Derivative
financial
liabilities - 115,533 - - - - 115,533
Other
financial
liabilities 169,535 - - - - - 169,535
Subordinated
debt - 1,772 - - 241,691 87,097 330,560
Total
financial
liabilities 10,382,468 7,668,045 7,660,274 13,451,924 7,011,440 9,269,031 55,443,182
Net liquidity
gap 848,498 3,050,348 (173,927) (432,023) 2,328,739 (936,098) 4,685,537
Cumulative
liquidity gap 848,498 3,898,846 3,724,919 3,292,896 5,621,635 4,685,537
The analysis by remaining contractual maturities may be
summarised as follows at 31 December 2021:
31 December Demand and From 1 to 6 From 6 to 12 From 1 to 3 From 3 to 5 Over 5 years Total
2021 less than 1 months months years years
month
Assets
Cash and cash
equivalents 8,196,652 - - - - - 8,196,652
Due from other
banks 208,322 24,092 877,224 208,950 257,745 379,970 1,956,303
Loans and
advances to
customers 2,303,397 7,692,692 5,415,340 11,550,168 7,910,452 7,665,002 42,537,051
Investment
securities
measured at
amortised
cost 446,005 493,401 - 125,664 2,442 - 1,067,512
Financial
assets
at fair value
through other
comprehensive
income - - - 48,136 - - 48,136
Other
financial
assets 20,249 - - - - - 20,249
Total
financial
assets 11,174,625 8,210,185 6,292,564 11,932,918 8,170,639 8,044,972 53,825,903
Liabilities
Due to other
banks 467,396 435,292 2,469 42,430 401,151 44,239 1,392,977
Customer
accounts 7,588,430 1,897,559 2,264,066 877,011 216,880 717,594 13,561,540
Debt
securities in
issue 3,002 33,801 70,000 3,211,014 - - 3,317,817
Other borrowed
funds 560,328 3,670,762 4,931,885 12,437,283 2,875,810 5,654,708 30,130,776
Other
financial
liabilities 155,755 - - - - - 155,755
Subordinated
debt - 1,771 - - 3,226 96,774 101,771
Total
financial
liabilities 8,774,911 6,039,185 7,268,420 16,567,738 3,497,067 6,513,315 48,660,636
Net liquidity
gap 2,399,714 2,171,000 (975,856) (4,634,820) 4,673,572 1,531,657 5,165,267
Cumulative
liquidity gap 2,399,714 4,570,714 3,594,858 (1,039,962) 3,633,610 5,165,267
The above analysis is based on remaining contractual
maturities.
Although the Group does not have the right to use the mandatory
deposits held in the CBU for the purposes of funding its operating
activities, the Management classifies them as demand deposits in
the liquidity gap analysis on the basis that their nature is
inherently to fund sudden withdrawal of customer accounts.
The matching and/or controlled mismatching of the maturities and
interest rates of assets and liabilities is fundamental to the
Management of the Group. It is unusual for banks ever to be
completely matched since business transacted is often of an
uncertain term and of different types. An unmatched position
potentially enhances profitability, but can also increase the risk
of losses. The maturities of assets and liabilities and the ability
to replace, at an acceptable cost, interest-bearing liabilities as
they mature, are important factors in assessing the liquidity of
the Group and its exposure to changes in interest and exchange
rates.
The Management believes that in spite of a substantial portion
of customer accounts being on demand, the fact that significant
portion of these customer accounts are of large state controlled
entities which are either the Group's shareholders or its entities
under common control and the past experience of the Group, indicate
that these customer accounts provide a long-term and stable source
of funding for the Group.
As part of liquidity risk management, the Group maintains a
contingency plan, periodically reviewed and adjusted, to be able to
withstand any unexpected outflow of customers and to respond to
financial stress. The contingency plan is developed primarily on
the basis of the Group's ability to access the State resources due
to its state ownership and strategic importance to the national
banking system of the Republic of Uzbekistan.
As at 31 December 2022, the contingency plan of the Group
consisted of the following:
- Attraction of long-term deposits of State funds under the
Ministry of Finance - Pension Fund, State Deposit Insurance Fund
and others;
- Attraction of budgetary funds up to one year through weekly
electronic bidding platform run by the State Treasury under the
Ministry of Finance;
- Utilization of the CBU's short-term liquidity loans;
- Attraction of deposits from inter-bank money markets within
the limits set by the local commercial banks.
The Management of the Group is of the view that through their
contingency plans the Group will be able to attract resources
sufficient to cover any potential negative liquidity gap as at 31
December 2022.
38. RELATED PARTY TRANSACTIONS
Parties are generally considered to be related if the parties
are under common control or one party has the ability to control
the other party or can exercise significant influence over the
other party in making financial or operational decisions. In
considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal
form.
-- "Significant shareholders" - legal entities-shareholders
which have a significant influence to the Group through Government
;
-- "Key management personnel" - members of the Management Board and the Council of the Bank;
-- "Entities under common control" - entities that are
controlled, jointly controlled or significantly influenced by the
Government.
Details of transactions between the Group and related parties
are disclosed below:
Column1 31 December 2022 31 December 2021
Related party balances Total category as per Related party balances Total category as per
financial statements financial statements
caption caption
Cash and cash
equivalents
- entities under
common control
(contractual interest
rate: 0% --32%) 35,908 1% 1,746,320 24%
Due from other banks
- entities under
common control
(contractual interest
rate: 0% -- 27%) 1,235,199 74% 1,483,268 76%
Loans and advances to
customers
- key management
personnel
(contractual interest
rate: 18% -- 28 %) 198 0% 1,176 0%
- significant
shareholders
(contractual interest
rate: 0% --0 %) - - 3,678,666 9%
- entities under
common control
(contractual interest
rate: 0% -- 23 %) 9,280,446 22% 8,157,239 19%
Investment securities
measured at
amortised cost
- significant
shareholders
(contractual interest
rate:4,75% -- 18,20
%) 2,060,476 38% 288,290 27%
- entities under
common control
(contractual interest
rate: 0 %) - - 770,932 72%
Financial assets at
fair value
through other
comprehensive
income
- entities under
common control
(contractual interest
rate: 0 %) - - 19,952 41%
Other Assets
- significant
shareholders
(contractual interest
rate: n/a %) 1,558 0% 13,270 4%
Due to other banks
- entities under
common control
(contractual interest
rate: 0% -- 16 %) 661,191 17% 963,175 69%
Customer accounts
- key management
personnel
(contractual interest
rate: 0% --22%) 1,347 0% 63 0%
- significant
shareholders
(contractual interest
rate: 0% -- 19 %) 3,383,672 22% 4,258,100 31%
- entities under
common control
(contractual interest
rate: 0% -- 4 %) 2,807,152 18% 2,891,164 21%
Debt securities in
issue
- entities under
common control
(contractual interest
rate: 0 % -- 5,75 %) - - 12,604 0%
- significant
shareholders - - - 0%
Other borrowed funds
- significant
shareholders
(contractual interest
rate: 0% -- 12 %) 4,813,932 11% 5,277,553 18%
- entities under
common control
(contractual interest
rate: 0% -- 4 %) - - 476 0%
Other liabilities
- significant
shareholders
(contractual interest
rate: n/a %) 50 0% 163 0%
- entities under
common control
(contractual interest
rate: n/a %) 383 0% 26,774 14%
Subordinated debt
- entities under
common control
(contractual interest
rate:0% -- 10 %) 330,560 100% 101,771 100%
Column1 2022 2021
------------------------------------------- -------------------------------------------
Related party Total category as Related party Total category as
balances per financial balances per financial
statements caption statements caption
--------------------- -------------------- --------------------- --------------------
Interest income
- key management
personnel 34 0% 48 0%
- significant shareholders 1,079 0% 226,419 5%
- entities under
common control 350,369 7% 332,970 8%
Interest expense
- key management
personnel (216) 1% (1) 0%
- significant shareholders (547,782) 21% (364,671) 18%
- entities under
common control (84,300) 3% (85,088) 4%
Provision for/(recovery
of) credit losses
on loans and advances
to customers
- significant shareholders (81,109) 9% (38,049) 9%
- key management
personnel (6) 0% - 0%
Fee and commission
income
- significant shareholders 29 0% 15,332 4%
- entities under
common control 26 0% 15,163 4%
Fee and commission
expense
- significant shareholders (4) 0% - -
- entities under
common control (34) 0% - -
Net gain from trading
in foreign currencies
- entities under
common control 63,051 6% - -
Other operating
income
- significant shareholders - - 246 1%
- entities under
common control 12 0% 78 0%
Administrative and
other operating expenses
- key management
personnel (12,574) 27% (10,465) 1%
- entities under
common control - - (110,189) 11%
The Group enters into transaction with other government related
entities in the normal course of business.
Key management compensation is presented below:
202 2 202 1
Salaries and other benefits qwerty 7,496 5,813
Bonuses 3,715 2,519
State pension and social security costs 1,363 2,133
Total 12,574 10,465
39. EVENTS AFTER THE OF THE REPORTING PERIOD
The Group made an investment in "Yashil Energiya" LLC
established on the basis of the Presidential Decree #57 dated 16
February 2023 on "Measures to accelerate the introduction of
renewable energy sources and energy-saving technologies in
2023".
The total charter of "Yashil Energiya" LLC capital constituted
UZS 118,420 million with the share of "SQB
Capital" LLC being 19.16% or UZS 22 684 million.
According to Presidential Decree #83 dated 1 March 2023 "On
measures to accelerate the processes of reforming enterprises with
the participation of the state", the share of the Ministry of
Finance of the Republic of Uzbekistan in the amount of 13.1% was
transferred to the Agency for Strategic Reforms under the President
of the Republic of Uzbekistan.
Change in refinancing rate. On 16 March 2023, the Board of the
Central Bank of Uzbekistan decided to lower the policy rate
refinancing rate by 1 percentage point and set it at 14 percent per
annum.
Current market events in the banking sector. In March 2023, due
to recent events that led to higher interest rates in both Europe
and the US, California-based Silicon Valley Bank filed for
bankruptcy, the second largest bankruptcy in US history since the
closure of Washington Mutual in 2008. Silicon Valley Bank was one
of the 16 largest US banks and specialised in working with
start-ups. The risks of the impact of the local crisis in the US on
the banks of the Eurozone led to a fall in the value of shares of
the Swiss bank Credit Suisse. In recent days, global events are
reflected in the domestic foreign exchange market. There is an
increase in volatility and a weakening of the national currency
against the US dollar, which is complicated by the fall in oil
prices to $73-74 per barrel. At the same time, the impact of local
crises in US and Eurozone banks on the financial market of
Uzbekistan is limited. The Group has assets in US and Eurozone
banks. As of the date of issue of these consolidated financial
statements, the management of the Group does not observe the impact
of these events on the Group, and the Group regularly conducts
stress testing, which allows it to predict the potential effect of
such events on the financial position of the Group. According to
the results of the latest stress testing, the margin of safety is
sufficient and in the event of such scenarios, the Group's
prudential standards will not be violated.
, the news service of the London Stock Exchange. RNS is approved by
the Financial Conduct Authority to act as a Primary Information
Provider in the United Kingdom. Terms and conditions relating to
the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FIFIERFIVFIV
(END) Dow Jones Newswires
June 23, 2023 02:00 ET (06:00 GMT)
Jsc Uzbek 5.75% (LSE:78JE)
Historical Stock Chart
Von Nov 2024 bis Dez 2024
Jsc Uzbek 5.75% (LSE:78JE)
Historical Stock Chart
Von Dez 2023 bis Dez 2024
