Uzbek Banks See 1.8 Trillion UZS Rise in Non-Performing Loans Amid Credit Growth in Q1 2026
Uzbek banks' total credit portfolio expanded significantly in Q1 2026, with a simultaneous increase in non-performing loans, driven primarily by state-owned banks.
In the first quarter of 2026, Uzbekistan’s banking sector experienced notable growth in its total credit portfolio, reaching over 623.3 trillion Uzbek soms. However, this expansion was accompanied by an increase of 1.8 trillion soms in non-performing loans (NPLs), highlighting emerging challenges within the sector.
Credit Portfolio Growth and Rising Non-Performing Loans
According to data released by the Central Bank of Uzbekistan, the total credit portfolio of the banking system grew by 19.3 trillion soms during the quarter. This growth reflects a dynamic credit environment with banks actively expanding their lending activities. However, the volume of problematic loans rose to nearly 19.9 trillion soms, signaling a slight deterioration in asset quality.
“While total lending surged, the increase in non-performing loans, particularly within state-owned banks, underscores the need for enhanced risk management and credit assessment practices.”
The increase in NPLs was predominantly driven by state-owned banks, whose portfolios grew by 11.1 trillion soms. Leading this expansion were Agrobank (+5.44 trillion soms), Milliybank (+2.63 trillion soms), Xalq Bank (+1.95 trillion soms), and Aloqabank (+1.89 trillion soms). These banks not only increased their credit volumes but also contributed the most to the rise in non-performing loans.
In contrast, some banks witnessed a contraction in their credit portfolios. For example, SQB and Asakabank recorded declines, suggesting a more cautious lending approach or repayment challenges within their client bases.
Private Banks and Market Dynamics
Among non-state banks, Hamkorbank, Hayot Bank, and Kapitalbank demonstrated active credit growth, expanding their lending operations during the quarter. Conversely, TBC Bank and Orient Finans Bank reduced their credit issuance, potentially reflecting strategic recalibrations or market pressures.
Non-performing loans increased mainly in state-owned institutions by approximately 1.46 trillion soms. The most significant NPL growth was seen in SQB, Aloqabank, and Asakabank. Some banks managed to reduce their NPL volumes; for instance, Ipoteka Bank wrote off 316 billion soms in problematic loans, while Anor Bank and Garant Bank faced increases in their non-performing loan balances.
Despite the rise in absolute NPL amounts, the share of non-performing loans relative to the total credit portfolio declined slightly from 3.19% to 2.99%. This indicates that credit growth outpaced the growth of problematic assets, a positive signal for overall sector health.
Implications for Banking Strategy and Risk Management
The dual trends of rapid credit expansion and rising non-performing loans present a complex strategic environment for Uzbekistan’s banks, especially state-owned ones. The significant contribution of these banks to both portfolio growth and NPL increases suggests that their lending policies and credit risk management frameworks require reassessment.
As competition among banks intensifies, balancing growth ambitions with asset quality preservation will be critical. State banks might need to enhance their credit underwriting standards and accelerate the restructuring of problematic loans to mitigate future risks.
Private banks’ mixed performance — with some expanding aggressively and others contracting credit — reflects diverse strategic approaches amid evolving market conditions. These dynamics may influence consolidation trends or partnerships in the sector, impacting the competitive landscape.
Overall, the data from Q1 2026 underscore the need for Uzbek banks to refine their corporate strategies, focusing on sustainable credit growth, proactive risk management, and operational efficiency to maintain sector stability and support economic development.
