Uzbekistan’s Banking Sector Sees Loan Portfolio Growth Amid Rising Problematic Credits
In Q1 2026, Uzbekistan’s banks expanded lending volumes but also experienced an increase in non-performing loans, primarily in state-owned banks.
In the first quarter of 2026, Uzbekistan's banking system demonstrated significant growth in its total loan portfolio, reaching 623.3 trillion Uzbek soums, an increase of 19.3 trillion soums compared to the previous quarter. This expansion reflects ongoing credit demand and banks’ increasing activity in lending.
However, alongside this growth, problematic loans—those at risk of default or already non-performing—also rose by 1.8 trillion soums during the same period, pushing their total volume to approximately 19.9 trillion soums. This rise was largely driven by state-owned banks, which played a pivotal role in expanding credit exposure.
State Banks Drive Credit Growth but Face Rising Risk
The state banking sector saw its loan portfolio increase by 11.1 trillion soums in Q1 2026. The most substantial contributions came from Agrobank (an increase of 5.44 trillion soums), Milliybank (+2.63 trillion soums), Halk Bank (+1.95 trillion soums), and Aloqabank (+1.89 trillion soums).
This surge in lending by state banks, while supporting economic activity, also correlated with a notable increase in problematic credits. Among these, SQB, Aloqabank, and Asakabank exhibited the highest growth in non-performing loans, accounting for 1.46 trillion soums of the overall rise.
"The increase in problematic loans within state banks signals growing credit risk that requires strategic management to safeguard financial stability," experts note.
Conversely, some banks experienced a contraction in their loan portfolios. For example, SQB and Asakabank saw reductions in total credit volumes, indicating potential risk-averse behavior or portfolio restructuring.
Private Banks Show Mixed Lending Trends
Among non-state banks, Hamkorbank, Hayot Bank, and Kapitalbank demonstrated active loan growth, suggesting confidence in market opportunities. Meanwhile, TBC Bank and Orient Finans Bank reported reductions in credit allocations, reflecting a cautious approach amid evolving economic conditions.
Despite the rise in problematic loans, the overall share of non-performing credits relative to the total loan portfolio improved slightly, declining from 3.19% to 2.99%. This decline reflects the faster growth of the overall lending volume compared to the increase in problematic debts.
Some banks managed to reduce their stock of problematic loans notably. For instance, Ipoteka Bank decreased its problematic loans by 316 billion soums. However, other institutions such as Anor Bank and Garant Bank reported increases in their problematic credit portfolios, highlighting uneven risk management practices across the sector.
Economic and Structural Implications
The simultaneous growth in total lending and problematic loans poses a nuanced challenge for Uzbekistan’s banking system. On one hand, expanding credit availability is essential for supporting economic development, especially in priority sectors such as agriculture and infrastructure. On the other hand, rising non-performing loans can strain bank balance sheets, increase the cost of credit, and potentially limit future lending capacity.
Historically, emerging markets undergoing rapid credit expansion often face cyclical increases in loan defaults, necessitating enhanced credit risk assessment frameworks and regulatory oversight. Uzbekistan’s experience in Q1 2026 underscores the importance of balancing growth ambitions with prudent risk management to maintain financial stability and foster sustainable economic progress.
Going forward, policymakers and banking institutions must focus on improving asset quality monitoring, enhancing transparency, and diversifying credit portfolios to mitigate sector-specific risks. This approach will be crucial to ensuring that the credit boom translates into genuine economic growth without sowing the seeds of future financial distress.
