Uzbekistan’s Banking Sector Sees Credit Growth Amid Rising Non-Performing Loans in Q1 2026
Total bank lending in Uzbekistan increased significantly in early 2026, with non-performing loans also rising, primarily in state-owned banks.
In the first quarter of 2026, Uzbekistan’s banking system experienced a notable expansion in its credit portfolio, reaching over 623 trillion Uzbekistani soms, according to reports from the Central Bank. However, this growth was accompanied by a simultaneous increase in non-performing loans (NPLs), posing potential risks to financial stability and economic growth.
Credit Growth and Rising Non-Performing Loans
The total credit portfolio of Uzbekistan’s banks expanded by 19.3 trillion soms during the quarter. Despite this positive momentum in lending, the volume of problem loans rose by 1.8 trillion soms, totaling nearly 19.9 trillion soms. This increase in NPLs was predominantly driven by state-owned banks.
State banks saw their loan portfolios increase by 11.1 trillion soms. The most significant growth was recorded at Agrobank, which added 5.44 trillion soms, followed by Milliybank (+2.63 trillion soms), Xalq Bank (+1.95 trillion soms), and Aloqabank (+1.89 trillion soms). These banks play a crucial role in financing key sectors such as agriculture, industry, and infrastructure development, underscoring the government’s strategic priorities.
Conversely, several banks experienced a contraction in their lending portfolios. Notably, SQB and Asakabank recorded declines, illustrating the uneven expansion across the banking sector.
Private Banks and Market Dynamics
Among private banks, Hamkorbank, Hayot Bank, and Kapitalbank exhibited robust credit growth, reflecting their efforts to capture market share and support emerging business segments. However, TBC Bank and Orient Finans Bank reduced their lending, possibly indicating more cautious credit policies or shifts in market demand.
“The rise in non-performing loans, especially within state banks, signals the need for enhanced risk management reforms to sustain long-term financial stability,” analysts suggest.
Implications for Financial Stability and Economic Policy
The surge in NPLs—primarily an additional 1.46 trillion soms within state banks—raises concerns about asset quality and credit risk. Banks such as SQB, Aloqabank, and Asakabank contributed most to this increase. Nevertheless, some institutions managed to reduce their problematic loan volumes; for example, Ipoteka Bank wrote off 316 billion soms worth of bad loans. In contrast, Anor Bank and Garant Bank saw increases in their NPLs.
Despite the rise in absolute NPL figures, the share of non-performing loans relative to the overall credit portfolio actually declined from 3.19% to 2.99%. This suggests that while credit growth is strong, underlying asset quality challenges remain.
From a macroeconomic perspective, the expansion in credit volume supports economic activity but also signals the necessity for vigilant supervision and regulatory oversight to mitigate systemic risks. The concentration of rising NPLs in state banks could reflect credit allocation to strategic but potentially riskier sectors, necessitating policy recalibrations to balance growth objectives with financial health.
For senior decision-makers and policymakers, these trends underline the importance of targeted reforms in credit risk management, enhanced transparency, and strengthened governance within state financial institutions. Such measures are critical to sustaining Uzbekistan’s economic momentum while safeguarding the banking sector’s resilience amid evolving domestic and global challenges.
