Why is this important
500 billion ($42 million) — the largest issuance of deposit certificates, will attract capital from corporate clients (large businesses, investment funds, insurance companies). 22% per annum — competitive rate, higher than deposits (18-20%), but lower than MFO bonds (27-28%). The nominal value of 50 billion is only for large companies, a barrier for small businesses. Currency settlements with conversion — hedging of currency risks for exporters, importers.
What happened
- AVO Bank will issue certificates worth 500 billion US dollars at 22% interest for 3 years;
- Nominal value — 50 billion ($4.2 million);
- Settlements in sums or currency with conversion to the exchange rate of the Central Bank;
- Only for legal entities, including non-residents;
- Placement in an unorganized market, circulation — only between companies.
Deposit certificates
- What is it: a security certifying a deposit in a bank with a fixed return. The holder receives interest, at the end of the term — the denomination.
- Difference from deposit: certificates are traded on the market, can be sold before maturity (deposit — no).
- Difference from bonds: certificates are issued by a bank, bonds by any company. Certificates are usually for legal entities, bonds are for everyone.
Conditions
- Emission: 500 billion ($42 million) = 10 certificates for 50 billion.
- Profitability: 22% per annum — higher than deposits (18-20%), but lower than MFO bonds (27-28%).
- Duration: 1092 days (3 years).
- Nominal: 50 billion ($4.2 million) — only for large companies (exporters, importers, investment funds, insurance).
- Calculations: in sums or currency with conversion to the Central Bank rate — hedging of currency risks.
Only for legal entities
Certificates are intended for legal entities, including non-residents (foreign companies). Individuals cannot buy due to the high denomination (50 billion).
Unorganized market
- Placement: on an unorganized market (exchange-free) — transactions between the bank and legal entities directly, without an exchange.
- Circulation: in organized (exchange) and unorganized markets — only between legal entities. Individuals cannot trade.
Why AVO Bank
- Attraction of capital: 500 billion to finance loans to corporate clients (exporters, importers, manufacturers).
- Diversification of Funding: Instead of individual deposits (volatile, can be withdrawn), legal entities attract stable capital for 3 years.
- Competition: 22% is more attractive than deposits (18-20%), competes with MFO bonds (27-28%).
Why legal entities
- Profitability: 22% per annum — higher than deposits (18-20%), lower than MFO bonds (27-28%), but AVO Bank is more reliable than MFO (NPL 2-3% versus 5-10% for MFO).
- Liquidity: certificates are traded on the market, can be sold before maturity (deposit — no).
- Currency hedging: settlements in currency with conversion to the Central Bank exchange rate — exporters, importers hedge currency risks.
AVO Bank
- Specialization: corporate lending (exporters, importers, large businesses).
- Reliability: one of the stable banks in Uzbekistan, NPL 2-3%.
Context
- 500 billion is a large issue: it will attract capital from large businesses, investment funds, and insurance companies.
- 22% — competitive rate: higher than deposits (18-20%), but lower than MFO bonds (27-28%). The golden mean is profitability + reliability.
- The nominal value of 50 billion is a barrier: only for large companies. Small businesses cannot buy.
- Currency settlements: hedging risks for exporters and importers. With the devaluation of the sum, they will receive more sums when converting the currency.
- Unorganized market: over-the-counter transactions, less transparency, but flexibility in conditions.
