Banks in Azerbaijan, Armenia, Georgia outperform historical credit benchmarks FITCH RATING SHOWS

Banking credit indicators in Azerbaijan, Armenia, and Georgia remain strong and continue to exceed historical norms, supported by high economic growth, improved sovereign credit profiles, and ongoing indirect effects of the conflict in Ukraine, according to Fitch Ratings.

Rapid credit growth and dividend payouts in Azerbaijan have reduced banks’ capital buffers, but the sector’s overall capitalisation is expected to remain stable in 2026, supported by strong profitability and moderate asset growth, Caliber.Az reports via local media.

Between 2022 and the first nine months of 2025, banks in the region posted record profitability. Net interest margins increased by 1–2 percentage points amid rising interest rates. Armenian banks, and to a lesser extent Georgian banks, also benefited from higher fees linked to transit trade, migration, and payment flows from Russia. In Azerbaijan, profitability was bolstered by reduced risks from non-performing assets of previous years.

Fitch emphasises that capital adequacy ratios in Armenia and Georgia remain resilient due to strong profits and strict regulatory requirements. Asset quality improved across all three countries, though further reductions in non-performing loans may be limited given already low levels.

The most notable improvement in asset quality since 2021 was seen in Azerbaijani banks, driven by a shift toward more diversified local-currency lending and stricter borrower creditworthiness requirements.

Dollarisation has declined across the region but remains high in Georgia (42% of loans at the end of the third quarter of 2025) and Armenia (34%). In Azerbaijan, foreign currency loans accounted for just 14%, thanks to the manat’s effective peg to the US dollar and strict foreign currency lending rules.

Banking sector liquidity remains comfortable. However, the sector-wide loan-to-deposit ratio exceeded 105% in Armenia and Georgia by the end of September 2025 (up from 82% and 101% at the end of 2022) amid normalised deposit inflows. In Azerbaijan, the ratio stood at 80%.

By Jeyhun Aghazada