Baku: ‘Banks’ core financial metrics in Azerbaijan, Armenia, and Georgia remain strong and exceed historical averages,’ APA-Economics reports, citing the international rating agency Fitch Ratings.
According to Azeri-Press News Agency, Fitch noted that economic growth, improvements in sovereign credit profiles, and indirect effects from the war in Ukraine have supported the banking sector’s performance. Banks posted record profitability over the first nine months of 2022-2025, with net interest margins increasing by 1-2 percentage points due to rising interest rates. Banks in Armenia and Georgia increased fee and commission income through transit trade, migration, and payment inflows from Russia. In Azerbaijan, a decline in previous asset-quality risks strengthened banks’ profitability.
The report highlights that bank capital adequacy in Armenia and Georgia remains strong due to high profits and regulatory requirements. In Azerbaijan, rapid loan growth and dividend payouts have reduced capital buffers, but Fitch expects overall capitalization to remain stable in 2026. This stability will be supported by high profitability and moderate asset growth.
Fitch stated that asset quality has improved across the region, with limited further declines in non-performing loans as problem loan levels are low. Notable progress in Azerbaijani banks since 2021 is attributed to a shift toward smaller local-currency lending and strict debt-service capacity criteria for borrowers.
Although dollarization has decreased, 42% of loans in Georgia and 34% in Armenia were denominated in foreign currency by the end of the first nine months of 2025. In Azerbaijan, the share of foreign-currency loans stood at 14%, attributed to the manat’s peg to the US dollar and strict foreign-currency lending rules.
Liquidity in the banking sector remains comfortable, though Armenia and Georgia’s loan-to-deposit ratio exceeded 105% by the end of the first nine months of 2025, compared to 82% and 101%, respectively, at the end of 2022. In Azerbaijan, the loan-to-deposit ratio was 80%.
According to Fitch’s assessment, bank ratings range from ‘B’ to ‘BB+’. Ratings of Georgia’s largest banks (BB/Stable) and Armenian banks (BB-/Positive) align with their sovereign ratings. Azerbaijani banks are rated below the sovereign rating (BBB-/Stable), reflecting their standalone credit profiles and operating environment. Fitch noted that stronger regulation and sustained financial metrics could create room for rating upgrades in Azerbaijan in the future.