Percent margin down to 3% against 5% in Armenia in first half of 2025 

ArmInfo. In the Armenian banking system, the net interest margin decreased from 5% to 3% in the first half of 2025. Moreover, among large lenders, some banks lost 3-4 percentage points in this indicator over the first half of the year  (from the previous 6-7%). This is evidenced by the Financial Rating  of Armenian Banks as of June 30, 2025, prepared by ArmInfo Investment  Company.

This reduction in the net interest margin is due to a relatively  modest increase in healthy loans - by 9.5% in the reporting period  (compared to 7% a year ago) - while non-performing loans accelerated  from 5% to 25%. Specifically, in corporate loans, the standard  (healthy) group grew by 11% over the first six months, while the  toxic group grew by 37%. This was also reflected in retail loans: a  7.4% increase in healthy loans was accompanied by a 27% jump in toxic  loans. It's worth noting that non-performing loans pose a threat to  bank profits and represent lost revenue, and their rapidly  accelerating growth signals an accelerated deterioration in the  quality of the loan portfolio, which, meanwhile, is the main source  of interest income and directly impacts the net interest margin.

Overall, the half-year growth of corporate lending accelerated from  2% to 11%, while retail loans stalled, falling from 11% to 9%,  reaching $10.5 billion and $8.6 billion, respectively. The annual  growth of these portfolios accelerated from 21-20% to 28-29%.

Against this backdrop, the annual growth rate of interest income and  expenses equaled 21%, while assets increased by 19%. According to the  agency's analysts, comparative data with the same period last year  shows that interest income maintained its growth rate, while interest  expenses accelerated (from 16%), while asset growth improved less  significantly (from 15%). As a result, interest income and expenses  reached $1.3 billion and $554 million, respectively, in the first  half of this year, while assets exceeded $30.2 billion.

In the asset structure, the loan portfolio and investments in  securities demonstrated mixed dynamics during the reporting period -  25% growth and a 0.3% decline to $19.8 billion and $5.1 billion,  respectively, while a year ago both items were in double-digit growth  of 20% and 16%.

Within the liabilities structure, customer deposits and current  accounts, loans and borrowings from external sources, and funds  received from the issuance of own bonds showed double-digit growth  during the reporting period of 16%, 32%, and 10%, respectively,  reaching $17.4 billion, $5.2 billion, and $1.2 billion.

Notably, interest income from the main item-customer  lending-accelerated year-on-year growth from 23% to 27%, while the  other two main items-securities and international loans-slowed  significantly from 13% and 31%, respectively, to 4% and 1%.

Meanwhile, interest expenses for these two main items not only  maintained double-digit growth but also accelerated. In particular,  interest expenses on the main item-customer deposits and current  accounts- accelerated from 17% to 21%, while those on external loans  and borrowings grew from 13% to 27%. Even interest expenses on  securities transactions (including operations with the bank's own  bonds) only marginally slowed their double-digit growth from 16% to  13%.

According to the agency's analysts, the decline in the net interest  margin in the country's banking system is consistent with the current  supply and demand situation for asset-passive transactions. This  trend reflects the gradual neutralization of exogenous growth factors  in the country's financial system and its return to the traditional  internal growth model.