ArmInfo. In the Armenian banking sector, corporate lending is trying to outpace retail lending in terms of growth - 26% versus 27%. This trend began to be observed a year ago - 22% versus 23%. This is evidenced by the Financial Rating of Armenian Banks as of September 30, 2025, prepared by ArmInfo Investment Company based on published financial reports and additionally requested data.
As a result, the annual growth of the loan portfolio accelerated from 19% to 24%, which in turn spurred the growth of interest income from lending from 22% to 27%.
Specifically, interest income from lending accounted for over 58% of total income (over $1.6 billion). The loan portfolio exceeded $21 billion, with corporate loans accounting for 53.2% ($11.2 billion) and retail loans for 49% ($9 billion). This, according to analytics, supported double-digit asset growth, accelerating from 16% to 18%, reaching $31.3 billion. As a result, the banks managed to maintain their net interest margin at 4% for the first nine months of 2025 (the same as last year).
In the asset structure, the share of loans increased from 63% to 67% over the year, while the share of securities investments remained at 17% (with a 12% increase in volume to $5.2 billion). The share of correspondent accounts with the Central Bank of Armenia also remained unchanged at 8% (with a 22% increase in volume to $2.5 billion). However, the share of correspondent accounts in banks (nostro) decreased from 4% to 2% (with a 30% decline in volume to $736 million).
Active lending is accompanied by a deterioration in portfolio quality
Amid accelerated consumer lending and active lending to the economy, the growth of non-performing loans (NPLs) has accelerated significantly - from 12% to 35%. Their share of the loan portfolio has increased from 4.7% to 5.1%, and of assets - from 3% to 3.4%. Moreover, approximately 50% of NPLs are high-risk loans - doubtful and bad loans. The agency's analysts noted that the bulk of delinquencies continues to accumulate in consumer loans - approximately 40%, half of which are doubtful and bad loans. However, the share of delinquencies in mortgage loans is small - 8%.
Meanwhile, writing off high-risk loans off-balance sheet has a particularly negative impact on profits, significantly reducing their growth rate - from 25% to 15%. As a result, for the first nine months of 2025, the banking sector's total net profit amounted to $805 million.
By share of overdue loans in total NPLs, the following sectors are ranked: trade (19%), construction (10%), industrial sector (over 8%), catering/services (approximately 8%), agricultural sector (over 4%), and transport and communications (just over 1%). The highest annual growth in overdue loans primarily came from the trade sector (79%), catering/services (61%), industrial sector (13%), and construction (10%). Only loans to the agricultural sector and transport/communications (22%) saw an annual decline in overdue loans, respectively. Overdue consumer loans increased by only 1.3% over the year, while mortgages saw a 67.4% increase. However, the high-risk group (dubious and hopeless) for both consumer loans and mortgages decreased by 30% and 24%, respectively.
Analysts point out the significant increase (8-fold) in overdue loans to non-residents, although this is largely due to the situation at one of the country's major banks, which unsuccessfully financed a foreign client whose loan debt is already classified in the high- risk, dubious group.
Nevertheless, it is significant that, in contrast to their historically traditional preference for the trade sector, Armenian banks have now reoriented themselves toward lending to the real sector and are focusing on financing industries such as industry (33%), construction (31%), and catering/services (25%). Investment growth in the retail sector was relatively slow at 14%, in transportation and communications at 11%, and in agriculture at 9%. Moreover, lending to small and medium-sized businesses (SMEs) slowed significantly in year-on-year growth, from 25% to 14%.
Meanwhile, consumer lending, while maintaining high double-digit growth rates, accelerated further, from 22% to 24%. Mortgage lending continues to grow at high double-digit rates, but a slight slowdown is already visible, from 28% to 25%, which can be easily explained by the reduction in the state tax deduction program.
Active lending is accompanied by a deterioration in portfolio quality
Amid accelerated consumer lending and active lending to the economy, the growth of non-performing loans (NPLs) has accelerated significantly - from 12% to 35%. Their share of the loan portfolio has increased from 4.7% to 5.1%, and of assets - from 3% to 3.4%. Moreover, approximately 50% of NPLs are high-risk loans - doubtful and bad loans. The agency's analysts noted that the bulk of delinquencies continues to accumulate in consumer loans - approximately 40%, half of which are doubtful and bad loans.
However, the share of delinquencies in mortgage loans is small - 8%.
Meanwhile, writing off high-risk loans off-balance sheet has a particularly negative impact on profits, significantly reducing their growth rate - from 25% to 15%. As a result, for the first nine months of 2025, the banking sector's total net profit amounted to $805 million.
By share of overdue loans in total NPLs, the following sectors are ranked: trade (19%), construction (10%), industrial sector (over 8%), catering/services (approximately 8%), agricultural sector (over 4%), and transport and communications (just over 1%). The highest annual growth in overdue loans primarily came from the trade sector (79%), catering/services (61%), industrial sector (13%), and construction (10%). Only loans to the agricultural sector and transport/communications (22%) saw an annual decline in overdue loans, respectively. Overdue consumer loans increased by only 1.3% over the year, while mortgages saw a 67.4% increase. However, the high-risk group (dubious and hopeless) for both consumer loans and mortgages decreased by 30% and 24%, respectively.
Analysts point out the significant increase (8-fold) in overdue loans to non-residents, although this is largely due to the situation at one of the country's major banks, which unsuccessfully financed a foreign client whose loan debt is already classified in the high- risk, dubious group.
Nevertheless, it is significant that, in contrast to their historically traditional preference for the trade sector, Armenian banks have now reoriented themselves toward lending to the real sector and are focusing on financing industries such as industry (33%), construction (31%), and catering/services (25%). Investment growth in the retail sector was relatively slow at 14%, in transportation and communications at 11%, and in agriculture at 9%. Moreover, lending to small and medium-sized businesses (SMEs) slowed significantly in year-on-year growth, from 25% to 14%.
Meanwhile, consumer lending, while maintaining high double-digit growth rates, accelerated further, from 22% to 24%. Mortgage lending continues to grow at high double-digit rates, but a slight slowdown is already visible, from 28% to 25%, which can be easily explained by the reduction in the state tax deduction program.
Capital continues to grow, but profit support weakens
The total capital of Armenian banks accelerated in annual growth to 17% by October 2025, after slowing in 2022-2024 from 38% to 13%, reaching $5.3 billion. Within this structure, the share of authorized capital decreased over this period from 61% to 48.5% ($2.6 billion), while accumulated profit increased from 32% to 43.7% ($2.3 billion). This is despite the fact that the annual growth of authorized capital accelerated from 12.2% to 19.3%, while accumulated profit slowed from 23% to 13%. In particular, out of 17 banks, only 6 increased their authorized capital year-on-year: Ardshinbank (by 95.2% in Q1 and Q2 2025), Acba Bank (by 64.9% in Q4 2024), IDBank (by 43.7% in Q3 2025), AMIO Bank (by 11.8% in Q1 2025), Unibank (by 11.6% in Q2 2025), and Armeconombank (by 5.4% in Q4 2024). Moreover, the increase in Ardshinbank's authorized capital is explained by the acquisition of HSBC Bank Armenia, completed on November 29, 2024, with the subsequent publication of the consolidated balance sheet for the same year. However, the higher double-digit growth in risk-weighted assets (18.4%) only marginally improved both the total capital adequacy ratio (from 26.5% to 26.8% on average for the market) (N1, with a minimum of 11%) and the core capital adequacy ratio (from 24.3% to 24.4% (N1/1, with a minimum of 6.2%).
According to ArmInfo analysts, liquidity ratios, assessed by four standards-N2/1 (total, with a minimum of 15%), N2/2 (current, with a minimum of 60%), N2/3 (LCR - short- term, with a minimum of 100%), and N2/4 (NSFR - long-term, with a minimum of 100%)-continue to decline. In particular, the overall liquidity level decreased from 35.2% to 32.3% on average across the market, current liquidity from 128.5% to 122.8%, short-term liquidity from 240.1% to 210.4%, and long-term liquidity from 140.5% to 136.2%. This was accompanied by a deterioration in the annual dynamics of almost all items of highly liquid assets: correspondent accounts with banks - from 19% growth to a 30% decline, cash and cash equivalents - with a slowdown in growth from 5% to 2%, correspondent accounts with the Central Bank - with a slowdown in growth from 23% to 22%. At the same time, the dominant item of highly liquid assets - investments in government bonds - accelerated in growth from 3% to 12%. At the same time, the main components of general and current liquidity ratios maintained growth: total assets, accelerating from 16% to 18%, and demand liabilities, decelerating from 14% to 3%. As for the two later-introduced ratios (N5/1 max 10% and N5/2 max 5%), designed to curb mortgage loan risks, their average market indicators remained at 1.3% and 0.2%, respectively, year-on-year. This is occurring against the backdrop of a slowdown in annual mortgage growth from 28% to 25% (covering a volume of $4.3 billion), due to the suspension of the state tax deduction program in Yerevan starting in 2025, which is currently only being implemented in the regions. However, starting in 2029, the Armenian authorities intend to completely abolish income tax refunds for mortgage loans (the restrictions will not apply to border settlements).
The top 5 banks have firmly consolidated their positions
In terms of loan investments (including interbank loans and deposits) and funds raised (including liabilities to clients, loans from external sources, and funds received from the placement of their own bonds), the top 5 are Ameriabank, Ardshinbank, Acba Bank, AMIO Bank, and INECOBANK.
Of these, the top five in terms of funds raised from external sources are Ardshinbank, Ameriabank, AMIO Bank, and Acba Bank, and in terms of funds received from the placement of their own bonds, Ameriabank, Acba Bank, and INECOBANK.
The aforementioned five banks represent the top 5 in terms of term deposits: Ardshinbank, Ameriabank, AMIO Bank, Acba Bank, and INECOBANK. Four of these banks also lead in demand deposits: Ardshinbank, Ameriabank, Acba Bank, and INECOBANK. All five of these banks represent the top 5 in terms of corporate and retail loans, while Ardshinbank holds the lead in terms of interbank loans/deposits.
These five banks also established themselves as leaders in terms of assets and total liabilities (with a market share of 61-62%) and total capital (with a market share of over 58%), with the top two banks - Ardshinbank and Ameriabank - holding the dominant share (34-39%).
These five banks completed the first nine months of 2025 with a profit, but four of them - Ardshinbank, Ameriabank, Acba Bank, and INECOBANK - remained in the top 5, accounting for approximately 66% of the banking sector's total net profit, with the top two generating over 50%.
International financial institutions warn of signs of lending market overheating
Meanwhile, international financial donor institutions, having improved their forecasts for Armenia's economic growth in November, are warning of signs of lending market overheating. The World Bank (WB) draws the mega-regulator's attention to the need to continuously monitor for signs of overheating, as indicated by the structure and growth rate of loans. Furthermore, the WB notes that the high rate of lending growth and the significant share of consumer loans and mortgages indicate debt accumulation, which could become a heavy burden in the event of deteriorating financial conditions or macroeconomic stress. Nevertheless, the WB notes that Armenia's financial sector is stable due to high loan growth, a low share of non-performing loans (NPLs), and strong capital buffers. Regarding Armenia's GDP growth forecast, the World Bank has revised it up from the previous 4% to an updated 5.2% for 2025, with further annual growth expected to slow to 4.9% in 2026 and to 4.7% in 2027.
According to the updated forecasts of the International Monetary Fund (IMF), Armenia's real GDP growth will remain high, reaching approximately 5% in 2025 (instead of the previously expected 4.5%), accelerating to 5.5% in 2026. The IMF attributes risks to this forecast primarily to uncertainty stemming from ongoing global trade tensions and a potential slowdown in economic growth among trading partners, as well as regional geopolitical risks. On the other hand, the IMF believes growth could exceed expectations if net exports are better than projected and the transport links underlying the peace declaration are implemented more quickly.
The Central Bank of Armenia also improved its GDP growth forecast for 2025 from the previous 5.1-4.6% to an updated 5.8-5.7% (following a slowdown in actual growth in 2022-2024 from 12.6% to 5.9%), now expecting an acceleration to 5.7-6.2% in 2026 (instead of the previously announced slowdown to 4.9- 4.4%). Moreover, in 2025, economic growth is no longer supported as strongly (as in the previous two years) by the construction and services sectors, while stimulus from the industrial sector has also faded (from double-digit growth to a decline). During a discussion of the draft 2026 state budget, which projects 5.4% GDP growth, Central Bank Governor Martyn Galstyan emphasized that the previously existing short- term factors influencing high economic growth are gradually neutralizing. "Under these conditions, potential sustainable GDP growth will depend on the results of government policies aimed at increasing productivity, stimulating exports, and improving the investment environment," he noted, noting the geopolitical and economic uncertainties that create significant internal and external risks. In this situation, to mitigate the negative consequences of these risks, Galstyan places particular importance on their ongoing monitoring and the development of approaches and skills for their management, considering this key to macroeconomic stability in the short and medium term.
Analysts at AmRating, a rating agency affiliated with ArmInfo, believe that this backdrop is forcing banks to refinance corporate loans, having used a similar tactic with consumer loans aimed at "formally refinancing" at least some portion of the portfolio, at least for the short term, which in turn allows them to maintain profit growth during this phase. The latter, according to analysts, is unlikely to be sustained over the long term, as evidenced by the significantly weakened growth and the rapid deterioration of the loan portfolio quality, which implies the write-off of toxic loans and the accompanying squeeze on profits.
Meanwhile, AmRating analysts, noting the accelerated growth of term deposits to high double-digit rates (30%), which have cemented their leadership in funding active operations, suggest that banks will still be able to maintain and even increase their lending activity. However, in terms of possible market overheating, it is important to consider that if the macro environment is less than favorable, banks will begin refinancing existing loans instead of actively issuing new loans, resulting in a significant increase in non-performing loans and reducing the potential for profit growth at the previous rate.
Unfavorable factors in such a scenario could include a continued slowdown in GDP growth without a further significant reduction in the cost of money, which would negatively impact economic agents' willingness to borrow. The potential conflict between the two main factors-economic development and inflation-will leave banks with no choice but to increase refinancing or restructure corporate loans, which would lead to a slight deterioration in portfolio quality. The extent to which the quality of the loan portfolio has deteriorated can already be judged based on the results of the first nine months of 2025: of the 17 banks operating in Armenia, 12 recorded an increase in the volume of toxic loans, and for most of them, the increase was quite significant.
Analysts note that the 25% annual growth of the standard group of loans is largely supported by a 30% increase in healthy corporate loans rather than a 26% increase in healthy consumer lending. Specifically, in industrial loans, the standard group increased by 51%, while delinquencies rose by 13%. In the latter group, a slight 4% decline in the low-risk (controlled) group was accompanied by a 2.3-fold jump in the medium-risk (non-standard) group and a 5% increase in high-risk (dubious and bad) groups. Slightly lower growth in standard loans was observed in the food service/service sector (37%) and construction (35%), while comparatively lower growth was observed in the trade sector (16%), agriculture (15%), and transportation/communications (13%). However, delinquency rates also increased: by 79% in the retail sector, by 61% in the catering/services sector, and by 10% in construction. Only in the agricultural and transport and communications sectors did delinquent loans decrease - by 26% and 22%, respectively. Moreover, among delinquent loans to the retail sector, a significant increase in the controlled, non-standard, and doubtful groups was accompanied by a less significant decline in bad loans, while in the catering/services sector, a slight decline in the controlled and hopeless groups was offset by a significant increase in the non- standard and doubtful groups.
When considering the projected risks of banks losing profitability, it's important to note that of the sectors listed, the main driver of GDP growth for the first nine months of 2025 is the construction sector, with annual growth accelerating from 15.9% to 20.7%, driven by increased residential building commissioning. Growth in the services sector accelerated more moderately, from 5.9% to 9.9% (due to the dominant IT and financial sectors), the energy sector, from 3% to 8.2% (primarily due to increased hydroelectric and solar power plant output), and the agricultural sector, from 1.3% to 6% (primarily due to high yields of grapes, fruits/berries, potatoes, and grains). Meanwhile, the leading trade sector by volume significantly slowed its annual growth from 19.5% to 3.5% (primarily due to significantly weakened wholesale trade growth), while the industrial sector's performance worsened from 12.6% growth to a 5.7% decline (due to a decline in the dominant manufacturing industry).
Nevertheless, in terms of profit growth, the fact that it is organic in nature is increasingly encouraging, as it has been supported by a key activity - lending - for a year and a half. Moreover, regulatory easing of monetary conditions continues through a reduction in the refinancing rate from 2023 to February 2025, from a historically high 10.75% to 6.75%, and has remained at this level since then. This signals a decline in interest rates, which nevertheless fluctuate depending on demand for credit products and are, so to speak, unresponsive to the key rate. The slowdown in economic growth reduces interest in project financing, concentrating demand on refinancing short- and medium-term debt, replenishing working capital, and trade financing.
