BAKU, Azerbaijan, October 13. In the first half
of 2026, the volume of nonperforming loans (NPLs) in Azerbaijan
increased by 25%, or 191 million manat ($112.4 million), to 954
million manat ($561.4 million). As a result, the share of
nonperforming loans in the total loan portfolio rose by 0.5
percentage points to 3%.


This was stated in the “Financial Stability Report” published by
the Central Bank of Azerbaijan (CBA).


According to the report, the increase in non-performing loans
amounted to 128 million manat ($75.3 million), 58 million manat
($34.1 million), and 5 million manat ($2.9 million) for business
loans, consumer loans, and mortgage loans, respectively.


The CBA noted that its analysis shows the increase in
non-performing loans is related to individual customers and does
not pose a systemic risk.


The CBA noted that the banking sector has set aside sufficient
reserves to cover potential credit risks. Thus, the amount of
reserves set aside to cover potential loan losses totals 1.93
billion manat ($1.1 billion). This amount is nearly double the size
of the non-performing loan portfolio.


Specifically, the amount of specific reserves set aside for
consumer loans reached 1.37 billion manat ($810 million). This is
approximately 3.8 times greater than the amount of nonperforming
loans in this category. The report notes that these figures
demonstrate the banking sector’s ability to manage potential credit
risks.


In the first half of 2026, the banking sector wrote off loans
totaling 62 million manat ($36.4 million). 92%, or 57 million manat
($33.5 million), of the write-offs were for consumer loans, while
8%, or 5.1 million manat ($3 million), were for business loans.


The Situation with Business Loans


During the reporting period, 3.2% of the business loan portfolio
was classified as non-performing. Compared to the beginning of the
year, the volume of the non-performing business loan portfolio
increased by 30% and reached 557 million manat ($327.7 million).
The non-performing loan ratio in this segment rose by 0.5
percentage points to 3.2%.


The increase in non-performing business loans was observed
primarily in the trade and service sectors. According to CBA’s
analysis, the increase in this segment is also linked to individual
customers and is not systemic in nature.







The non-performing loan ratio for mortgage loans stood at
0.7%.


In the first half of 2026, the volume of nonperforming mortgage
loans increased by 17.4%, or 5.1 million manat ($3 million),
reaching 34.2 million manat ($20.1 million). The share of
nonperforming loans in the mortgage portfolio rose by 0.1
percentage points to 0.7%.


The nonperforming loan ratio for mortgage loans issued with
government funds was 0.2%, while for mortgage loans issued with
banks’ own funds, it was 1.5%.


The volume of nonperforming loans on consumer loans increased to
363 million manat ($213.6 million).


The report notes that risks associated with consumer loans are
continuously monitored. In the first half of 2026, the volume of
non-performing loans for these loans increased by 19.1%, or 58
million manat ($34.1 million), reaching 363 million manat ($213.6
million). The non-performing loan ratio increased by 0.4 percentage
points to 3.7%.


According to an assessment by the Central Bank of Azerbaijan
(CBA), the growth of the consumer loan portfolio was primarily
driven by loans with a debt-to-income (DTI) ratio below 45%. At the
same time, the share of loans with a DTI ratio above 45% in the
portfolio decreased.


Thus, according to data for the first half of 2026, 37% of the
consumer loan portfolio consisted of loans with a DTI above 45%.
This is 1 percentage point lower than at the end of 2025.


During the reporting period, the volume of consumer loans with a
debt-to-income ratio of less than 45% amounted to 6.2 billion manat
($3.6 billion), while the volume of loans with a debt-to-income
ratio of more than 45% amounted to 3.7 billion manat ($2.1
billion).


According to the Central Bank’s estimates, the predominance of
loans with a debt-to-income ratio of less than 45% in the growth of
the consumer loan portfolio reflects healthier and more responsible
lending trends.