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.