Azerbaijan's Bad Loans Rise 25% to $561.4m in H1

Nonperforming loans (NPLs) in Azerbaijan rose 25% in the first half of 2026 to 954 million manat ($561.4 million), the Central Bank of Azerbaijan said in its Financial Stability Report for the first half of 2026, as reported on 13 October 2026 by Trend News Agency. The NPL ratio stands at 3%, up 0.5 percentage points.

The increase was 191 million manat ($112.4 million). The central bank said the rise is tied to individual borrowers and does not pose a systemic risk.

Where the increase came from

Business loans accounted for most of the rise, adding 128 million manat ($75.3 million). Consumer loans added 58 million manat ($34.1 million) and mortgages 5 million manat ($2.9 million), the report shows.

Business NPLs grew 30% to 557 million manat ($327.7 million), with the ratio up 0.5 points to 3.2%. The report says the increase was concentrated in trade and services. Consumer NPLs rose 19.1% to 363 million manat ($213.6 million), a ratio of 3.7%, up 0.4 points. Mortgage NPLs rose 17.4% to 34.2 million manat ($20.1 million), a ratio of 0.7%, up 0.1 points. Government-funded mortgages show a ratio of 0.2%, against 1.5% for bank-funded mortgages, Trend reported.

Reserves and write-offs

Banks hold loan-loss reserves of 1.93 billion manat ($1.1 billion), about double the NPL portfolio. Specific reserves against consumer loans stand at 1.37 billion manat ($810 million), about 3.8 times consumer NPLs. The central bank said these figures show the sector's ability to manage potential credit risks.

Write-offs in the period totalled 62 million manat ($36.4 million). Consumer loans made up 92% of that figure, or 57 million manat ($33.5 million), and business loans 8%, or 5.1 million manat ($3 million), according to the report.

Household debt load

The report also shows that 37% of the consumer loan portfolio had a debt-to-income ratio above 45%, down one point from the end of 2025. Loans with a ratio below 45% total 6.2 billion manat ($3.6 billion), and those above 45% total 3.7 billion manat ($2.2 billion), Trend reported.

The central bank is also tightening the rules. On 13 October 2026 it said it had amended three regulations on credit risk, asset classification and loan-loss provisioning, including the requirements on guarantees in consumer lending, with effect from 9 November 2026. CBJ reported the change in its story on loan guarantors' limits.

What to watch

A 25% rise in six months is a fast move, even from a low base. The cushion of reserves is wide and the 3% ratio is still low in absolute terms. The more useful signal is the shift in business loans, where the report places the increase mainly in trade and services. The second-half data will show whether that rise continues. CBJ has also covered the sector's balance sheet from the same report, and bank profits for January to August. The next dated step is 9 November 2026, when the amended credit-risk rules take effect.

The figures were checked against the central bank's report, which is published in Azerbaijani. Dollar conversions are those supplied by Trend.

Sources

• Maliyyə Sabitliyi Hesabatı, 2026-cı il I yarımil (Financial Stability Report, first half of 2026, in Azerbaijani), Central Bank of the Republic of Azerbaijan, October 2026
• Central Bank enhances prudential requirements for credit risk management, Central Bank of the Republic of Azerbaijan, 13 October 2026
• Azerbaijan's nonperforming loans rise 25% to $561.4M in H1, Trend, 13 October 2026

Further reading

• Azerbaijan Holds Key Rate at 6.5% and Widens Its Corridor
• ING Sees Azerbaijan Holding Its 6.5% Rate for Longer