Azerbaijan 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, 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).

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.

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. These buffers are the main reason the regulator describes the situation as contained.

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).

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).

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 trade and services are the weak points. If the trend continues into the second half, lenders may tighten terms for small and medium-sized firms in those sectors.

All figures are from the central bank report as reported by Trend. CBJ has not independently audited them. Dollar conversions are those supplied by the agency.