Moody’s: Dollarization of Azerbaijani banks’ loan portfolios no longer poses significant risk

The level of dollarization in the loan portfolios of Azerbaijani banks has significantly decreased in recent years and is no longer considered a major risk factor, Lev Dorf, Assistant Vice President at Moody’s Ratings, told Report.

According to him, the share of foreign currency loans in the total loan portfolio has fallen to 15%, compared to about 30% in 2020.

“At the same time, we are observing a significant improvement in the quality of loan portfolios. As of mid-2025, the share of non-performing loans with a delay of more than 90 days remains at a historically low level — 2.8%, compared to 4% at the end of 2021. An additional factor of resilience has been the expansion of lending in the retail and small and medium-sized business segments, which helps reduce risk concentration in bank portfolios,” Dorf noted.

He stressed that a favorable macroeconomic environment, continued growth in the non-oil sector — where banks’ main activity is concentrated — and rising household incomes are supporting borrowers’ payment discipline and further strengthening the financial stability of the banking system.

According to official statistics, as of July 1, 2025, the loan portfolio of the 22 banks operating in Azerbaijan amounted to 28.472 billion manats (an annual increase of 11.96%), with foreign currency loans accounting for 14.58%, or 4.152 billion manats.

Meanwhile, the total deposit portfolio of the banking sector as of the same date reached 37.353 billion manats, up 6.2% from the same period last year. Of this amount, deposits in US dollars accounted for 40.75% (equivalent to 15.224 billion manats).