Non-performing loans in Armenia’s banking sector reach 8.3% in March as credit exposure shrinks 5%

11.05.2015 15:47
Non-performing loans in Armenia’s banking sector reach 8.3% in March as credit exposure shrinks 5%

YEREVAN, May 11. /ARKA/. The share of non-performing loans in the loan portfolio of Armenia’s banking sector rose 1.3 percentage points to 8.3% in March as credit exposure shrank 5% to AMD 1 893.7 billion, the Central bank of Armenia reports on its website.

Experts say 8.3% is a quite high rate for non-performing loans, since in March 2014 it stood at 6%.
The share of non-performing loans was growing throughout 2014 - the increase sped up in the second half of that year, and in December 2014 the share reached 7% amid financial shocks triggered by the precipitous devaluation the Armenian dram faced.

According to the regulator’s report, the share of non-performing loans in the banking sector’s loan portfolio kept growing also in 2015 and reached 8.9% in February, hitting the record high in the last six years. The previous increase was seen in 2009 amid the global recession.

The 2014 increase was due not only to economic shocks in the end of the year, but also the then lending risks that were rising over several years in Armenia’s banking sector.

Analysts say the rise of non-performing loans in commercial banks and the lending risks, which have increased as a result of that, emerged amid household debt load.

The banks were quick in lending money and they extended loans without scrutinizing borrowers’ solvency, since high profitability weighed down risks.

This situation led to increase in amounts of classified loans in the banking sector.

According to the National Statistical Service, overdue loans grew 14.2% in March 2015, compared with March 2014, to AMD 37.13 billion, and prolonged loans grew 6% to AMD 130.8 billion. ($1 – AMD 480.98). --0--


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