Fitch Ratings has given the Armenian banking sector stable outlook for 201.

The agency said that with operating environment trends broadly supportive for banks’ growth, performance and asset quality.

Nevertheless, banks’ credit metrics are sensitive to exchange-rate movements given the sector’s high dollarisation.


Fitch expects banking sector loan growth of 10% in 2019, supported by the growing economy and falling interest rates, with loan penetration now at a historical high.

“High dollarisation is a structural weakness, posing significant risks to asset-quality metrics at times of stress given the low proportion of naturally hedged borrowers. New lending is provided increasingly in local currency. Local-currency loan rates have reduced significantly towards foreign-currency loan rates, and continuation of this trend could make local-currency borrowing more attractive, contributing to further de-dollarisation,” said Fitch.

According to the rating agency, operating profitability remains moderate, despite the recent lending growth.

“The sector’s return on average equity was modest and we do not expect a significant improvement in 2019,” Fitch said.