S&P Global Ratings stated that “despite very high loan growth, Armenian banking sector remains stable, underpinned by strong capitalization and high profitability”.

S&P revised its outlook on Armenia to positive from stable and affirmed 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings.

“We assess risks to Armenia's financial stability as contained, for now. The banking sector remains well capitalized and highly profitable, supported by strong net interest income, while the rate of credit growth remains above 20% year-on-year, driven mainly by consumer and mortgage lending. 

The gradual phase-out of mortgage interest tax credits and macroprudential tightening measures have begun to temper housing demand, particularly in Yerevan. Dollarization of banks' assets and liabilities has trended down in recent years with around a third of domestic deposits and loans currently denominated in foreign currency”, the agency said.

“The banking sector’s stock of short-term external debt (primarily nonresident deposits) stands at a relatively large $3.3 billion. We expect reserves to register more modest growth through 2029, rising by around 5% annually”, S&P Global Ratings noted.