Moody's: Armenian banks stable, yet challenged

The credit outlook for rated Armenian banks is stable, reflecting an evolving regulatory framework, buoyant credit growth, low banking penetration, robust aggregate capitalization and good asset quality, Moody's Investors Service said in a new report on the country.

These strengths are offset, however, by the challenging operating environment, potential for accelerated asset quality deterioration due to the unseasoned nature of loan portfolios and real concerns regarding operating risk due to under-developed infrastructure, the agency said.

The Armenian banking sector has undergone considerable consolidation in the past decade following the banking sector turmoil of the mid-1990s and subsequent tightening of prudential regulations.

In its current structure, the sector lacks economies of scale, resulting in low productivity and thereby raising the potential for further market consolidation, Moody's said.

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