Fitch Ratings stated in a report published on Tuesday, October 28, that Tunisian banks continue to face challenges stemming from high inflation, sluggish economic growth, and rising interest rates.
The agency added that weak credit growth (0.6% during the first five months of 2025) reflects both tepid demand and the government’s high financing needs, which limit the availability of credit for other sectors.
Fitch Ratings recalled that it had upgraded Tunisia’s sovereign rating to “B-” with a Stable Outlook in September 2025. However, the agency does not expect a significant improvement in banks’ operating conditions, despite the upward revision of the country’s operating environment score.
The sector’s non-performing loan (NPL) ratio reached 14.7% at the end of March 2025 — its highest level in four years (end-2021: 13.1%). However, a substantial portion of these bad loans are tied to legacy assets, leaving considerable potential for a gradual reduction in the NPL ratio over the long term.
“Profitability remains modest once adjusted for inflation, with an average return on equity of 10.6% between 2022 and the first quarter of 2025,” Fitch Ratings noted in its report.
The net income of the ten largest banks rose by 13% year-on-year in the first half of 2025, a limited increase due to a 21% rise in loan-loss provisions and an 8% increase in operating expenses.
Fitch indicated that it expects liquidity conditions to remain adequate in 2026. Customer deposits — the main funding source for the banking sector — grew by 3% in the first five months of 2025 (compared to 10% in 2024), while loans expanded by only 0.6%. The banks’ reliance on Central Bank of Tunisia refinancing accounted for 5% of sector liabilities as of end-May 2025.
According to Fitch, these solid liquidity conditions are likely to result in greater exposure of banks to sovereign debt in 2026, supported by the expected weakness in private-sector credit demand and by the favorable risk-adjusted returns on government securities, which carry a 0% risk weight in capital adequacy calculations.
Fitch Ratings expects the performance of Tunisian banks to remain constrained in 2025 and 2026, in line with modest real GDP growth. Inflation is expected to stay high, while the Central Bank of Tunisia is likely to maintain a restrictive monetary policy.
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