The average ratio of non-performing loans (NPLs) across Central, Eastern and Southeast Europe fell to a record low in 2025, although the overall volume of troubled loans increased for the first time in several years, highlighting growing differences in credit risks across the region, the European Bank for Reconstruction and Development (EBRD) said in a new report.

According to the latest edition of the EBRD's NPL Monitor, the average NPL ratio declined to a historic low of 1.86% at the end of 2025 as lending growth outpaced the increase in impaired loans.

However, the stock of non-performing loans (NPLs) rose by 4.5% year-on-year to €28.6bn, reversing the downward trend seen in recent years and signalling what the report described as "more uneven credit risk dynamics".

While banking sectors across the region have remained resilient despite a difficult economic backdrop, the report said underlying conditions varied increasingly between countries and sectors.

"Non-performing loan (NPL) levels across the regions covered by the European Bank for Reconstruction and Development's (EBRD) NPL Monitor remain near all-time lows, reflecting the resilience of banking sectors despite a challenging economic environment," the report said.

"However, the latest edition of the NPL Monitor highlights growing divergence across countries and sectors, suggesting that credit risks are becoming increasingly uneven."

The report said Hungary, Romania and Slovenia recorded notable increases in NPL volumes during 2025, although other markets continued to improve their asset quality.

Across European Union member states in central and eastern Europe, the share of loans classified as Stage 2 — loans showing a significant increase in credit risk but not yet in default — fell to 8.5% by the end of 2025 from 10.4% a year earlier. Stage 3 loans, which are considered impaired, remained broadly stable at about 2%.

The EBRD said commercial real estate and construction remained among the most vulnerable sectors, with construction recording the highest NPL ratio in the region. Small and medium-sized enterprises, especially exporters, also remained exposed to geopolitical tensions and trade uncertainty, while consumer lending required continued monitoring.

The report noted that banks' provisioning buffers had weakened slightly, with the regional coverage ratio slipping to 62.7% from the end of 2024.

The EBRD also said the market for trading bad loans was changing. Large-scale deleveraging deals that had characterised previous years were increasingly being replaced by smaller targeted transactions, forward-flow agreements and secondary market sales.

Looking ahead, the report warned that the risk of renewed NPL accumulation had not disappeared. Ongoing geopolitical tensions, global trade fragmentation and weaker growth prospects continued to weigh on many of the region's small and open economies, it said, adding that early identification of credit stress and timely resolution of distressed assets would remain essential.

The NPL Monitor covers 17 countries in Central, Eastern and Southeast Europe and is published under the Vienna Initiative, a forum established during the 2009 financial crisis to support financial stability across emerging Europe.