New loans to businesses up 15.8 y-o-y

TIRANA, Oct. 11 – Total credit to both businesses and individuals during the first eight months of this year grew by 12.8 percent y-o-y, reflecting the tight standards banks are applying and low demand by businesses as consumption remains at low levels. Latest Bank of Albania data show loans to businesses rose by 49 billion lek or 15.8 percent in Aug. 2011 compared to August 2010. Lending to businesses represents 70 percent of the total credit with 64 percent being issued in Euro. Total loans to businesses at the end of August 2011 registered 506 billion lek compared 448.5 billion lek a year-ago.
The “trade, repair of cars and household equipment” is the most financially supported sector holding around 34 percent of total credit to businesses. Second come the construction and manufacturing industries with 18.8 percent and 15.4 percent respectively.
Meanwhile, lending to individuals during the first eight months of this year grew by 8.6 billion lek or 6.2 percent y-o-y. Loans in Euro also represent the majority 55 percent even for individuals. Around 90 percent of loans in Euro to individuals are used to buy immovable properties, considering that the Albanian real estate market uses Euro as its currency.
Total loans to individuals at the end of August 2011 climbed to 148 billion lek, up from 139.4 billion lek in August 2010.
The latest Bank of Albania decision to lower the key interest rate to 5 percent, one of the lowest historical levels a couple of weeks ago, is expected to give another impetus to lending, especially that in the national currency, lek, with lower interest rates for new loans.
Governor Ardian Fullani said the decision by the Supervisory Council of the Bank of Albania would give a new stimulus to the economy promoting consumption and investments which continue remaining at low levels.
After the 2009 global financial crisis lending has been at slightly more than 10 percent compared to the pre-crisis levels of 30 to 50 percent.
Lending standards for businesses became tighter in the second quarter of this year and are expected to further tighten in the third quarter because of the banks’ deteriorating bad loan portfolios, currently at around 17 percent of the total portfolio.
The loan-to-deposit ratio stood at 60.1 percent in August 2011 with relatively higher levels for foreign currency denominations (82.9 percent), whereas the ratio for loans and deposits denominated in lek remained below 40 percent.