For the first quarter of 2012, banks expect lending standards to further tighten for businesses and slightly ease for individuals
TIRANA, Jan. 22 – Banks continued tightening lending standards for businesses in the final quarter of 2012 despite demand by small and medium-sized enterprises registering a considerable increase, according to a quarterly survey published by the Bank of Albania this week. Meanwhile, lending standards for individuals remained unchanged as demand remains at negative rates influenced by a drop in demand for new home loans.
For the first quarter of 2012, banks expect lending standards to further tighten for businesses and slightly ease for individuals.
Banking experts expect an increase in the approval of loans in lek and a drop in those denominated in foreign currency for the first quarter of 2013. Meanwhile, interest rates are expected to increase for lek-denominated loans and drop for foreign-currency ones, the latter account for around 70 percent of total lending.
Specific problems in the sector where businesses operate, the situation with bad loans, and the general macroeconomic situation are the key factors contributing to tougher lending standards for businesses. Apart from the non-performing loan indicator, individuals’ financial situation and developments in the real estate market also affected the tighter standards for individuals, according to the survey.
Demand for collateral remains the key condition of the banks tighter policies while the liquidity situation and Bank of Albania key interest rate cuts had minor impacts in easing lending conditions.
Bad loans at a record 22 percent and falling demand by both businesses and individuals for new loans have considerably affected credit growth which is struggling to preserve its growth rates, registering the lowest rates in the past decade. After registering record high growth rates of 30 to 40 percent in the pre-crisis period until 2008, and maintaining moderate growth of 10 to 12 percent even from 2009 to 2011, credit growth has decelerated to as low as 4 percent in 2012. Latest central bank data show total credit at the end of October 2012 was at 552 billion lek, up only 4 percent year-on-year. Compared to the end of 2011, total lending during the first ten months of this year has increased by only 10 billion lek or 1.9 percent.
Differently from loans, 63 percent of which are issued in foreign currency, mainly in Euro, the situation with deposits appears more balanced with lek deposits accounting for 52 percent of total deposits.
While domestic consumption remains sluggish, Albanians continue maintaining their saving trend reflected in their rising bank deposits although at a slower pace compared to previous years. Total deposits at the end of October 2012 reached around 933 billion lek, up 7.6 percent year-on-year. Compared to the end of 2011, Albanians have increased their deposits by 57 billion lek or 6.5 percent. The crisis impacts have reduced citizens saving trend, with deposits in the third quarter of 2012 increasing by only 8.8 percent, down from 13.5 percent during the same period a year ago.
Central bank data show deposits grew by around 193 billion lek (Euro 1.35 bln) to 881.3 billion lek in 2011, registering an 11.7 percent increase, lower compared to the 18.5 percent growth rate in 2010, but better compared to 2008 and 2009 at 2.2 percent and 6 percent respectively.
Data show the overwhelming majority of 95 percent of Albanian depositors have managed to save up to 2.5 million lek (Euro 17,667, USD 22,737) which is the threshold making them fully safe and guaranteed by the Deposit Insurance Agency. The remaining 5 percent of depositors having more than 2.5 million lek in their bank accounts possess around 58 percent of the total amount of deposits in the 16 commercial banks operating in Albania, according to data presented in the annual report of the Deposit Insurance Agency. The data reconfirm the deep social gap between the rich and the poor. Average deposits for the rich stand at 55,000 USD while the average savings for the overwhelming majority is at around USD 2,000.
