TIRANA, Oct. 12 – Non-performing loans rose for the third month in a row in August 2016 when they climbed to 21.44 percent in an unexpected rising trend at a time when banks have been writing off considerable amounts of bad debts from their balance sheets after a new regulation requiring the mandatory write-offs of loans that have spent three years in the “loss” category came into force at the beginning of 2015.
The latest central bank data shows non-performing loans rose to 21.44 percent last August, up from about 20 percent in mid-2016 and a peak level of 25 percent in mid-2014.
While Albania’s overwhelmingly foreign-owned banking system remains liquid and highly profitable, the high level of non-performing loans has kept lending standards tight in the past few years and lending at sluggish growth rates, being a barrier to boost sluggish domestic consumption and investments.
Non-performing loans among households who hold about a quarter of total credit dropped to 12 percent in the first half of 2016 but rose to 24.4 percent for businesses.
Although 5.9 billion lek (€42.6 mln) of bad debt was written off from banks’ balance sheets in the first half of this year, the stock of bad debt rose by 11.7 percent to 119 billion lek (€861.4mln), says the central bank in its latest financial stability report.
Non-performing loans have more than trebled in the past six crisis years, becoming a drag on economic growth and lending which has been struggling with sluggish growth rates in the past couple of years.
Some thirty-five big borrowers hold about half of total NPLs, estimated at €861 million in mid-2016.
