TIRANA, Aug. 20 – Albania’s banking sector continued posting considerable profits in the first half of this year as credit recovered and non-performing loans slightly dropped fuelled by the ongoing compulsory write-off of bad debt.
The 16 overwhelmingly foreign-owned commercial banks operating in the country posted total profits of about 11 billion lek (€87 million) in the first half of this year, about 4 percent lower compared to the record high profits during the same period last year, according to data by Albania’s central bank.
However, detailed preliminary data by the Albanian Association of Banks shows six small commercial banks, among which foreign-owned units that have changed hands, posted losses in the first half of this year.
Banks’ high profits come at a time when credit to Albania’s private sector was officially below zero in the first five months of this year, but Albania’s central bank says lending grew by an annual of about 5 percent when corrected for sharp strengthening of the Albanian lek against Europe’s single currency and loan write-offs effects that statistically keep credit below real figures.
The rise in profits in the past couple of years is mainly attributed to lower provisioning for bad loans at a time when non-performing loans have significantly dropped.
A key barrier to easier lending standards, non-performing loans have been gradually declining in the past four years after hitting a record 25 percent in mid-2014 also thanks to a new regulation making it mandatory for banks to write-off NPLs that have spent three years in the ‘loss’ category since 2015.
Non-performing loans remained unchanged at about 13.3 percent in the first half of this year compared to early 2018, but were down by 2.3 percentage points compared to mid-2017.
Commercial banks operating in Albania posted record profits of about 22 billion lek (€174 mln) in 2017, more than double compared to 2016 and breaking a previous record of about 15.7 billion lek (€124 mln) in 2015.
Albanian capital in the banking system, estimated at 10 percent at the end of 2017, has significantly increased during this year following the acquisition of two Greek bank units by Albanian-owned banks and companies. Tirana Bank and NBG Bank, both of which units of Greek banks in Albania, held a market share of about 8 percent in terms of assets at the end of the first half of this year.
The country’s banking system is considered well-capitalized, liquid and profitable.
