Banking system remains stable, Association says

TIRANA, May 29 – The Albanian banking system remains stable and well-capitalized despite bad loans reaching a record high of around 24 percent, says the Association of Albanian Banks in its financial report for the first quarter of 2013.
In the first quarter of 2013, capital adequacy ratio increased to 16.8 per cent, compared to 16.2 percent at the end of the previous year. The assets of banking system amounted to ALL 1.193 trillion, recording an annual growth of 4.7 per cent.
Total deposits increased at a slower rate of 0.5 per cent compared to the end of 2012 with household deposits growing by 0.7 percent and business deposits continuing their downward trend. “The slowdown of the growth rate of deposits reflected the drop in deposits’ interest rates by the banking system, in response to the transmission of the monetary policy signals. The slowdown is estimated to be in line with the financial situation of the consumers and lower disposable income,” says the Association.
Loans to the private sector grew by only 0.35 compared to the end of year 2012. The new loans disbursed during this quarter amounted to ALL 41 billion, dominated by business loans at around 78 per cent. Some 41 per cent of the new loans were disbursed in ALL, while the remaining part in foreign currency, mainly in Euro. The new household loans are distributed almost equally, both for real estate funding and consumption. Meanwhile, lending to businesses is used for short term financing needs (about 66 per cent), and less for investments, as a result of a lower demand for investments financing.
Nonperforming loans (NPL) continued to increase in the first quarter 2013 amounting at 23.7 per cent of the total loans at the end of March. The NPL growth affected the banking system profit, which although at a positive amount of ALL 1.3 billion for the first quarter, is about 32 per cent lower than the same period of the previous year.