TIRANA, May 5 – The 16 overwhelmingly foreign-owned commercial banks operating in Albania continue posting significant profits despite non-performing loans standing at around a quarter and credit at sluggish growth rates of 2 to 3 percent.
Data published by the country’s central bank show banks’ net profits grew to around 5.9 billion lek (Euro 41 mln) in the first quarter of this year, up from 4.5 billion lek (Euro 31.5 mln) in the first quarter of 2014, registering a significant 30 percent increase on lower spending on interest rates and provisioning for non-performing loans.
Meanwhile, non-performing loans slightly dropped to 22.69 percent in the first quarter of this year, down from 22.76 percent in the final quarter of 2014 and 24.08 percent in the first quarter of 2014.
In the first quarter of 2015, the highest percentage in the non-performing loan portfolio belonged to loss loans at 11.73 percent with borrowers having failed to pay installments for more than one year. Second came substandard loans with 6.37 percent followed by doubtful loans at 4.59 percent. Under the central bank regulation, loans are considered doubtful when borrowers have not been able to pay for 180 days and substandard when repayment has been delayed from 61 to 90 days.
Banks’ profits reached a historic high of 11.2 billion lek (Euro 78.4 million) in 2014 as bad loans registered a slight decrease and provisioning against loss more than halved.
The capital adequacy ratio slightly dropped to 16.84 percent at the end of 2014, down from 18 percent 2013, staying comfortably above the BoA’s minimum requirement of 12 percent.
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.
In its latest country report on Albania, the IMF says recent regulatory and legal changes to facilitate collateral execution and increase loan write-offs are showing modest results.
“A new regulation requiring mandatory write-off of loans categorized as ‘lost’ for more than three years came into force at the beginning of 2015 and is expected to reduce non-performing loans by 3 percentage points,” says the IMF.
