TIRANA, Aug. 7 – Banks posted surprise profits of about 59 million euros in the first half of this year as non-performing loans dropped by 4 percent to 20 percent but lending strived to remain at positive growth rates.
Latest data published by the country’s central bank shows banks’ profits rose to 8.3 billion lek (Euro 58.6 million) in the first half of 2015 up from 5.4 billion lek (Euro 38.3 million) during the same period last year.
Meanwhile, non-performing loans (NPLs) dropped to 20 percent in the second quarter of 2015 down from 22.69 percent in the first quarter of the year and a record of about 24 percent in the first half of 2014.
In the second quarter of 2015, the highest percentage in the non-performing loan portfolio belonged to loss loans at 10.32 percent with borrowers having failed to pay installments for more than one year. Second came substandard loans with 5.12 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.
