TIRANA, Feb. 7 – A sharp cut in provisioning needs as non-performing loans continue their downward trend supported by the mandatory write-offs of loans that have spent three years in the ‘loss’ category led to historic high profits for commercial banks operating in Albania in 2017.
Bank of Albania data shows the 16 overwhelmingly foreign-owned banks operating in Albania posted record profits of about 22 billion lek (€165 mln) in 2017, more than double compared to 2016 and breaking a previous record of about 15.7 billion lek (€116 mln) in 2015.
The record high profits come at a time when credit struggled to remain at positive growth rates, registering a mere 0.5 growth rate but moderate rates of about 3 percent when adjusted for the exchange rate effect and the NPL write-offs.
Non-performing loans, a key barrier that has been keeping lending standards tight, dropped by an annual 5 percent to 13.23 percent at the end of 2017 and were about 12 percent lower compared to the peak 25 percent level in mid-2014.
Data published by the country’s central bank shows the record high profits were mainly a result of a sharp cut in provisioning for bad loans which dropped to a record low about 1.2 billion lek (€8.8 mln), down from a four-year high of 17.4 billion lek (€130 mln) in 2016.
However, a report published by the country’s association of banks shows the picture is not the same for all 16 commercial banks, and five small banks incurred losses in the first three quarters of 2017. Three-quarters of profits in the first the first three quarters of 2017 were posted by the country’s two largest banks Turkish-owned BKT and Austrian Raiffeisen Bank, says the Albanian Association of Banks.
In its latest country report on Albania, the International Monetary Fund describes the country’s banking system as well-capitalized, liquid and profitable.
