TIRANA, March 1 – Banks’ profits suffered a sharp decline in 2016 as non-performing loans remained almost unchanged at 18 percent and credit struggled to recover to positive growth rates.
Central bank data shows the 16 overwhelmingly foreign owned banks operating in Albania reported net profits of 9.27 billion lek (€68.5 million) in 2016, down 40 percent from a historic high of 15.7 billion lek (€116 mln) in 2015.
The situation was affected by the bankruptcy of ARMO oil refiner whose minority 15 percent stake is still held by the Albanian government and the default of country’s largest steelmaker, Turkey’s Kurum, on its loans, increasing NPLs to 21.3 percent by the end of the third quarter of 2016 before dropping to 18.23 in December 2016 also as a result of the ongoing write-off of loans that have spent more than three years in the ‘loss’ category from banks’ balance sheets.
The lower profits were mostly affected by record high spending of 18.4 billion lek (€136 million) on provisioning against loss, more than treble compared to 2015.
Despite the high level of non-performing loans Albania’s banking system remains liquid and well capitalized with credit being largely deposit funded.
Lending has been struggling to recover in the past year affected by ongoing tight lending standards as NPLs stand at a record high and poor demand by both businesses and households despite loan rates in the national currency having considerably dropped due to the key rate standing at a historic low of 1.25 percent.
Banks’ profits hit a historic high of 15.7 billion lek (€116 mln) in 2015 as non-performing loans dropped to 17.66 percent and deposit interest rates registered a record low, according to central bank data.
