TIRANA, May 9 – Banks’ profits surged in the first quarter of this year as non-performing loans hit a six-year low of 17.44 percent despite credit struggling to recover to positive growth rates amid the mandatory write-off of loans that have spent three years in the “loss” category statistically keeping real lending low.
Central bank data shows the 16 overwhelmingly foreign-owned banks operating in the country reported net profits of 5.77 billion lek (€42.3 million) in the first quarter of this year, more than half of the total for the whole 2016 as spending on provisioning against loss sharply dropped and net income from other activities mainly related to commission fees and foreign exchange operations increased.
Credit to the economy grew slightly above zero in the first quarter of this year when demand for new loans remained sluggish amid tight lending standards pushing some banks to increase lending abroad, mainly to neighboring Kosovo.
The poor performance of credit is also related to the ongoing write off of NPLs. Banks wrote off some 12.6 billion lek (Euro 92 mln) in loss loans in 2016 taking the total amount of bad debt removed from balance sheets in the past couple of years to 39.3 billion lek (€288 million), according to the central bank.
Bank of Albania 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.
While interest rate on deposits on the national currency have dropped to below 1 percent, interest rates on loans were at about seven times higher at an average of 7 percent last March, poorly reflecting the cut to the key interest rate currently standing at a historic low of 1.25 percent.
