BoA: Bad loans climb to 13.6% in 2010

TIRANA, March 1 – The increase of bad loans slowed down in the final quarter of 2010 when the non-performing portfolio registered 13.61 percent of the total loans, up 0.1 percent compared to the third quarter and 3.6 percent more compared to last quarter of 2009, official Bank of Albania data showed this week. Meanwhile, the net profit of the 16 commercial banks operating in Albania almost doubled to 6.7 billion lek (48 million euros), up from 3,5 billion lek at the end of 2009 when banks saw their profits halved because of the deposit withdrawal impact at the end of the 2008.
Official data show lost loans at the end of 2010 increased to 3.98 percent, up from 3.88 percent in the previous third quarter and 2.87 percent at the end of final quarter of 2009. The number of doubtful loans dropped to 3.59 percent, down from 3.79 percent in the previous quarter but was up from 2.7 percent at the end of 2009.
The percentage of substandard loans also registered a slight increase of 0.2 percent compared to the third quarter of 2010 climbing to 6.04 percent of the total loans, but remained high compared to fourth quarter of 2009 when they were at 4.7 percent.
Provisions for bad loans also slightly increased to 8.17 percent at the end of 2010, up from 8.16 percent in the third quarter and 6.3 percent at the end of 2009.
Central bank data show the net revenues from interest rates rose to 37 billion lek, up from 31 billion lek at the end of 2009 while expenditure on provisions slightly increased to 13 billion lek.
The central bank’s data are in line to those published few days ago by the Association of Banks which showed bank profits in 2010 climbed to 6.7 billion lek up from 3.5 billion lek (25 million euros) in 2009 despite non-performing loans growing to 14 percent at the end of 2010.
Banking sector experts say there are a number of causes that have led to strong growth of bad loans. They include shrinking family incomes, businesses in crisis and depreciation of the local currency, mainly against the euro. These factors have made it harder for people to pay back the loans they took in better times.