From December 2011 to May 2012, businesses borrowed only Euro 7.8 million compared to 6.6 billion lek or (euro 47 million) in the national currency.
TIRANA, July 6 – Facing a sharp shrink in profits because of poor consumer spending and tighter lending standards as one in five loans is now officially considered non-performing businesses are borrowing less this year. Bank of Albania data show total credit to businesses in May 2012 decelerated by 15 percent y-o-y, down from 18 percent last December. Lending in Euro which accounts for almost 60 percent of total credit to businesses has almost frozen in the first five months of this year and companies prefer borrowing in the national currency rather than lek. From December 2011 to May 2012, businesses borrowed only Euro 7.8 million compared to 6.6 billion lek or (euro 47 million) in the national currency. As a result, the lending portfolio in Euro has dropped by 2 percent to 58 percent. Lending in the national currency at the end of May 2012 accounted for 31 percent. Lending in US dollar has also registered a sharp increase of 32 percent and accounts for 10 percent of credit to businesses.
In Euro, overdraft loans and credit for purchase of equipment and real estate stand at almost the same levels.
Credit to individuals continues registering negative growth rates for this year. In May 2012 loans to individuals shrank by 3.5 percent year-on-year. Lending in Euro which accounts for a majority of 54 percent now registers the lowest level since Jan. 2009.
Credit for real estate, mainly apartments shrank by 7 percent year-on-year but accounts for 87 percent of total portfolio of 76 billion lek in credit to individuals.
Total credit to both businesses and individuals decelerated to 9.5 percent in May 2012 due to tighter standards applied by banks and low demand. The performance of imports also reveals the difficult situation businesses are facing with investments. INSTAT data show imports of “machinery, equipment and spare parts” dropped by 5.2 percent to 38.4 billion lek in Jan-May 2012 compared to the same period in 2011.
Almost all key economic sectors including production, construction, transport and services report lower profits in the first four months of this year
VAT and excise taxes which indirectly measure domestic consumption, the key contributor to Albania’s growth, rose by 2.2 percent and 1.1 percent respectively. However, what’s most concerning, profit tax performance further deteriorated to 23.1 percent drop in Jan-May 2012, according to Finance Ministry data.
Albania’s banking sector is expected to undergo a cyclical weakening of lending growth in line with the more challenging overall economic outlook, according to a new Raiffeisen Research report.
Lending growth in Albania developed more dynamically in 2011. For the full year 2011, loans grew by around 15% yoy, compared to a growth around 8-9% yoy in 2010. Lending growth was particularly strong in the corporate segment, with double digit yoy growth rates, while household lending expanded at a lower pace of around 3-6% yoy (with a negative reading in December).
Albanian banks are characterized by a modest loan-to-deposit ratio of 60% on average.
In 2011, customer deposits increased by almost 13% yoy, showing that the banking sector continues to be trusted.
