TIRANA, Nov. 15 – Commercial banks operating in Albania posted record high profits of about 17 billion lek (€125.5 mln) in the first three quarters of this year as non-performing loans continued their downward trend and credit returned to positive growth rates, according to the Bank of Albania.
The banks’ record high profits, almost treble compared to the same period last year, come at a time when deposit rates are close to zero, spending on provisioning against loss sharply dropped and net income from other activities mainly related to commission fees and foreign exchange operations increased.
The 16 overwhelmingly-foreign owned banks spent only about 1.65 billion lek (€12.2 million) on provisioning against loss in the first three quarters of this year, compared to 13.6 billion lek (€100 million) during the same period last year.
The lower spending comes as non-performing loans dropped to 14.8 percent at the end of September 2017, down 6.5 percent compared to a year ago as banks continued to write-off bad debt from their balance sheets.
Meanwhile, lending returned to positive growth rates last September, but real credit growth is estimated at about 3 percent when adjusted for the mandatory write-off of NPLs that have spent three years in the ‘loss’ category and the considerable appreciation of the national currency against Europe’s single currency, accounting for half of total credit.
Central bank data shows the average interest rate on lek-denominated loans dropped to an almost all-time low of 6.31 percent in September 2017, but yet 24-times higher compared to the average rate of 0.26 percent for lek-denominated deposits.
The situation is the same with Euro denominated loans dropping to a historic low of 3.86 percent and average deposit rates at only 0.07 percent.
Yields on government securities have been on upward trend this year, with 12-month T-bill yields slightly growing to 2.54 percent in early November. The government’s key instrument for internal borrowing, 12-month T-bills have remained stable at about 2 percent since late March, down from 3.22 in late December 2016, following a gradual upward trend after hitting a historic low of 1.24 percent in mid-2016.
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.
The Albanian banking system has been well-capitalized, liquid and profitable during the past eight years with the Albanian-owned assets increasing their share to 11.5 percent at the end of 2016.
