Lending slows to 1.2%, deposits grow by 5.4%

TIRANA, April 2 – While deposits continue maintaining their growing trend, lending slowed down to the lowest historic levels in the first three months of 2013. Bank of Albania data show total lending in March 2013 reached 556.6 billion lek (Euro 3.8 billion) up from 551.6 billion lek last February and 550 billion lek in March 2012 registering a mere 1.18 percent growth year-on-year. In March 2012 lending registered a 10.9 percent increase year-on-year.
Meanwhile, deposits although decelerating continue maintaining their positive growth trend, unveiling consumers’ saving trend and uncertainty about escalating crisis impacts. At the end of March 2013, total deposits reached 932.5 billion lek, down from 933.2 billion lek last February and 884.6 billion in March 2012, registering a 5.4 percent increase year-on-year. In March 2013, some 709 million lek of deposits was withdrawn from the banking system. In March 2012, deposits grew by 11 percent year-on-year.
In early 2013, lending has almost frozen after growing by an average of 10 percent in the past three years compared to the pre-crisis levels of 30 to 50 percent. Lending sharply decelerated to 2.36 percent at the end of 2012, down from 12 percent in 2012. In the global crisis year of 2009 credit growth slowed down to 11 percent and decelerated to 9.6 percent in 2010, compared to a 30 to 50 percent growth rate in the pre-crisis years, according to Bank of Albania data. Central bank data show deposits grew by around 56 billion lek to 937.4 billion lek in 2012, registering a 6.36 percent increase, sharply lower compared to 11.7 percent in 2011 and 18.5 percent growth rate in 2010, but better compared to 2008 and 2009 at 2.2 percent and 6 percent respectively.
Bad loans at a record 22 percent and falling demand by both businesses and individuals for new loans have considerably affected credit growth which is struggling to preserve its growth rates, registering the lowest rates in the past decade. Latest available data shows that the ratio for loans and deposits denominated in Albanian lek represented 39 percent of total loans and 50 percent of total deposits respectively.
The business community, commercial banks and financial experts have welcomed a package of measures adopted by the central bank to boost lending which has recently slowed down to a record low of 2 percent. The changes to the Bank of Albania regulations lift barriers on capital adequacy, the liquid assets to short term liabilities ratio and loan restructuring. Changes to the Civil Procedures Code, requiring a qualified majority of 3/5 of votes are also considered a key reform by the central bank to help curb bad loans which have reached a record of 23 percent.