For the second quarter of 2013, banks expect lending standards to ease for both individuals and businesses and demand for loans to slightly accelerate by small and medium-sized enterprises
TIRANA, April 16 – With lending having declined to a historic low, banks continue applying tight standards both for individuals and businesses despite demand remaining sluggish. The latest survey carried out by the Bank of Albania shows lending standards in the first quarter of 2013 were slightly eased for individuals and continued tightening for businesses. While individuals had their standards eased for home purchases and tightened for consumer loans, small, medium-sized and big enterprises suffered tighter standards both for the financing of working capital and investments.
For the second quarter of 2013, banks expect lending standards to ease for both individuals and businesses and demand for loans to slightly accelerate by small and medium-sized enterprises.
Banks also expect foreign-currency denominated loans, mainly in Euro, to grow more than lek-denominated loans and interest rates to drop for both loans in the national currency and foreign currency.
Specific problems in the sector where businesses operate, the situation with bad loans, and the general macroeconomic situation are the key factors contributing to tougher lending standards for businesses. Apart from the non-performing loan indicator, individuals’ financial situation and developments in the real estate market also affected the tighter standards for individuals, according to the survey.
Demand for collateral remains the key condition of the banks tighter policies while the liquidity situation and Bank of Albania key interest rate cuts had minor impacts in easing lending conditions.
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. After registering record high growth rates of 30 to 40 percent in the pre-crisis period until 2008, and maintaining moderate growth of 10 to 12 percent even from 2009 to 2011, credit growth has decelerated to as low as 4 percent in 2012.
Lending to businesses in early 2013 has slowed down to its lowest historical rates and shrunk compared to last December. Data published by the country’s central bank show total lending to businesses at the end of February 2013 reached 399 billion lek, up 2.6 percent year-on-year but down 0.65 percent compared to last December when it was at 401.7 billion lek.
Detailed data show “trade, repair of cars and household equipment” holds the majority share of lending with 135 billion lek or 34 percent of total lending to businesses. The crisis-hit construction sector ranks second with 63 billion lek, down from 70 billion lek in February 2012, followed by the processing industry with 56 billion lek and “production, distribution of electricity, gas and water” with 56 billion lek.
Despite accounting for almost 20 percent of the GDP and employing half of the country’s population, the agriculture sector is one of the least financed sectors by commercial banks. Total lending to the agriculture sector at the end of February 2013 was at 5.6 billion lek almost at the same levels compared to a year ago and accounting for only 1.4 percent of total lending to businesses.
Loans to individuals in February 2013 declined to 140.7 billion lek, down from 141.7 billion lek a year ago, registering a 0.7 percent shrink and the lowest rate since late 2010. Lending in lek accounts for 45 percent of total lending and is mostly awarded to finance real estate.
