TIRANA, Jan. 5 – Lending standards for businesses were largely eased in November 2010 when total lending increased by a record 13 billion lek (130 million dollars) compared to the previous month but remained tight for individuals, according to central bank data published on Wednesday.
Lending to businesses had almost remained frozen from May 2010 to October when it increased by a total of only 10 billion lek. Central bank data show lending to businesses, which accounts for 70 percent of the total loans, rose by 13 billion lek, a sign showing banks have eased their standards despite rising bad loans which in September 2010 climbed to a record 13.5 percent.
The majority of business loans are granted in foreign currency mostly euro which accounts for more than 70 percent of the total. The bulk of new loans in euro granted to businesses were used for purchase of new equipment.
Meanwhile, lending to individuals remained almost unchanged in Novemberincreasing by only 267 million lek (2.6 million dollars) compared to October 2010.
The “Trade and repair of cars and household equipment” holds one-third of the total business loans, some 108.6 billion lek at the end of November 2010. Its loan portfolio increased by almost 5 billion lek compared to October 2010 and 13 billion lek year-on-year. Second came lending to the crisis-hit construction sector which increased by only 1 billion lek compared to October 2010. The processing industry ranks third with 14 percent of the total loans.
The data are in line with the central bank’s latest survey which expected lending conditions for the fourth quarter of this year to ease for businesses but further tighten for consumers despite an expected increase in demand by both of them especially in foreign currency loans.
Lending standards during the third quarter of this year eased somehow for businesses but further tightened for individuals, according to a lending survey carried out by the Bank of Albania published on the latest monetary policy report.
Data show lending standards eased only for small and medium-sized enterprises and home loans to individuals, confirming the commercial banks’ hesitation to lend for the third quarter in a row this year, especially because of a significant increase in the bad loans which climbed to 12.2 percent in the first half of this year.
Banking experts said the tight lending standards were influenced by specific problems in the sectors where businesses operate, the macroeconomic situation and the individuals’ financial situation.
The International Monetary Fund expects the private credit growth to drop to 8.6 percent of the GDP in 2010, down from 10.3 percent in 2009 and 32.1 percent in 2008 when the global crisis started.
Deposits
Time deposits in the national currency Lek and euro continued growing slowly even in November 2010. Central bank data show time deposits in euro increased to 1.67 billion euros at the end of November 2010 up from 1.63 billion euros from the previous month and 1.21 billion euros in November 2009.
Time deposits in lek in November 2010 registered 318.6 billion lek (3.18 billion dollars) up from 314 billion lek last October and 288 billion lek in November 2009.
Meanwhile, time deposits in the US dollar remained unchanged at 413 million dollars in November 2010, but dropped 66 million USD year-on-year.
As elsewhere in the region, Albanian banks witnessed substantial panic deposit withdrawals in the face of spillovers from instability of global financial markets, which were compounded by concerns about the health of the Greek banking system in the fall of 2008.
