Loans to households turn to positive growth rates

TIRANA, August 6 – Loans to households returned to positive growth rates in the second quarter of 2013 when they rose by 2.7 percent to 144.6 billion lek (Euro 1 billion) ending their downward trend since the second quarter of 2011. Bank of Albania data show an increase in all major districts for consumer loans. Meanwhile, home loans continue declining. In Tirana home loans dropped by a sharp 14 percent to 44.6 billion lek in the second quarter of 2013 compared to the first quarter of the year and 13 percent year-on-year.
Meanwhile, lending to businesses in the second quarter of the year declined by 0.5 percent to 401 billion lek compared to the first quarter of the year and was up negligible 0.3 percent compared to the second quarter of 2012.
Detailed data show “trade, repair of cars and household equipment” holds the majority share of lending with 138 billion lek or 34 percent of total lending to businesses. The crisis-hit construction sector ranks second with 59 billion lek, down from 71 billion lek in June 2012, followed by the processing industry with 56 billion lek and “production, distribution of electricity, gas and water” with 49 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 June 2013 was at 5.8 billion lek, up 18 percent compared to a year ago but only 1.45 percent of total lending to businesses.
With bad loans at a record 24 percent, lending continues remaining at historic lows hardly managing to preserve positive growth rates of less than 1 percent while deposits are growing at a slightly higher rate. Central bank data published this week show lending rose by 0.85 percent year-on-year in the first half of this year while deposits were up by 3.8 percent. Deposits although decelerating continue preserving a moderate growth trend unveiling consumers’ saving trend and insecurities about their future as they expect harsher times ahead. In the first six months of 2013, deposits grew by 3.8 percent year-on-year with its stock climbing to around 940 billion lek. Compared to December 2012, deposits grew by only 1 percent or 8.8 billion lek.
While lending to businesses has preserved high growth rates compared to the onset of the global crisis in early 2009, lending to households has registered negligible growth rates. Compared to the onset of the global crisis in the first quarter of 2009 when lending to businesses stood at only 269 billion lek (Euro 2.8 billion), lending has increased by 50 percent.
The situation with households is quite different. Central bank data show that since the onset of the crisis in 2009, loans to individuals have increased by a mere 2 percent. Lending to individuals was at 138.5 billion lek in the first quarter of 2009 and at 141.5 billion at the end of the first quarter of 2013. Tirana holds the majority 60 percent of total lending to individuals with 62 percent of credit awarded to finance the purchase of houses.