Tirana Times
TIRANA, May 3 – New loans during the second half of 2010 were worth 137.8 billion lek, up 11.6 percent compared to the same period at the end of 2009, according to data from a financial stability report published by the Bank of Albania. The majority of new credit, 117.4 billion lek or around 85 percent of the total went to businesses with the remaining 15 percent to individuals.
Some 44.5 percent of the new credit was given in overdraft, 23.3 percent in floating capital, 15.4 percent for purchase of equipment and the remaining 16.7 percent for investments in real estate. As far as individuals are concerned, an increase was observed in lending to non-durable goods, real estate and business activity.
Lending in the national currency, lek and the common European currency, Euro, rose by 11.4 percent and 16.6 percent respectively while lending in the US dollar dropped by 23.4 percent. Credit in foreign currency accounts for around 70 percent of the total lending.
During the second half of 2010 the banking sector financially supported almost all sectors of the economy with “trade, repair of cars and household equipment” topping the list at 31 percent, followed by construction and the processing industry at 13 percent.
Credit to production and distribution of “electricity, gas and water” also increased to 10 percent, up from 5 percent during the second half of 2009.
Meanwhile, deposits continued growing, registering an increase of 17.7 percent at the end of December 2010 compared to a year ago.
Deposits in lek accounted for 51.2 percent of the total at the end of 2010, registering a 3 percent drop compared to the end of 2009.
Bank of Albania governor Ardian Fullani has called on commercial banks operating in Albania to accelerate lending as a necessity supporting not only the economy and customers, but also banks. “There exists necessary space for banks to support lending to small and medium sized enterprises and offer more financing opportunities in the national currency lek,” said Fullani last month.
The governor called on the 16 commercial banks operating in Albania to cooperate with their customers in case of temporary difficulty in paying off installments but be strict and act in time executing collateral in case of identifying bad loans.
“These actions are important under conditions when the Bank of Albania estimates that lending will continue facing a challenging environment and targeted improvements in credit quality will require more time to be put in place,” added Fullani.
Lending standards marked a turning point in the final quarter of 2010 easing both for businesses and individuals after tough times in the first three quarters of last year. The results are confirmed by a lending survey published by the central bank this week which explained the ease of standards with the banks’ improved liquidity, capital adequacy and increased competition among the 16 commercial banks operating in Albania.
Financial system stable
As at end of the second half of 2010, Albania’s financial system and banking sector were assessed as being stable. The banking sector’s activity expanded further and its share to the Albanian economy increased. Profit indicators improved relative to the previous period. Capitalization and operating liquidity position remained good. The need to improve the loan quality remains the main challenge facing the banking sector. Stress-test exercise results show banks’ resilience to adverse assumed economic and financial shocks.
Albania’s financial system expanded its activity in H2 2010, thus increasing its share in the GDP to 85.7%. Banking sector’s assets amounted to ALL 990.6 billion, accounting for 94.5% of total financial system assets. Excluding accrued interests, loans rose to ALL 486.5 billion, up by ALL 21.1 billion or 4.5% versus end-June. The annual growth rate of loans is estimated at 9.1%, out of which about 7.1 percent represents the growth rate of business loans. Banking sector deposits rose to ALL 805 billion, up by 9.3% versus end-June and 17.7% versus the previous year. The positive performance of the banking sector owes also to the smooth operation of payment systems infrastructure. Liquid assets accounted for 26% of total banking sector assets. At the sectoral level, banking activity is well-capitalized, although Capital Adequacy Ratio has slightly dropped to 15.4%. The banking sector’s profit was positive at ALL 6.7 billion, almost twice higher than profit in 2009. Annualized return on assets is estimated at 0.72% versus 0.42% the same period the previous year. Annualized return on equity is estimated at 7.6% versus 4.6% the same period the previous year. The higher profit attributes to the increase in net interest income and better operating cost control. Nevertheless, the positive profit requires better allocation and it has to be higher in order to sustain the banking sector’s activity better.
