TIRANA, June 7 – Non-performing loans hit a six-year low last April when they dropped to 16.6 percent, down 3 percent compared to a year ago and a post-crisis record high of about a quarter in mid-2014 as commercial banks continued to write off bad debt and reach out-of-court loan restructuring deals with big private sector borrowers.
The drop in NPLs did not have a significant impact on lending which turned negative last April following eight months of sluggish growth, apparently hit by the tense political climate preceding the June 25 general elections undermining business confidence.
Credit contracted by an annual 0.4 percent last April, negatively affected by the high level of non-performing loans and the write off of loans that have spent three years in the “loss” category statistically keeping real lending lower.
NPLs, one of the region’s highest, have become a real barrier to credit, with lending standards continuing to remain tight despite the key interest rate standing a historic low of 1.25 percent since a year now. Albania’s NPLs stood at just about 4 percent in 2008 just before the onset of the global financial crisis with the sharp hike in the following years triggered by the pre-crisis credit boom.
Demand for new loans also remains low by both businesses and households amid perceived uncertainties related to their business and financial situation as well as the economy in general.
Interest rates on both lek and euro-denominated loans of above 5 percent are still considered too high as deposit rates stand close to zero.
Despite the high NPL levels, the 16 overwhelmingly foreign owned banks operating in the country have posted almost record high profits in the past couple of years as spending on provisioning against loss sharply dropped and net income from other activities mainly related to commission fees and foreign exchange operations increased.
