TIRANA, August 31 – Lending registered only a slight increase during the second quarter of 2010 confirming the tight standards commercial banks operating in Albania apply both to businesses and individuals.
Central bank data show lending in the national currency during the April-June period totaled 447.4 billion lek (around 4.4 billion dollars), up from 438.8 billion lek in the previous quarter and 409.2 billion during the same period last year increasing by only 2 percent quarter-on- quarter and 9 percent year-on-year.
Capital Tirana, where a quarter of the country’s total 3.5 million population lives and the majority of businesses operate, received 308 billion lek in loans, around 69 percent of the total.
The majority of loans granted in Tirana were short-term commercial ones mostly in foreign currency, according to the Bank of Albania statistics. Most credit in Tirana is given in consumer loans, some 81.3 billion lek and home loans some 30.8 billion lek.
Second came the coastal city of Durres with a total credit of 36.2 billion lek, around 8 percent of the total, followed by the southern city of Vlora with 15.5 billion, Elbasan with 13.5 billion lek, Fier 13.1 billion and Shkodra 10.8 billion.
As far as commercial loans are concerned Tirana stills tops the list with a total of 226.7 billion lek, some 73 percent of the total 308.3 billion reported at the end of the second quarter.
The “Trade, car and household article repair” group received the majority of loans, some 72 billion lek or 30 percent of the total, followed by construction with 47 billion lek and the processing industry with 30.5 billion.
The situation is the same even in other cities where trade, industry and construction sectors are given the majority of loans.
Meanwhile, loans to individuals remained at 139.1 billion lek at the end of the second quarter, the same as one year ago, but dropped by 371 million lek compared to the first quarter.
Lending standards during the second quarter of this year remained tight for businesses and eased somehow for individuals, according to a lending survey carried out by the Bank of Albania.
Data show lending standards applied to small and medium-sized enterprises remained tight while corporations had their standards eased for the second quarter in a row.
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.
Survey data showed there was an increase in demand for loans by small and medium-sized enterprises and individuals. Meanwhile, corporations and individuals’ demand for home loans dropped.
Increase expected
The central bank expects credit to the private sector to grow during the second half of this year after the budget review and the cut of the key interest rate by 0.25 percentage points few weeks ago.
Credit to the private sector continued growing at low rates even in the first half of this year despite improved liquidity and a significant increase in the number of deposits which was followed by declining interest rates.
The average year-on-year growth of credit to the private sector during the second quarter of 2010 was 9 percent, said the central bank. The International Monetary Fund expects the private credit growth to drop to 8.6 percent of the GDP this year, down from 10.3 percent in 2009 and 32.1 percent in 2008 when the global crisis started.
The lending market continued to suffer from fluctuation of interest rates and tight lending standards in the April-June period, said the central bank in its latest monetary policy report.
Despite a drop in treasury bills yields and in interest rates for deposits in the national currency, lek, loan interest rates did not display a clear declining trend.
Bad loans
Bad loans continued increasing even during the second quarter of this year climbing to 12 percent of the total loan portfolio, up from 11.45 in the first quarter, according to Bank of Albania statistics.
Lost loans increased to 3.5 percent, up from 3.2 percent in the previous quarter and 2.1 percent during the same period in 2009. Meanwhile, the number of doubtful loans also increased to 3.1 percent, up from 2.0 percent in the previous quarter and 2.4 percent in Q2 2009.
The percentage of substandard loans registered a slight decrease of 0.1 percent dropping to 5.3 percent of the total loans but remained high compared to Q2 2009 when it was 4.2 percent.
Banking sector experts say there are a number of causes that have led to strong growth of bad loans. They include shrinking family incomes, businesses in crisis and depreciation of the local currency, mainly against the euro. These factors have made it harder for people to pay back the banks for loans they took in better times.
Gross problematic loans at the end of 2009 increased to 10.48 percent of the total loans, up from 6.64 percent at the end of the previous year. The report says the quality of credit portfolio will continue deteriorating, not only because of internal factors but also because of the crisis in Greece, where thousands of immigrants working in agriculture and tourism have been hit, affecting the remittances they send home.
Central bank data show the banking system’s net revenue at the end of the second quarter more than doubled reaching 3.6 billion lek, up from 1.55 billion in the previous quarter and 660 million in the second quarter of 2009.
