TIRANA, Nov. 10 – The 16 overwhelmingly foreign-owned banks operating in Albania posted historic high profits in the first three quarters of this year as non-performing dropped by 4.6 percent but credit suffered moderate negative growth rates due to poor demand and tight lending standards.
Data published by the country’s central bank shows banks’ profits in the first three quarters of this year rose to a historic high of 11.6 billion lek (€82 mln), up from a previous record of 8.7 billion lek (€61.6 mln) during the same period last year and losses of 1.3 billion lek (Euro 9 mln) in the first three quarters of 2013.
The surge in profits came as non-performing loans in the third quarter of this year slightly rose to 20.23 percent, up from 20.03 percent in the second quarter of this year and a record high of 24.89 percent at the end of Sept. 2014.
Banks’ profits sharply rose thanks to a 7 billion lek (Euro 49 mln) cut in spending on interest rates as deposit rates stand at historic lows of 1 percent.
The so-called ‘loss’ loans, whose borrowers have failed to pay for more than one year, dropped to 10.55 percent at the end of the third quarter of 2015, down from 12.05 percent in Sept. 2014.
The capital adequacy ratio slightly dropped to 15.8 percent in Sept. 2015, down from 17.6 percent a year ago, yet staying comfortably above the BoA’s minimum requirement of 12 percent.
Albania’s central bank says the value of NPLs dropped by 8 percent to 152 billion lek (Euro 1.07 billion) at the end of June 2015 fuelled by changes making it compulsory to write-off of bad loans for more than three years and acceleration of collateral execution.
A new package of measures drafted by the Albanian government and the central bank is targeting to tackle non-performing loans for 35 companies which are estimated to hold around half of NPLs in Albania.
Non-performing loans have more than trebled in the past six crisis years, becoming a drag on economic growth and lending which has been struggling with sluggish growth rates in the past couple of years.
Banks’ profits reached a historic high of 11.2 billion lek (Euro 78.4 million) in 2014 as bad loans registered a slight decrease and provisioning against loss more than halved.
Albania’s Competition Authority has recently launched an enquiry into the country’s banking system over allegations of limited competition leading to high loan interest rates and standstill in lending.
The loan rates, although considerably lower to the pre-crisis period, are still considered high and unaffordable by the business community because of being six times higher compared to the deposit rates which have dropped below the average inflation rate for the past year.
