DREAM / The Prime Minister resigns and wakes up under the Parisian bridge!

 Kliko këtu për të tjera
Voxpress:

Higher euro interest rates increase the ratio of non-performing loans

2024-06-11 14:00:54Biznes SHKRUAR NGA REDAKSIA VOX

Higher euro interest rates increase the ratio of non-performing loans

The ratio of non-performing loans showed a slight increase in April. According to data from the Bank of Albania, this indicator increased to 4.82%, from 4.64% in March.

This was the first increase in the NPL ratio since January. However, this ratio continues to decline on an annual basis. A year ago, non-performing loans accounted for 5.18% of the value of the loan portfolio for the economy.

According to the analyzes of the Bank of Albania, the increase in the ratio of non-performing loans seems to be mainly an effect of the increase in interest rates in euros. The segment where the increase in problem loans has been observed is mainly the loan for the purchase of real estate in euros, especially in the segment of individuals.

For the Bank of Albania, an increase was expected, given the strong increase in interest rates for the European currency, until last year. The European Central Bank increased the base interest rate at a rapid pace, reaching a historic record level of 4.5%, in the autumn of last year. This increase was transmitted to the interests of the financial markets and to the main benchmark indicator used for quoting loans with variable interest rates in euros, the Euribor.

At the end of September 2023, the Euribor reached the level of 4.23%, the highest in the last 15 years. The 12-month Euribor is the main benchmark indicator used to build loans with variable interest rates even by Albanian banks.

This increase in the ratio of non-performing loans seems to be mainly the effect of the increase in euro interest rates, accompanied by a kind of time delay. For borrowers with income in lek, the effect of the increase in interest has been amortized by the strengthening of the lek in the exchange rate. However, even the strengthening of the lek has not been completely enough to avoid an increase in the ratio of non-performing loans.

Here it should also be taken into consideration the fact that a good part of the borrowers have their income in euros and have not benefited from the strengthening of the lek in the exchange rate. According to a survey conducted by "Monitor" on the website and social media channels at the end of last year, it was found that 27% of Albanians have their income fully or partially in foreign currency.

This year, the European Central Bank has started reducing interest rates, but the Bank of Albania expects that the effect of this reduction is expected to be reflected in the quality of the loan portfolio starting next year.

In fact, the increase in the ratio of non-performing loans to loans for the purchase of real estate by individuals began as early as the second half of last year. According to data from the Bank of Albania, the ratio of non-performing loans for this product at the end of 2023 increased to 3.2%, from about 2% in the middle of the year and 2.3% a year ago.

The loan for the purchase of real estate, mainly housing, by individuals still remains among the products with the best quality performance for the banking sector. However, the increase in the ratio of non-performing loans may be a signal of caution, given the rather high lending rates in this market segment over the past few years. Over the past five years, the loan portfolio for the purchase of real estate by individuals has grown by more than 70%.

If we take into account the significant fall in the euro exchange rate over this time horizon, the growth stripped of the exchange rate effect for the foreign currency loan would be even higher.

Developments in the real estate market and bank loans for properties have been assessed with concern by the International Monetary Fund (IMF).

In the last statement for Albania, in January of this year, the IMF suggested to the Bank of Albania the establishment of a countercyclical capital increase for the banking sector, mainly oriented towards curbing the rates of lending for real estate. According to the IMF, the imposition of a countercyclical addition to the capital adequacy ratio for commercial banks may be considered in the medium term, to further strengthen financial stability.


Në përputhje me standarded JTI

Video

SHIKO KANALIN NE YOUTUBE
×