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The banking sector wrote off 6 billion ALL of bad loans last year

2023-05-04 13:18:20Biznes SHKRUAR NGA REDAKSIA VOX
The banking sector wrote off 6 billion ALL of bad loans last year
The Bank of Albania

The banking sector wrote off about ALL 6 billion in bad loans last year.

Bank of Albania data show that write-offs have continued to make a significant contribution to reducing the ratio of non-performing loans even during 2022. According to the Bank of Albania, the majority of written-off loans were loans in euro currency held by business sector. During the period 2015-2022, banks have written off about 80 billion ALL of lost loans from their balance sheets.

Problem loans last year marked the lowest levels in the last 13 years, both expressed as a ratio and in absolute value.

The ratio of non-performing loans fell to 5% (from 5.65% a year ago), while the stock of non-performing loans fell to ALL 36 billion (from ALL 40 billion a year ago). Banks have reported an improvement in credit quality mainly for loans with long-term maturity, loans for businesses and loans in foreign currency.

This performance was mainly influenced by the reduction of the loan stock in the classes of "substandard" and "lost" loans. This progress has been determined by the deletion of lost loans from the banks' balance sheets, the repayment of problem loans, as well as the reclassification of problem loans into performing classes.

However, compared to a year ago, new repayment flows of non-performing loans appear to be decreasing, while loan transfers to non-performing classes have been increasing. These are warning signals that the ratio of non-performing loans may increase this year.

The assessment of credit quality and risk can be completed through the analysis of the performance of some additional indicators such as the flow rate of non-performing loans, the default rate and the rate of recovered non-performing loans.

These indicators, with the exception of the default rate, suggest that over the last twelve months the banking sector has recorded more new non-performing loans, which are expected to be reflected in the credit quality indicators. For the last quarter of 2022, the flow of new non-performing loans was 2.1% of regular loans, up from 1.8% and 1.5% six months and a year ago. This indicator has recorded the maximum value of 5% during 2019, and a temporary increase up to the level of 3% during the first half of 2021.

The recovery rate of non-performing loans fell to 12%, from 15% a year ago. This development indicates an increase in the difficulty of banks to recover non-performing loans.

On the other hand, the default rate, which shows the speed at which bad loans accumulate compared to the overall loan portfolio, was 1%, maintaining the level of six months ago, but falling slightly from the level of 1.6% a year ago. before.

In fact, the data for the first two months of 2023 have shown a slight increase in the ratio of non-performing loans, reaching 5.2%./Monitor


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