Publication Date 16.09.2009
The Supervisory Council of the Bank of Albania, in its meeting of 26 September 2009, analysed the banking system’s situation at the end of the second quarter 2009.
Following is found a summary of this analysis:
In the second quarter of year, the banking system’s total assets accounted for ALL 832 billion. Lending activity seems to have been also increased further during this quarter, notwithstanding at less modest pace.
In concrete terms, this increase accounts for about ALL 4.4 billion (1.05 percent), relative to the increase of ALL 20.84 billion (5.25 percent) over the previous period, notwithstanding this latter owed mainly to the exchange rate fluctuations. On annual basis (June’08-June’09) loan’s portfolio growth is calculated at 21.7 percent or ALL 75.2 billion, amounting ALL 422 billion as at the end of first half of 2009. Lending in foreign currency has declined at about ALL 2.75 billion or by 0.9 percent owed to the fall of loan denominated in EUR at EUR19 million or about ALL 2.5 billion. Meanwhile credit denominated in USD increased at USD 1.4 million or about ALL 130 million. Credit denominated in the domestic currency (LEK) increased by about ALL 7.1 billion or by 6.2 percent.
Large banks are assessed to carry out a better cover against indirect loan related risk through the unfavourable exchange rate’s volatilities compared to small and medium-sized banks, while all banks-groups appear to have reduced their exposure against this risk. We deem this development owes also to the better orientation of lending in the domestic currency and on the reflection of the regulatory arrangements implemented by the Bank of Albania.
Loan to businesses is grown at quicker paces persuading the previous trend, even in this quarter, in concrete terms by 1.3 percent (ALL 3.3 billion ), relative to the increase by only 0.5 percent (ALL 750.6 million) of the loan granted to households. It is noted a distinguished increase of the overdraft loan granted to businesses that means the liquidity demand continues to be stable.
Owed to the quick growth of non-performing loans (+16.8 percent or ALL 5.3 billion), in terms of a loans’ portfolio reflecting a modest grothw (+1.05 percent), the indicator of non-performing loans to total portfolio pointed to
8.73 percent, from 7.55 percent at the end of March 2009. Businesses appear more problematic in terms of non-performing loans’ portfolio about 10.1 percent of total loans portfolio. This indicator regarding households accounts for 7.3 percent.
Loan portfolio quality by currencies, in contrast to the developments of first quarter of year, manifests a quicker deterioration of the portfolio denominated in foreign currency, by exceeding the ALL rate and revealing an indicator rate at 8.84 percent form 8.5 percent for the loan denominated in ALL.
The analysis of loan quality by branches of economy distinguishes the “manufacturing industry” and “trade, repairing vehicles and home appliances” sectors, particularly due to the weak quality of credit portfolio granted to these sectors and to their significant share in economy.
Net result of banking system for the second quarter of 2009, is reported at about ALL 385 million or 40 percent higher that the first quarter of year.
The performance of main profitability indicator, Return on Average Assets (RoAA) is evaluated at rates close to the previous period and far from the end of year 2008, or relative to the same period of previous year.
The banking system’s total regulatory capital total is reported at ALL 76.1 billion at the end of second quarter 2009, accounting an increase of ALL 14.9 billion (24.4 percent). Core capital continues to dominate the composition of the system regulatory capital, covering its 96 percent. The subordinated debt composes the added capital of the system.
Capital adequacy ratio, as at the end of second quarter 2009, pointed to 16.85 percent, considerably higher than the minimum regulatory rate of 12 percent.
Liquid assets of the system, during the second quarter of year, reduced by ALL 4.1 billion or 1.2 percent, against the reduction of All 12.9 billion (3.6 percent) during the first quarter 2009. The decrease of liquid assets owed many to the downward of liquid assets denominated in EUR, by EUR 82 million or 25.5 percent. It appears that liquid assets decline is mainly imposed by the drop of “Relations with banks and other financial institutions” item.
Loans granted from parent banks, other banks of the group and from other non-resident financial institutions are an important founding source for some of subsidiaries or branches of foreign banks in Albania. During this quarter, these funds have been reduced by ALL 20 billion (20 percent) and their share to the system liabilities points to 7 percent relative to 9.2 percent in the previous quarter.
Al last, “loans to total deposits” indicator, which builds up a complete panorama of liquidity situation in the banking system was shown deteriorated during forth quarter of 2008, whereas over the two first quarters of 2009, its value appears stable at 66 percent. A relative stability of the deposits’ base, has provided a significant contribution, which particularly for the continuing period are characterised by a stable growth, as an expression of the public’s confidence return toward the developments occurring in the banking system and in the whole Albanian economy.