Banking system expanded lending to foreign businesses in 2016 – Domestic loans shrinking
Banks’ lending to non-resident businesses has increased significantly during the second half of 2016, while lending to domestic businesses has reported a decline.
The report of financial stability for the second semester of 2016 warns that lending to businesses, representing nearly 67 percent of total lending, has expanded by 2.4 percent in annual terms, adding that this performance is almost entirely based on the credit performance of entities that do not operate in Albania.
While lending to resident businesses recorded negative rates, shrinking by 0.8 percent during last year.
Because of low demand and a perceived weakness of the domestic economy, banks are forced to seek alternative investment opportunities abroad.
The report estimated that the financial system has performed positively during the second half of last year and the banks share in the Gross Domestic Product is steadily increasing.
The banking system expanded its activity, going up to 94.9 percent of GDP, resulting in good profit and a good indicator of capital and liquidity.
During the presentation of the financial stability report for the second semester of 2016, BoA experts have suggested that deposits for individuals and businesses have expanded significantly in relation to loans, while the main contribution to this growth came from foreign currency deposits.
Specifically, the share of deposits in foreign currency increased by 53 per cent of the total, with a positive contribution from both foreign currency deposits of individuals and those of businesses.
Foreign currency deposits account for about 51 percent of individual deposits and for about 65 percent of business deposits.
In relation to non-performing loans, the BoA data show that there is a fall to 18.3 per cent.