Banking system starts 2018 with high profitability; non-performin loans at 13.5%

The banking system in Albania started 2018 with good results as far as profitability is concerned.

According to statistics published by the Bank of Albania, return on equity or profit in relation to share capital is reported at the level of 4.1%.

Although the performance remains positive, the most significant profitability indicator has had a significant correction compared to January last year, when it was about three and a half times higher.

In 2017 the banking system reported a record profit in absolute terms, while in terms of return on equity, it reached nearly 16%, the highest in nearly a decade.

The non-performing loans ratio increased slightly to 13.5%, from 13.2% that it was at the end of 2017.

However, this indicator is about five percentage points lower than in the same period a year ago and is floating on the best levels since 2010.

The non-performing loans indicator appears to be more stable, thanks to the many cleanings carried out in the last three years, while the improvement of mechanisms such as mandatory restructuring or execution of collateral have also had a significant impact.

However, to ensure a steady and significant decrease, lending needs to increase at higher rates, something that is expected to lower the share of existing non-performing loans in banks’ balance sheets.

The most important regulatory indicators for the banking system remain at very high levels. Thus, the capital adequacy ratio is 16.6%, while the ratio of liquid assets to short-term liabilities has increased further to 41.3%.

SCAN

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