Banks’ net interest income in decline even this year
Net interest income of the banking system is declining.
According to data from the Bank of Albania, interest income decreased to ALL 22.4 billion for the 6-month period, down by 4.7% compared to the same period a year earlier.
This implies that the difference between interest income and interest expenditures has narrowed.
Banking income from loans and securities interests has fallen further compared with lower interest cost spending.
This trend was expected, given that there has been little room to lower the costs on the deposit side, because last year the interest rates dropped very close to zero.
Meanwhile, interests of loans have continued to follow a downward trend as a result of competition between banks, especially in the retail business, which includes lending to individuals and small businesses.
The banking system for the six months of this year has expanded its profits by 2.2 times compared to the previous year, with a net result of ALL 11.5 billion.
However, this increase in profits has not come from interests, but thanks to the expansion of revenues from other activities, especially those of foreign exchange.
Also, high earnings have resulted in extraordinary income, mainly referring to the sale of collateral from lost loans.
The other factor with a lot of weight in widening profits was the reduction of expenses for the reserve fund of non-performing loans.
The 6-month provision expense was only ALL 1.4 billion, down from ALL 5 billion in the same period a year earlier.
This indicates that the quality improvement of the loan portfolio has contributed to the increase of bank profits, but also to greater flexibility in the interests offered to customers, as evidenced by the decline in revenues from this item.