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Albania: Banks Show Major Losses
Tirana | 03 June 2009 | By Gjergj Erebara
Albania’s banking system registered net losses of 869 million leks (6.56 million euro) in April, down from net earnings of 275 million lek in March, data from Albanian Banks Association show.
Looses were mainly the result of massive write-offs, with problematic loans jumping to 8 percent of the total loans portfolio. Loans classified as ‘lost’ jumped up to 8.2 billion lek, (61.7 million euro), up 16 percent from March - 186 per cent increase, year on year.
The banking system in Albania has been very profitable in the last decade. The system is 95 per cent foreign owned.
Lending has been increased by more then 50 per cent year on year since 2005, beginning from a very low base. However, the rapid growth has been a cause of concern for the Central Bank and the International Monetary Fund, IMF, both of whom have pushed to strengthen regulations on risk management. Anticipating looses, Albania’s Central Bank ordered banks to not distribute dividends for the last year’s earnings and temporarily halted loan operations for some.
“Banks will be less profitable this year, but they are still well capitalized,” Central Bank governor Ardian Fullani said in a statement.
“Banks in Albania have been the most profitable financial institutions in Europe,” Elvin Meka, general secretary of the Albanian Banks Association, told Balkan Insight. Their return to equity ratio was worth 20 per cent in 2007 and 15 percent for 2008.
However, the global financial crisis affected the credibility of the banking system in Albania. A bank run in the last quarter of 2008 wiped several hundred million euros of deposits from the banking system. Many experts blame poor lending practices in the past for bad loans, saying that the global financial crisis has only aggravated the situation.
Following the collapse of Lehman Brothers in the US, Albania faced a bank run. Deposits in the banks fell from 700 billion leks (5.7 billion euro) in September 2008, to 638 billion leks, (4.9 billion euros) in February 2009.
The Albanian government also has faced difficulties in refinancing its debt during the past months, but the market showed signs of stabilisation in March. Interest rates for 12-month treasury bills jumped to 9.24 per cent, almost one per cent, within a quarter. Source: Balkaninsight
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