The number of non-performance loans is lower than before and more and more customers are repaying their loans. This is the situation with bank loans in the second half of last year, confirmed by Bank of Albania in its Financial Stability Report. How is it possible? Experts say that the reason for this is the fact that banks are asking for more collateral when issuing loans to individuals and businesses. Under such circumstances, they feel more obliged to pay off their loan. In other words, if a property or an amount of money is pledged as security for the repayment of a loan, the likelihood that this loan will be paid off is higher than a loan for which nothing has been pledged. “The amount of loan collateral is high and it has seen a constant growth. This makes loans less risky”, central bank notes. According to the bank, last year, 78.2% of loans were covered by collateral, 1.5% more than a year ago. This shows that it’s now easier for banks to get customers to repay their loans, but it has also taken the number non-performance down by 10.5% compared to the end of last year.
NPLs went down to 17%; loans written off had an impact
“The quality of loans has improved significantly as a result of the fall of non-performance loans to 17% or 64 billion leks”. This is another confirmation made by experts of the Bank of Albania, according to whom this is the lowest level of NPLs registered since 2010. In addition to the fact that more customers have paid their loans, the fact that banks have written off a number of loans has led to a fall in NPLs. Another factor which seems to have had an impact on this is the fact that many non-performance loans have been restructured and outstanding instalments have been paid. “Since June 2018, the amount of NPLs which have been repaid amounts to 17.6 billion leks, while 4.5 billion leks worth of loans have been written off”, experts of the central bank confirm among others.
Fewer NPLs in large banks
“The main contribution given for the improvement of loan quality has been made by large banks”, Bank of Albania confirms. According to this institution, the ratio of NPLs for large banks fell from 14% to 11%”, experts also explain. “Medium sized banks have highest ratio of NPLs with 11.6%, while small banks have the lowest one with 8.8%. Structural changes have also had an impact on this”, the Financial Stability Report says.