Albanian banks boost provisioning to 632 mln USD due to deterioration of loan portfolio

The deterioration of the loan portfolio has made the second-tier banks operating in Albania increase the provisioning funds as a way to cope with this situation, data published by the Bank of Albania on the first half of the year Monday.

Referring to the official data, the reserve funds to cover bad loans growth amounted to 79 billion leks, or 632 million U.S. dollars.

In view of the Bank of Albania, despite the ongoing process of writing-off the lost loans from banks balance sheets, the deterioration of the loan portfolio quality has led to increase of provisioning fund for the first half of 2016.

The provisioning fund hiked to about 2.4 billion leks, or 19.2 mln U.S. dollars, 3.2 percent more compared to the surplus of fund at the end of 2015, BoA said.

Nonperforming loans in Albanian banking system saw an increase even in August, 2016, thus growing for the third consecutive month, to reach the level of 21.44 percent.

This is the highest level recorded by NPLs since May 2015 while it is seen as an indicator of the fact that businesses are having problems to get out of the crisis.

On the other hand, the Bank of Albania, in its last report on banking supervision, expressed concern about the increase of indicators of bad loans in the category of businesses, especially in terms of loans in foreign currency.

However, Albania's central bank experts deem that the banking sector in Albania has shown good ability of absorbing losses, as the coverage with basic capital of nonperforming loans resulted at 93 percent. Endit