Profits of second-tier banks in Albania halved in eight month period

The profits of the Albanian banking system for the first eight months of 2016 saw a significant decline of 48 percent compared with the same period of last year, statistics published by the Albanian Association of Banks showed Thursday.

According to the data, the banks operating in Albania registered a profit of 5.7 billion leks (45.4 million U.S. dollars) in the period from January to August 2016.

This figure confirms the strong decline of profits as a year ago, the second-tier banks posted profits if 11 billion leks (87.7 million dollars).

On the other hand, one of the main concerns of the banks remains the problem of increasing non-performing loans. The non-performing loans reached a new high in August 2016, at 21.4 percent.

This new development forced the banks to increase the provisioning funds for the bad loans, as the Bank of Albania showed in its latest report.

According to the Albanian Association of Banks, the low interest rates being applied here and the increase of the provisioning expenses were two main reasons that led to the halving of banks profits in this period.

Statistics of AAB also showed that the ratio of return on assets (return on weighted assets, which indicates how effectively the bank uses its own funds) fell to the level of 6.7 percent in the eight-month period of 2016 from 14.1 percent in the same period of last year.

Return on capital also deteriorated to only 0.6 percent, from 1.3 percent in the eight months of 2015. Endi