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The non-performing loan ratio fell for the eighth consecutive year in 2024

Politiko 2025-02-11 08:34:30

The non-performing loan ratio fell for the eighth consecutive year in 2024

The non-performing loan ratio fell for the eighth consecutive year in 2024. According to data from the Bank of Albania, the non-performing loan ratio fell to 4.17%, from 4.74% a year earlier. This indicator has reached its lowest level since September 2008.

As is usually the case, December brought a larger decline compared to previous months of the year. This is because banks clean up their portfolios of lost loans before the end of the financial year, but the significant expansion of the total loan portfolio, by 11 billion lek more compared to November, may have also had an impact.

It is precisely the increase in the total loan portfolio that has played an important role in reducing the ratio of non-performing loans last year.

The loan portfolio for the economy at the end of 2024 reached the value of 835.6 billion lek, an annual increase of 12.3%. This is also the highest growth of the loan portfolio for the economy in the last 16 years.

The Albanian economy last year was characterized by relatively high growth rates, supported especially by the good performance of sectors related to tourism and real estate.

Over the past year, the ratio of non-performing loans has also decreased slightly in absolute terms. Total non-performing loans at the end of 2024 are estimated at approximately 34.8 billion lek, down from approximately 35.3 billion lek a year earlier. In absolute terms, bad loans have decreased by approximately 0.5 billion lek or 1.4% compared to a year earlier.

The year 2024 also brought a continuation of the multi-year downward trend in the ratio of non-performing loans, but nevertheless the rapid growth of credit, especially in the real estate sector, has raised concerns at the Bank of Albania. Last year, the real estate loan portfolio of individuals and businesses increased by 15.5% and 17.4%, respectively.

Taken together, these portfolios comprise approximately half of the total value of credit provided by the domestic banking sector.

Last year, the Central Bank decided to apply a countercyclical surcharge to the banking sector's capital adequacy ratio for the first time. Initially, the required capital adequacy ratio was increased by 0.25% in June, while in December Governor Sejko decided on a second increase, bringing the countercyclical surcharge to 0.5%./Monitor

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