Albania as the "black sheep", banking groups have lower returns compared to their average

Foreign banking groups appear dissatisfied with the profitability of their business in Albania. According to a survey conducted by the European Investment Bank (EIB), most foreign banking groups report lower than average profitability from their activity in Albania.

Although the performance of the banking market has improved in recent years, profitability indicators remain at levels that are not fully satisfactory for their shareholders. In particular, the strong increase in capital requirements by the Bank of Albania has resulted in lower returns on capital compared to most other markets in the Region.

Albania appears as the only market in Central and Southeastern Europe where returns on equity for banking groups are lower than average levels at the group level.

Also, according to a survey of banking groups, Albania is one of the markets with the lowest potential, at levels comparable to Serbia and Bulgaria.

These results indicate that Albania may still be an unattractive market for new investments from large banking groups.

Albania seems to be an exception compared to other Central and Southeastern European markets.

According to the survey, international banking groups see this area as a market where they intend to grow further in the long term. Three-quarters of banking groups operating in these regions plan to expand, while none intend to reduce their presence.

Most parent banks in Central, Eastern and Southeastern Europe have either maintained or increased their exposure to the region over the past six months. Looking at their long-term strategies, parent banks continue to favor expansion.

However, the banking groups in question assess the market potential as particularly high in the Czech Republic, Romania and Slovakia, while seeing this potential as more moderate in the Western Balkans.

They also report higher profitability in the region compared to the group's overall operations, particularly for Bosnia and Herzegovina, Bulgaria, the Czech Republic, Hungary, Kosovo, North Macedonia and Serbia.

According to the survey, credit demand is expected to remain strong in the region, while credit conditions are expected to ease slightly in the coming months. In the second half of the year, credit demand is expected to remain strong for businesses and households.

Demand for credit has remained strong in recent years, driven mainly by individual customers.

In contrast, credit supply in the region has been weaker, despite some signs of improvement in 2024, and has remained broadly stable over the past two years.

Access to funding for local branches remains favorable and has improved over the past six months, supported by higher retail and corporate deposits.

In recent years, the markets of Central and Southeastern Europe have been regaining attention from major European banking groups. After an exit process of many important players following the 2008 crisis, it seems that the consolidation and improvement of the banking market in these countries is gradually making them attractive again. Most banking groups are trying to return to organic growth, but in the meantime they are also showing interest in new acquisitions, with the aim of increasing their market share and efficiency./ Monitor