Tirana, Albania – | 05 Feb 2022 (Tirana Echo) – Albania’s banking sector recorded the highest historical profit during 2021, reaching ALL 19bn Lekë (€160m), a record number for the small Balkan country according to financial daily Monitor.
The latest numbers comes out of the preliminary data published by the Albanian Banking Association, showing joint profits of commercial banks according to the International Financial Reporting Standards (IFRS).
Of the twelve active commercial banks in Albania, eleven ended the financial year profitably. The increase in the banking sector profits reflects a generally positive performance of the activity, characterized by an expansion of assets and especially the loan portfolio and a further improvement of asset quality.
The net loan portfolio (always with IFRS standards) amounted to almost ALL 648 billion, with an annual increase of 12%. While the ratio of non-performing loans (estimated according to the standards of the Bank of Albania) at the end of last year fell to 5.65%, the lowest level in the last thirteen years.
In absolute value, the bank with the highest value of profits remains the National Commercial Bank (BKT), for a total value of almost ALL 7.9 billion, an increase of 27% compared to a year ago. Raiffeisen Bank continues with a net profit of ALL 3.4 billion, 132% more compared to a year ago.
The other banks that have secured a profit of ALL 1 billion are OTP Albania, with ALL 1.9 billion (annual growth of 26%), followed by the American Investment Bank with ALL 1.45 billion (annual growth of 14%) and Credins Bank with ALL 1.2 billion (with annual growth of 8%). Other banks have reported lower results, but for most of them increasing compared to last year.
The performance improvement is also reflected in the profitability indicators of the banking sector. The average return on equity for 2021 reached the level of 11.32%, from 8.63% that had been a year earlier, but slightly lower than the level of 12.03% of 2019, before the pandemic.
Although in absolute terms the profits are the highest historically, in relative terms the returns are at average levels. The crisis and the new regulatory requirements of the Bank of Albania, related to macro-prudential surcharges, have led to an increase in banks’ capitalization. This makes it increasingly difficult to secure large returns on equity, but nevertheless some individual banks have significantly better returns than the system average.
During 2021, the bank with the highest return on capital was for the third year in a row OTP Albania, with 20.3%, followed by Fibank Albania with 16.93%, BKT with 16.85%, Union Bank with 15.74%, American Investment Bank (ABI Bank) with 14.7% and Raiffeisen Bank with 12.49%. Other banks have reported positive returns in single-digit levels.
In recent years, a group of medium-sized banks are showing increasing performance and profitability. The process of consolidating the banking sector seems to have increased the efficiency and profitability of some of the banks, an element that can make these banks more competitive in the long run.
The lowest profitability for 2021 was reported by Alpha Bank, with a return to 0.97%. The modest results were the main reason that pushed the Greek group to put the Albanian bank up for sale. The only bank with a loss for last year is the United Bank of Albania (UBA), with a negative return on equity at 3.9%.
However, the UBA reporting is the only one based on the local standards of the Bank of Albania and it is not excluded that the final annual result according to IFRS may be different.
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