Non-performing loans showed an upward trend in the first half of this year due to a significant expansion of substandard loan, affecting credit growth and bank’s profits, according to Central Bank.
The value of non-performing loans rose by 11.7% and the ratio of non-performing loans in the banking sector rose to 20%, from 18.2% at the end of 2015, Bank of Albania said in its latest Financial Stability Report.
According to the report, credit to enterprises, foreign currency credit and medium-term credit gave the main contribution to this increase. The increase in non-performing loans is associated with the slight reduction of their coverage with reserve and capital funds, albeit these indicators remained at the same levels as a year ago.
The increase in non-performing loans points to the difficulty for their resolution and the need to closely monitor this process.
The non-performing loans ratio felled significantly last year the write-off of bad debt from banks’ balance sheets.