Non-performing loans, "in free fall" - BoA: 4.01% registered in June, the lowest level since 2008
Non-performing loans in banks have returned to decline in June. The latest data from the Bank of Albania shows that the rate of non-performing loans has reached historical lows.
Specifically, the level of non-performing loans decreased to 4.01% from 4.12% in May, a figure that constitutes the lowest level of bad loans in commercial banks since 2008. This shows that the health of banks has improved, that is, the quality of the loan portfolio has increased, due to the growth in credit as a whole.
According to data from the Central Bank, in June, total bank credit increased by 12.1%, reaching 892.6 billion lek.
But how has the non-performing loan ratio moved since the beginning of the year?
The year 2025 began with a level of 4.12% of non-performing loans, a level that continued to improve in February and March to 4.06% and 4.02% respectively. Meanwhile, the ratio of non-performing loans to total loans would increase again in April and May, reaching levels of 4.03% and 4.12%.
Non-performing loans are those in which the installments are not paid on time by the borrower or are not paid in the correct amount. The decline in non-performing loans is an indicator of the growth of regular loans, which do not have any problems in the repayment term and amount.
A loan becomes non-performing when there is suspicion that the borrower is unlikely to repay the loan, or if more than 90 days have passed without the borrower making the agreed-upon installment payments. This can happen when an individual loses their job and therefore cannot repay their mortgage as agreed, or when a company experiences financial difficulties.
This always brings costs to the bank, so they must keep the level of bad loans to a minimum.
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