Problem loans 'halt' the decline/ The ratio rose to 3.77%, but remains near an 18-year low
The non-performing loan ratio rose slightly in May, after falling to an 18-year low in April. According to data from the Bank of Albania, non-performing loans accounted for 3.77% of the total loan portfolio at the end of May, up from 3.75% a month earlier. However, the indicator remains close to the lowest level recorded since 2008.
Although there was a slight increase on a monthly basis, compared to the same period a year ago, the quality of the loan portfolio has improved. At the end of May 2025, the non-performing loan ratio was 4.12%, or 0.35 percentage points higher than the current level.
Based on the stock of credit to the economy at the end of May, the value of non-performing loans is around 36.9 billion lek. Although the ratio increased slightly compared to April, the level remains close to the minimum of the last 18 years.
On the other hand, other financial health indicators give mixed signals. Net non-performing loans to regulatory capital rose to 6.45% in May, from 5.71% in April, while the ratio of net non-performing loans to tier 1 capital rose to 7.10%, from 6.27% a month earlier. This suggests that, although the weight of non-performing loans remains low, banks' net exposure to them has increased slightly.
Meanwhile, the profitability of the banking sector improved. The return on equity (ROE) indicator increased to 12.46%, from 12.17% in April, while the return on assets (ROA) rose to 1.50%, from 1.47% a month earlier.
The liquidity of the banking system remains at high levels, although it has continued to decline gradually. Liquid assets accounted for 29.93% of total assets at the end of May, compared to 30.23% in April.
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