Bad loans return to decline in October/Non-performing loans indicator fluctuates, but remains at healthy levels
The latest data from the Bank of Albania shows that after a period of stability for several months, the level of non-performing loans increased slightly during August and September, reaching 4.19% and 4.37% from 4.04% in July. Although it was a small increase, this development marked the cessation of the downward trend that had characterized the previous months.
However, data for October show that the downward trend has returned, as the non-performing loan rate for the tenth month of the year is estimated at 4.33%, lower than in September.
However, the non-performing loan ratio remains at historically low levels, reflecting a stable banking sector and good loan portfolio quality. Compared to the beginning of the year, the ratio has fluctuated slightly, moving between 4.0 and 4.37%.
More specifically, according to official statistics, 2025 began with a level of 4.12% of non-performing loans in January, then decreased to 4.02% in March. The ratio then stabilized around 4.0% during the spring, while in the summer months it showed a slight increase.
In the Albanian banking sector, the non-performing loan ratio is an essential indicator to measure the quality of a bank's loan portfolio. These indicators demonstrate that the banking system has the capacity to cope with risks, despite the slight increase in non-performing loans.
Compared to last year, non-performing loans continue to remain below the 5% threshold, a level considered healthy by the Bank of Albania and indicating a steady improvement in lending quality.
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