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BSH analysis: Businesses with more assets receive less bank loans

2023-11-16 13:19:47Biznes SHKRUAR NGA REDAKSIA VOX

The improvement of the liquidity situation is causing businesses to take less loans from banks. According to the latest analysis of lending activity by the Bank of Albania, credit for businesses has followed a slowing trend since the beginning of 2023, but this trend was even more emphasized in the third quarter of the year. Annual growth in business credit this quarter was 3%, roughly half of the growth recorded in the first half of the year.

In the analysis of the Bank of Albania, the main reason behind this performance is the improvement of the liquidity of businesses, reflecting the continued growth of domestic demand and the strong growth of foreign demand, mainly for tourism. An impact on this improvement may also have been given by the increase in business margins, especially in that segment that has benefited from the strengthening of the lek in the exchange rate.

The data shows that businesses have repaid a good portion of their working capital loan portfolio. In September, the loan for this purpose shrank by 1.7%.

Another trend observed during 2023 was the shift of the loan portfolio for businesses from loans in foreign currency, mainly in euros, to loans in Lek. This shift is motivated by the decreasing difference between interest in Lek and those in Euro, but also by the appreciation of the exchange rate. At the end of September, credit in foreign currency was 1.3% less than a year ago.

Loans in lek increased by 16 billion lek during the first nine months of the year, where the effect of converting loans from euro to lek has been emphasized from May onwards. At the end of September, loans in lek for businesses recorded an annual expansion of 7.6%, significantly higher than the average growth of 1% in the first half of the year.

The above developments have resulted in the increase of the share of loans in Lek to the total to 46%, at historically high levels.

According to the size of the business, it is observed that the loan for large business has shrunk, the loan for medium business has slowed down, while that for small business has improved. Thus, the September figures show that credit for large business was 1.4% lower than a year ago, credit for medium business slowed down to 8%.

Meanwhile, the small business portfolio grew by 3% in the third quarter, after two quarters of contraction. These developments have reflected, on the one hand, the improvement of the financial condition of large businesses and, as a result, a lower need for financing from banks, while the banks have kept the lending conditions for this group unchanged.

According to the Bank of Albania, positive developments in the economy, in business confidence together with the stabilization of prices and uncertainty in the country have helped to revive the demand for financing from small businesses. Meanwhile, even though the supply for this segment remains in the tightening direction even in the third quarter, the increased risk tolerance of the banks has helped to fulfill the demand.

These developments have been reflected in a shift in the credit structure of businesses towards small and medium-sized businesses, whose loan weight reached 51.5% of the total.


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