BSH: Business credit in the first 6 months reached the highest growth in a decade

2024-08-23 07:23:00, Ekonomi CNA

BSH: Business credit in the first 6 months reached the highest growth in a

Credit to businesses grew by 12% on average in the first six months of the year, marking a record annual increase over the past decade.

According to the Bank of Albania, the financing of businesses by banks has increased significantly in the first six months of the year, reflecting the higher willingness of banks to finance the increased demand of businesses for credit.

Compared to the previous six months, the growth of business loans was about 2 times higher. During the first half of the year, banks mainly lent to big business and the trade sector.

The trends observed at the end of 2023 have been carried over to the beginning of this year, with a shift of credit towards the Lek currency, while according to the goal, the increase in credit for financing investments is dominating.

Loans in Lek for businesses recorded a double-digit rate growth of 17.4% in the first half of the year. However, in the second quarter of the year, a revival of credit in foreign currency was also observed, which marked an improved growth rate, peaking at 12% in the month of June.

Meanwhile, the phenomenon of shifting the loan portfolio from Euro to Lek continued during this period, but at much lower levels than the one observed in 2023.

According to the size of the businesses, it was the credit for the big business that influenced the acceleration of the growth rates. Credit for large business, after showing stagnation in the last two years, has shown a strong increase in bank financing in the first six months of the year. It recorded one of the highest growth rates of 18%, up from 2% in the second half of the year

2023. The Bank of Albania emphasizes that the expansion of large business credit reflects, among other things, the financing of government infrastructure projects.

In parallel, the loan portfolio for small and medium-sized businesses grew by 6% during the first half of 2024, a rate slightly lower than the 7% growth recorded in 2023.

Within this category, it seems that medium-sized businesses have shown the most noticeable slowdown in credit for financing their needs.

Banks have increased financing of businesses in all sectors of the economy, but the highest growth is observed in the trade sector. Credit to this sector increased by 13%, double the growth rate observed in the second half of 2023. Within the sector itself, a contribution similar to last year of the tourism branch is observed, and an increased contribution from the branch of transport.

Meanwhile, the industry sector has also had a positive impact on the growth of the loan portfolio for businesses; whose growth rates of 10% brought the contribution of this sector back to positive ground. Within this sector is the manufacturing industry branch, which gained the most financing from banks. Likewise, bank financing for construction sector businesses has been positive and stable. Credit to this sector grew by 6%, a rate similar to the average for the second half of 2023.

The double-digit growth of 12% in lending to the agricultural sector should also be mentioned, but its contribution to the growth of credit for businesses is almost negligible.

The Bank of Albania estimates that these developments in the business loan portfolio are generally in line with the economic activity in the country.

Loan interest rates in Lek for businesses in the first half of this year have marked a slight upward trend mainly in the last three months. However, the growth has been minimal and the level of interests remains low, thus favoring lending activity. The average interest rate for new loans in Lek for businesses in the second quarter was 6.8% from 6.6% in the first quarter and 6.7% last year. Interests have increased slightly in all three categories, although it was the category of loans over ALL 140 million that had the greatest impact in recent months.

Loan interests in euros have appeared stable this 6-month after the increases realized last year in reflection of the increase in the base rate of the euro by the European Central Bank.

The interest rate for business loans in euros in the second quarter was 7%, being the same as the first quarter and higher than the 6.6% of the second half of the year./ Monitor Magazine