The strengthening of the lek reduced the balance of the banking sector by 30 billion lek in 2023

2024-05-08 09:25:00, Ekonomi CNA

The strengthening of the lek reduced the balance of the banking sector by 30

Illustrative photo

The strengthening of the lek in the exchange rate reduced the value of the assets of the banking sector by 30 billion lek last year.

According to the Bank of Albania, in 2023, the total assets of the banking sector increased by approximately 5% and reached a total value of 1.96 trillion ALL. In the absence of the negative effect of the exchange rate, the growth of the sector's assets would have been approximately 7%.

In the nominal increase of about ALL 100 billion in assets, the main contribution to the increase in assets was given by the expansion of investments in securities by about ALL 50 billion and those in loans by about ALL 30 billion. Transactions with the treasury and interbanks increased by ALL 40 billion from the increase in the item "relationship with the central bank".

The only item that registered a decrease during the period was that of interbank operations, which decreased by ALL 9 billion (or 6%), influenced by the decrease in the level of deposits with banks and other financial institutions, mainly non-residents. The shrinking of the provisioning funds of the banking sector contributed to the increase of assets by ALL 1 billion.

According to the Bank of Albania, in particular, assets and liabilities in foreign currency last year expanded to a small extent, respectively by 1% and 2%. But, corrected for the effect of the exchange rate change, these growth rates are calculated at 10% and 12% respectively.

The weight of assets and liabilities in foreign currency to the total balance remained stable last year.

At the end of the period, the banking sector's assets and liabilities in foreign currency accounted for 51% and 50% of the total balance sheet, respectively, and these ratios were maintained during the period despite the effect of exchange rate appreciation. In the absence of the exchange rate effect, the weight of assets and liabilities in foreign currency would have increased significantly.

In absolute value, banks reported approximate levels of assets and liabilities in foreign currency, in the values ??of 1,000 billion and 983 billion ALL, thus presenting a balanced position of activity in foreign currency for the banking sector.

In terms of assets in foreign currency, the items with the largest weight remain lending activity and interbank investments. However, during the last three years, an increase in the share of investments in securities has also been observed.

The strengthening of the local currency has had a greater impact on the main balance sheet items such as actions with securities, actions with the treasury and interbank ones (from about 10 billion ALL).

In terms of liabilities in foreign currency, the structure is more stable over the years and is dominated by foreign currency deposits.

The above items have largely determined the sensitivity of the banking sector to changes in the exchange rate. On the liability side, the effect of the exchange rate on the reported value of foreign currency deposits is estimated at around ALL 25 billion.

The statistical decreasing effect of the exchange rate has also been felt on the foreign currency part of the capital of the banking sector, with a value of about 15 billion ALL. The lek marked a strong exchange rate appreciation last year, especially against the euro.

At the end of 2023, the annual decline in the rate was more than 9%. This has negatively affected the size of the balance sheet of the banking sector./ Monitor