Slowing Lek appreciation and rising gold prices improved the BoA's balance sheet in 2024

2025-11-07 07:53:00, Ekonomi CNA

Slowing Lek appreciation and rising gold prices improved the BoA's balance

The more stabilized exchange rate performance improved the financial result of the Bank of Albania for 2024.

According to the Central Bank's audited financial statements, the net financial result for 2024 was a profit of 5.2 billion lek. The result returned to positive values ??after two consecutive years of large losses.

For 2023, the Bank of Albania reported net losses of 27 billion lek, while in 2022 the losses were approximately 17.7 billion lek.

The factor with the main impact on the performance of the Bank of Albania's results in recent years has been the effect of the exchange rate.

The Bank of Albania holds a large foreign exchange reserve, as a necessary tool to meet the emergency needs that the economy and the financial sector may have. Given that the Bank of Albania's balance sheet is reported in local currency, the continuous strengthening of the Lek in the exchange rate has reduced the value of the reserves held in foreign currency.

For 2024, net exchange rate losses amounted to 13.5 billion lek. However, losses in this item suffered a significant reduction of 63% compared to the previous year.

During 2023, the Lek had recorded its strongest historical appreciation in the exchange rate against the Euro and most other foreign currencies. At the end of 2023, the annual decline in the Euro-Lek exchange rate was at 9.1%. Meanwhile, at the end of 2024, the decline in the Euro-Lek exchange rate slowed to 5.5%, reducing the negative impact of the exchange rate on the balance sheet.

The increase in the value of monetary gold held by the Central Bank, as a result of its revaluation at market value on the reporting date, also had a significant positive effect on the income statement. Income from the revaluation of gold amounted to 5.7 billion lek, while a year earlier this item had been negative at 128 million lek.

If we refer to the result of the Bank of Albania's comprehensive income (which includes items that are not classified as part of the profit or loss of the financial year), the year 2024 marked a higher result, with a total value of 7.7 billion lek. The comprehensive income also includes a positive change of 2.5 billion lek in the fair value of debt securities during the previous year. The decline in interest rates also during 2024 influenced the further increase in the price of financial instruments and consequently improved the result of the Bank of Albania's comprehensive income.

The Bank of Albania also closed 2024 with negative capital, at a value of around -9 billion lek. However, the negative value of capital improved compared to the level of -16.7 billion lek a year earlier.

The improvement in the net capital position was due to the better financial result of the previous year and the additions to the legal reserves made. The main effect was provided by a special reserve for capital strengthening created by the decision of the Supervisory Board dated March 5, 2025.

Meanwhile, the negative balance in the unrealized revaluation reserves item deepened further in 2024, reaching 62.4 billion lek, an increase of 9.5% compared to the previous year. The main reason was precisely the strengthening of the Lek and the depreciation of foreign currencies and monetary gold in the foreign exchange reserve of the Bank of Albania.

Despite the fact that the capital position remains negative, the Bank of Albania, in the notes to the financial statements, once again assesses that it remains well-capitalized based on the capital realized, even though the strengthening of the Lek currency against the currencies in which the foreign exchange reserve is invested, has eroded its capital. According to the Bank of Albania, revaluation gains or losses are volatile and subject to economic factors outside the direct control of the Bank of Albania, which may reverse with changing global economic conditions./ Monitor