The banking sector grew by 4.7% last year. According to data from the Bank of Albania, the total assets of the sector at the end of 2023 reached 1.965 trillion lek.
The pace of asset growth slowed from the 5.8% level in 2022, but it is still considered that a determining factor in the slowdown of banking sector growth was the exchange rate effect. At the end of 2023, the euro-lek exchange rate was annually down by 9.1%, which also affected the value of assets in the European currency of the banking sector.
51% of the total assets of the banking sector are in foreign currency, mainly in euro. However, the specific weight of assets in foreign currency decreased from the 52.8% level at the end of 2022, precisely due to the exchange rate effect.
The increase in assets during the past year was mainly concentrated in the segment of debt securities. The total investment in debt securities reached 682.7 billion lek, an increase of 10.5% compared to a year earlier. During the past year, interest rates on the euro and the US dollar in international markets showed significant increases, following the tightening monetary policies of the respective central banks. This was reflected in a generally increasing trend of yields, increasing returns from foreign currency debt securities.
This also simultaneously influenced the growth of the value of non-resident assets, which reached 422.7 billion lek, an increase of 6.8% compared to the end of 2022.
Meanwhile, in the local currency, the yields of government securities restrained the rapid growth of the second half of 2022, but nevertheless, banks continued to increase investments in these instruments, which continue to offer quite satisfactory returns relative to risk.
The gross loan portfolio (excluding provisions for problem loans) at the end of last year reached 735.9 billion lek, an increase of 3.4% compared to the end of 2022. The gross credit growth is slightly lower than that reported in net terms, due to the increase in total provisions. According to the Bank of Albania, the state of provisions to cover losses from loans at the end of 2023 reached 22.4 billion lek, an increase of 8.4% compared to a year earlier.
Also, it is estimated that the loan portfolio was more influenced by the negative effect of the exchange rate, due to the higher weight of assets in currency compared to the volume of investments in debt securities.
The other important group of assets, that of treasury and interbank operations, saw a decrease last year to 510.4 billion lek, 1.8% less compared to a year earlier. This group includes the liquidity items of assets, such as monetary instruments, placements with the central bank, treasury bills, and placements with banks and other financial institutions, mainly abroad.
