Ardian Fullani: The Albanian economy and the banking sector in 2010 Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the reception of the Albanian Association of Banks, with bankers and representatives of banks operating in Albania, Tirana, 17 December 2010. *  *  *  Dear bank executive managers, Dear participants, It is always a pleasure to meet once the year-end approaches to make a summary of events that characterized the Albanian economy and the banking sector over the course of 2010. The Albanian economy is forecast to grow in 2010 slightly higher than in 2009. Industry and services provided the largest contribution to the positive economic growth, yielding as well a relative improvement in the balance of payments’ current account. Lek’s exchange rate was more stable compared with the preceding year, whilst consumer prices fluctuated within the Bank of Albania’s target of 3%. Fiscal policy engaged in a process of fiscal consolidation during the present year, which we consider as critical in order to preserve the budget deficit and domestic debt levels and keep the level of interest payments in check. Developments in the financial system attest to the full recovery of public confidence in the banking system. As at end of the third quarter of 2010, total banking sector assets accounted for 81.7% of GDP, up 12.2% y-o-y versus merely 0.9% in the same period in 2009. Deposit growth and higher capital account provided the major positive contribution to the expansion of banking sector activity.
Deposits have grown by 18% y-o-y, out of which more than 2/3 of this figure represents foreign currency-denominated deposit growth. Banking sector treasury and interbank operations declined versus the same period in 2009. Liabilities to non-residents have dropped by 32% y-o-y. Concerning the composition of banking sector assets, we note that lending has grown by 8% on a yearly basis. The annual growth rate of lending has been constantly downward in the last couple of years. Banking sector and interbank operations have grown by about 25% on a yearly basis. Banking sector investments in non-resident assets increased by 53% y-o-y. Net profit was positive and substantially higher than in the same period in 2009. Return on Assets and Equity stood at 0.6% and 6%, respectively. Capitalization and liquidity figures were at adequate levels. Capital adequacy ratio was estimated at 15.7%, while liquid assets accounted for 28.9% of total assets. As part of the regular stress-test analyses conducted by the Bank of Albania, in the context of a more comprehensive risk evaluation, the banking sector results stable. Let me now elaborate on some issues I find critically important for the future. The banking sector weathered the hard liquidity situation in year-end 2008 and early 2009 successfully. Following that period, public deposits in banks have grown at stable rates and liquidity has improved markedly. However, lending has contracted pronouncedly, initially as a result of the higher credit risk and later, due to the fall of business and consumer demand for loans.