The Governor of the Bank of Albania, Gent Sejko, said in his report to the Albanian Parliament that the consolidation process has strengthened the Albanian banking sector. According to him, from this process the banks have emerged healthy and this was proven last year, when the banking sector was put under the test of the pandemic.
Governor Sejko said that the Bank of Albania already estimates the number of banks in the market at optimal levels. However, according to him, further consolidation can be positive and can further strengthen the system.
"This week, the Greek media announced that Alpha Bank has decided to put up for sale its subsidiary in Albania. The sale of Alpha Bank in theory could lead to further consolidation of the banking sector in Albania, if the buyer will be one of the existing banks in the market. Overall, the interest of existing banks in buying competitors for sale in recent years has been high, even given that outbound bank sales have been made at affordable prices for buyers.
The crisis-driven sales process in the Albanian banking sector began in 2015, when the French bank Credit Agricole launched its bank in Albania. The process continued with the sale of Veneto Bank to Intesa Sanpaolo (group level transaction), NBG Albania to American Investment Bank, Tirana Bank to Balfin Group, International Commercial Bank to Union Bank, as well as exit from the market through liquidation of the Credit Bank of Albania. The process reduced the number of commercial banks from 16 to 12. The share of banks from the Eurozone has decreased, while the market share of domestic banks has increased significantly, which at the end of 2020 reached 31%, from 15.5% in end of 2015.
Consolidation of the financial sector is an advisable process by specialized institutions in case of crises that bring significant negative consequences for the system. Banks created by sales or mergers are bigger, healthier and with more motivated investors. These premises in themselves usually positively affect competitiveness, offsetting the effect of reducing the number of actors in the market.
In these first years after consolidation, the Albanian banking sector seems more dynamic and lending in recent years is significantly improving. From the end of 2015 to the end of 2020, the loan portfolio increased by 7.6%. The figure may not be very large, but it should include the effect of clearing bad loans and the depreciation of the euro in the lek exchange rate. In the last five years, banks have written off more than ALL 70 billion in bad loans, while the euro has depreciated by approximately 12% against the lek, which gives a statistically significant impact on the foreign currency loan portfolio' said Sejko.