Assets of investment funds have fallen for the second consecutive quarter. According to data from the Financial Supervisory Authority, net asset value at the end of June was ALL 66.5 billion, down 8.6% since the beginning of the year. The market is falling, not only in volume but also in number of members. By the end of June, the number of members fell to about 29,000, from 31,000 at the end of last year. The fall in the market is due to a downward trend in the size of the two larger funds managed by Raiffeisen Invest.

All in ALL, Raiffeisen Prestig’s fund decreased its net assets by 7.7%, while the euro-denominated fund Raiffeisen Invest fell by more than 15.6%. On the contrary, the Credins Premium investment fund has been growing at 44% since the beginning of the year, although this growth has come from a low base. Credins Premium assets have exceeded 10 million euros. This year, the investment fund Top Invest has started, but the market share of the new fund is currently negligible.

After a rapid growth in the first years, investment funds have entered a stagnation phase, coupled with limited investment alternatives, at least as far as ALL assets are concerned. These funds invest mainly in government bonds .The market needs new instruments and potentials are great, especially for corporate bonds, which have been issued with private bidding for years. But regulatory restrictions do not currently allow funds to invest in Albanian company bonds.

Local banks are growing further in 2018, factorizing even more within the financial system, while the largest capital banks in the euro area are still lowering their market share.

According to data provided by the Albanian Association of Banks, in the middle of this year, the National Commercial Bank and Credins (NCB or BKT) continued to grow at high rates, while Raiffeisen and Intesa Sanpaolo further shrunk.At the end of June, NCB owned ALL 402 billion of assets or 27.96% of total banking system assets. The market share of NCB has increased by 1 percentage point in one year.

Meanwhile, Raiffeisen in the middle of this year owned 16.38% of market assets, from 17.93% a year earlier.After the crisis and the strengthening requirements of regulatory capital by euro area regulators, Raiffeisen has started a process of reducing the size of its activity in Albania. Credins Bank has strengthened its position as the third largest bank in the country with a total assets of ALL 185 billion or 12.91% of system assets.

Credins has increased its market share by 1.1 percentage points in a year .It is likely that in recent years within a medium-term horizon, Credins will become the second largest bank in the country. Intesa Sanpaolo bank is right behind and holds a market share of 10.92%, down from 11.25% a year earlier.

Among the euro zone banks, the only ones that have grown in the last 12 months covered by the statistics are Societe Generale, which has reached 5.92% of the market and Alpha Bank, which owns 5.31% of assets. However, the French bank has decided to leave Albania and has just formalized the agreement to sell its shares to the Hungarian OTP bank.

Union Bank, ABI Bank and Fibank continued to increase their market share, confirming each with increasing ambition to get a greater share within the banking sector.

Meanwhile, banks that have transferred ownership have been falling and are moving towards joining new buyers. Veneto Bank, which will soon be merged with Intesa Sanpaolo, fell to 1.38% of the market, from 1.8% in the previous year. Even NBG Bank, newly purchased by ABI Bank, lowered its market share to 2.54%, from 2.83% in the previous year.

The banking system recorded an increasing financial result during the second quarter of the year with progressive profit of the banking system amounted to ALL 11 billion. Bank earnings increased by 2.3 times compared to the first quarter. While for the first half of last year, profit has decreased slightly by 4%.

However, given that 2017 was a record year in terms of profits, it seems that the financial performance of the banking system is still high this year. We must say that profits remain very concentrated only in a few large banks, while for the rest of the commercial banks, the profits are in normal value and some of them are in loss.

This year it looks like the most decisive factor in maintaining high profits, is to improve the quality of bank assets. The banking system has recovered nearly ALL 7 billion previously calculated provisions, for possible losses from loans or other financial instruments.

This implies a lower risk rating for the assets. Also, banking system has managed to steadily reduce the ratio of non-performing loans to the level of 13%. According to the Bank of Albania, at the end of June, the ratio of non-performing loans was 13.27%, from 15.58% a year earlier.

Following the approval from Bank of Albania on June 6, 2018, American Bank of Investments is proud to announce today the successful closing of the transaction for the acquisition of NBG Bank Albania.

NBG Bank Albania has been operating in the Albanian market since 1996 and is known for its innovative individual loans.

The Bank has a broad base of customers and extension of the branch network in the main cities of Albania.

Commenting this latest transaction, Mr. Gregory Katz as ABI Bank’s shareholder representative stated that: “This transaction demonstrates the confidence in the Albanian banking market and in the Albanian economy of one of the largest American investors in Albania and the region. The clients of both banks have welcomed this transaction, which will enable the release of unique synergies between ABI Bank and NBG Bank Albania. These synergies made possible by specialized and dedicated staff will create the largest boutique bank in Albania. The American Bank of Investments, over the past two years has become a success story marking record growth of deposit, profit, liquidity, and capital adequacy. The American Bank of Investments expresses its determination and dedication to the high quality of customer service”.

Kerameus & Partners of Athens, Greece acted as legal counsel to ABI.

Since 1993, NCH Capital is one of the largest regional investors. Companies operated by NCH have been doing business in Albania since 2007. In the field of banking and financial services, NCH Capital has deep experience in Romania, Moldova, Ukraine, and Latvia in addition to Albania.

Bank of Albania has drafted a new project for settling the issue of large non-performing borrowers, which have exposures in several banks that operate in the system.

Announced since last year as Tirana Approach, the project foresees the establishment of a common platform between banks to address these cases.

The project foresees that joint treatment of these cases by banks would take a mandatory form, while previously this was done in co-operation between banks, but without a mechanism that legally binds them to pursue this process up to the end.

According to BoA’s regulation, all commercial banks are obliged to engage in this common platform and the platform is granted the right of to supervise and to impose sanctions against non-cooperative banks.

The issue of large borrowers with exposures to several banks has been one of the most important points of the BoA’s strategy to cope with the ratio of non-performing loans.

Some of the cases were resolved with restructuring, some others with the takeover of assets by the lending bank, while a handful of bad creditors were sent to trial for bankruptcy.

Tirana Approach platform will primarily aim at resolving the remaining cases, which according to unofficial data from the Bank of Albania are less than ten.

The regulation proposed by the Bank of Albania has been sent for consultation to commercial banks and is expected to be approved within September.

According to Bank of Albania’s statistics, the ratio of non-performing loans in the first half of this year has stabilized close to 13.5%, while the operational objectives aim to reduce it to the level of 10% by 2019.

The Bank of Albania has given the green light to the establishment of a national payment system in euro.

The project submitted by the Albanian Association of Banks has been approved and is expected to enable significant reductions of bank commissions for domestic transfers made in the European currency.

Currently, Albania has no payment systems in foreign currencies and foreign currency transfers are carried out through correspondent banks outside Albania.

This brings much higher commissions compared to ALL transfers, which are processed through systems managed by the Bank of Albania.

According to the approved project, the euro payment system will be managed by the central bank.

Banks are obliged to hold a mandatory reserve at the Bank of Albania, at the rate of 10% of the deposits they own in each currency.

The project foresees that banks use the euro account at the Bank of Albania as a bridge for conducting internal transfers in euros.

In the required reserve account, banks will place a surplus, which will be used to make transfers from one bank to another.

Thus, if a customer makes a transfer from bank A to bank B, both within Albania, then the transfer of funds will be made between the accounts each bank holds in the central bank.

Subsequently, the receiving bank will transfer this money from its mandatory reserve account to the beneficiary’s account.

This scheme will avoid the involvement of foreign correspondent banks and will drastically reduce the cost of the transfer.

With an unexpected decision, Bank of Albania’s Supervisory Council decided to lower the key interest rate to 1% by setting a historic record for Albania.

Governor Sejko argued the decision with the rapid strengthening of the ALL against the euro, making it even more difficult for Bank of Albania to bring inflation back to the 3% target.

The decline of the key interest rate, in theory, is a measure that can directly affect the exchange rate.

The reduction of the key interest rate increases the money supply in Lek and may lead to the depreciation of the domestic currency.

Sejko also announced an intervention in the foreign exchange market for the euro, which is expected to bring about an appreciation of the European currency vis-a-vis ALL.

Sejko did not offer any details about the measures that these operations would produce, but it should be said that starting from the previous year Bank of Albania has been buying euros in considerable amounts in order to increase the foreign exchange reserve.

Until now, these purchases have failed to prevent the weakening of the euro.

The next intervention may be larger in order to provide a rapid impact on the exchange rate.

However, in addition to the direct impact of the intervention, perhaps the most important may be the psychological effect of the impact of this movement on the actors operating in the market.

After many days in decline, the euro was slightly strengthened and switched Wednesday at the value of ALL 124.42.

This may be the first effect of the intervention of the Bank of Albania in the market.

In recent weeks, there has been a growing pressure from exporting businesses, but also by the opposition, who have urged measures that would curb the euro’s downfall.

Governor Sejko reminded once again that his institution backs the free exchange rate and that this is an extraordinary intervention, only in view of the inflation target, a statement that implies that

Bank of Albania has not been influenced by external pressures in this decision.

SCAN

Today at June 1st, 2018, the Albanian Securities Exchange ALSE received the expert from World Bank Mrs. Adriana Tanasoiu, who is assisting the Albanian Financial Supervisory Authority for studying the market related with the central securities depository in Albania. Mrs. Tanasoiu is an expert with a long experience in the securities industry, because of the long term commitment as a top level manager at the Central Securities Depositary in Rumania.

During the meeting it was discussed regarding the opportunities of clearing and settlement process of the securities that will be traded at ALSE, focusing not only at the Government Securities Depositary (AFISaR), which is administered from Bank of Albania, but also for the importance of existence of another depositary which will administer the process of clearing and settlement of transactions with securities issued by businesses (shares, corporate bonds, commercial paper etc.). Likewise, , a special attention in this meeting was given to the schema of clearing and settlement of cash funds through AIPS system administered from Bank of Albania.

At the end of the First Monitoring made after the completion of the program with Albania, the International Monetary Fund has evaluated the progress of the Albanian economy. The country report underlines that Albanian economy has continued to grow, marking a real growth of Gross Domestic Product by 3.8% during 2017.

In the analysis made for non-banking financial markets, IMF report evaluates positively the work done by AFSA and states that “the Albanian Financial Supervisory Authority has made a substantial progress regarding with the improvement and adoption of a new regulatory framework about the supervision of capital markets and funds, improving the new draft rules on administration of Investment Funds Liquidity, transactions with related parties, etc.”.

AFSA is committed to complete all the recommendation given by the IMF report related with:

  • The regulatory framework for management of Investment Funds crisis, that actually in collaboration with Ministry of Finance and Bank of Albania is toward completion;
  • The creation of a necessary legal and regulatory framework for the new instruments, just licensed Stock Exchange, according to the best international standards.

To read the full report of the Executive Board of IMF, please click here.

In its largest equity investment in the tourism sector to date, the EBRD has signed investment agreements to become a shareholder in D Marinas B.V., the holding company for a network of currently 10 marinas in Croatia, Greece and Turkey, operating under the brand name D-Marin.

The EBRD is investing €70 million for a stake of approximately 25 per cent. The funds will be used to finance the company’s growth plans, including the development of marina management operations, further acquisitions and deleveraging.

D Marinas B.V. is the largest and only international chain of marinas in the Eastern Mediterranean offering approximately 8,000 berths. The company’s ultimate beneficial owner is Doğuş Holding A.S., one of Turkey’s leading business conglomerates and a long-standing partner of the EBRD.

The company’s expansion will support the development of the local tourism sector, promote growth and create jobs. Technical cooperation funds provided by the EBRD Shareholder Special Fund will be used to finance training programmes and work-based learning opportunities for young people and women.

The investment comes under the new EBRD Inclusive Tourism Framework for the Eastern Mediterranean which aims to support local tourism sectors to grow and upgrade through investments in hotels and tourism operators.

EBRD First Vice President Jurgen Rigterink signed the investment in Zagreb today and said: “With this investment the EBRD is demonstrating its long-term commitment to supporting the progress of Croatia’s economy. Tourism is a major driver of growth for the country and we expect this investment to open up new opportunities for local businesses as well as create new jobs. The beginning of the tourism season is the right time to sign such an important investment where the EBRD can provide much-needed capital for the next steps of development in the tourism sector which is so important for Croatia, Greece and Turkey.”

Ferit F. Şahenk, Chairman of the Board of Doğuş Group, said the partnership highlighted Turkey’s efforts and success in terms of becoming a world renowned brand. He added “We are proud that Doğuş Group’s long-term strategy of investing in the tourism and specifically the marina business has been recognised by such an important institution such as the EBRD. This agreement is testament to D Marinas’ success, especially in the Eastern Mediterranean basin where the potential for tourism is still rising and accordingly our strategy is to expand further in the region. I hope that we will continue to look for other valuable investments with the EBRD in and around Turkey. This agreement also underscores the great progress that Turkish businesses have made in recent years globally. I believe our partnership will contribute positively to the cooperation between all sides and create a constructive momentum and motivation for the Turkish business community. I would like to thank both the EBRD for the trust they have shown in us and also my colleagues at Doğuş Group for their substantial support.”

The EBRD signed its first project in Croatia in 1994 and has invested over €3.6 billion in 198 projects in the country to date. The Bank’s activities cover all areas of the economy but are especially strong in the infrastructure, corporate, financial institutions and energy sectors. The EBRD is also engaged in policy dialogue, capital market development and regulatory reform.

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