Annual Report 2010 03 August 2011 - Banka Qendrore e ...

Annual Report 2010
CBK
portfolio increases the need for further development of credit risk assessment capacities at
the commercial banks, in order to ensure that that further expansion of lending by banks is
conducted on sound lending practices, by not jeopardizing the system’s performance.
The structure of NPL has constantly been dominated by loans classified as ‘loss’. However,
in December 2010, the share of these loans to total NPL was 59.5 percent or 12.5 pp lower
compared to 2009. Whereas, the share of loans classified as ‘doubtful’ increased to 40.5
percent of total NPL. In 2010, loans classified as ‘loss’ increased by euro 10.8 million (27.3
percent), while loans classified as ‘doubtful’ increased by euro 19 million (122.5 percent).
Regarding the structure of NPL in terms of economic agents, it can be noticed that during
2010, the household loan portfolio has not experienced any change with regard to the
quality compared to the previous year (Figure 21). On the other hand, the portfolio of loans
designated to non-financial corporations was characterized with higher sensitivity towards
economic difficulties that appeared as a consequence of the financial crisis. During this
period, 5.3 percent of loans to enterprises were classified as NPL, which represents a
growth of 0.2 pp compared to 2009.
Kosovo’s banking system has Figure 22. NPL and provisions
continuously shown to be
7%
conservative in terms of NPL
coverage with loan loss provisions.
In December 2009, coverage ratio
of NPL with loan loss provisions
stood at 125 percent, whereas the
average for the last four years was
6%
5%
4%
3%
2%
130 percent (Figure 22). In 1%
December 2010, provisions 0%
amounted at euro 93.2 million,
compared to euro 77.4 million in
December 2009. The high level of
NPL/Total loans
Source: CBK (2011)
NPL coverage ratio indicates that
the actual level of NPL does not threat the stability of the banking system.
December 2007 December 2008 December 2009 December 2010
Provisions/NPL (right axis)
160%
140%
120%
100%
80%
60%
40%
20%
0%
42 |
iii. Solvency risk
Figure 23. Capital adequacy of banking sector
One of the most important 20%
16.9% 16.7%
indicators for measuring the 18%
17.9% 18.7%
banking system sustainability is
the Capital Adequacy Ratio (CAR).
In 2010, Kosovo’s banking system
increased its CAR to 18.7 percent
compared to 17.9 percent in 2009
(Figure 23). This level is quite
satisfactory considering that it is
well above the minimal level of 12
16%
14%
12%
10%
8%
6%
4%
2%
0%
December 2007 December 2008 December 2009 December 2010
percent that is required by the
CAR Tier 1 capital/risk-weighted assets Capital/Assets ratio
CBK regulative. All commercial Source: CBK (2011)
banks operating in Kosovo are well
capitalized and do not have any difficulty to fulfil the criterion of 12 percent for the CAR.
The increase of this indicator during 2010 was driven by the faster growth of capital (13