The decline has also been reflected in the main profitability indicators. Return on Equity (ROE) fell to 14.03%, from 16.69% a year earlier, while Return on Assets (ROA) declined to 1.39%, from 1.66%.
At first glance, this may appear to be a negative signal for the sector. However, the figures point to a more complex situation: banks continue to expand their activity, while profit margins are facing greater pressure.
Interest Rates Are Changing the Game
One of the main factors behind the decline in profits is the reduction in interest rates.
For banks, the difference between income from loans and the cost of funding is an important component of profitability. When interest rates decline, pressure on interest income may increase, particularly if expenses do not fall at the same pace.
At the same time, competition for deposits has added pressure to banks’ costs. Data for 2025 indicate that the decline in interest rates, combined with increased competition for deposits, affected net interest income and the profitability of the sector.
In other words, banks are operating in an environment where the price of money is changing and competition is becoming stronger.
Lending Is Growing, but Return on Equity Is Falling
One of the most interesting developments is that the decline in profitability is occurring at the same time as the sector’s balance sheet continues to expand.
At the end of May 2026, the loan portfolio reached approximately ALL 986.2 billion, while deposits increased to approximately ALL 1.89 trillion, compared with ALL 1.73 trillion a year earlier.
This means that banks are not facing a lack of activity. On the contrary, lending is growing and demand for financing remains strong.
The challenge is different: how much profit does a bank generate from the capital it has invested and from the activity it carries out?
This is why indicators such as ROE and ROA are important. They show not only how much a bank earns in absolute terms, but also how efficiently it generates profit from its capital and assets.
What Could Change for Customers?
A banking sector operating with narrower margins may become more competitive for customers.
Banks may seek to expand lending, attract more deposits, and increase revenue from services and other financial products. In a market where differences between banks become more important, competition may be reflected in interest rates, fees, loan terms, and deposit offers.
For customers, this means that choosing a bank should not be based solely on the institution’s name or on a single interest rate.
A loan with a lower interest rate may come with other fees. A deposit offering a higher interest rate may have different terms. And a product that initially appears more attractive may not necessarily be the most suitable option overall.
Source: Albanian Association of Banks • Bank of Albania • Albanian Daily News
FINARCH RECOMMENDS
When the market changes, the way we choose financial products should change as well.
A decline in banks’ profitability does not necessarily mean that the sector is facing difficulties. On the contrary, the data show that banks continue to maintain a high level of activity and lending is expanding. However, pressure on margins and increasing competition may create more alternatives for customers.
For individuals and businesses, this is another reason to compare offers before making a financial decision.
Do not look only at the interest rate. Analyze the total cost, fees, term, terms and conditions, and flexibility of the product.
Our recommendation:
Do not choose a bank solely based on the offer that appears to be the best. Compare the entire package and make your decision based on cost, terms and conditions, and your financial needs.
In an increasingly competitive market, information and comparison can make a difference.
This material is for informational purposes only and does not constitute individual investment advice.