BPM In Talks Over NPLs: Should Be Spread Positive, Wider Implications For Consolidation

Banco BPM (BAMI IM) reported as looking to sell package of bad loans. Generally good for spreads and pricing will give an indicator of clearing level for Italian distressed.

• Italian press (MF) is reporting BPM in talks to sell as much as EUR400m of leasing assets which are poorly performing. This is around 0.4% of the loan book (so very small) but over 10% of non-performers, so should be spread positive.

• Finding the clearing price for such assets has wider implications: BPM, alongside Monte Paschi and BP Sondrio have been talked about as takeover targets (in the long saga of Italian banking consolidation). Understanding NPL value could be a key to unlocking the valuation arguments around these banks and catalysing a sale process.

• However, it should be remembered that Italian banking is highly politicised and, even when the financial and industrial logic can be made to align, finding an end-game could be a distant prospect.