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Free AccessMNI INTERVIEW: Italian Banks Face Only Marginally Higher NPLs
Italian banks' gross nonperforming loans will increase marginally in 2022 but begin to decline again in 2023, the general manager of the Italian Banking Association, Giovanni Sabatini, told MNI.
A slight deterioration in asset quality is expected in the coming months as "a delayed effect of the macroeconomic shock of 2020," Sabatini said in an interview, expressing confidence that fiscal stimulus put in place during the Covid crisis will be withdrawn only once Italy's economy has resumed its pre-pandemic growth trajectory by around 2024, in line with government forecasts.
In June 2021, defaults by households and businesses hit historic minima, with the stock of gross NPLs in the Italian banking system at EUR100 billion and net NPLs of EUR49 billion running at 4.2% of total loans, the lowest on record, Sabatini said. Gross NPLs fell from EUR104 billion in December and EUR147 billion at the end of 2019, according to the association's estimates.
BANKING UNION
Italian banks' ability to deal with NPLs has also been improved by rising capital, with CET1 ratios of 15.5% in March up 1.6 percentage point from December 2019 and close to the European average, Sabatini noted. His comments came after the president of the Spanish Banking Association told MNI that fears of a wave of Covid-era defaults had proved unfounded (MNI INTERVIEW:Spain's Covid NPL Surge More Ripple Than Tsunami)
Asked about a recent call by the ECB's top banking supervisor, Andrea Enria, for eurozone banks to open branches rather than establish subsidiaries in other member state countries even before work on European banking union is finalised, Sabatini said he shared Enria's ambition for a more integrated regional banking market within the existing rules. But banks should be able to choose how to expand abroad in line with their business interests, he added.
"The choice should not be conditioned by regulation," he said.
Limits under Basel III rules on the extent to which banks can include capital instruments issued by lenders in which they have acquired a minority interest in their own prudential calculations also remain an obstacle to greater banking consolidation, Sabatini said.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.