MNI DATA ANALYSIS: Italy Jan Net Bad Loans E59.3 Billion - ABI

--January Bad Loans Fall Sharply From Dec Levels, Down E5.1 Bln

By Silvia Marchetti

     ROME (MNI) - The volume of net bad loans sitting on Italian lenders'

balance sheets fell to E59.3 in January, down from E64.4 billion at the end of

2017, Italy's Banking Association said Tuesday.

     It is among the lowest levels seen in the last two years, as banks are

boosting their financial solidity and reducing the stock of bad loans.

     January net bad loans are now E27.5 billion below the E86.8 billion peak

seen in December 2016, the ABI said in its March outlook report, as the volume

of bad loans has shrunk over 30%.

     --ASSET RATIO DOWN

     The ratio of net bad loans as a proportion of total lending stood at 3.4%

in January. At the end of 2016 the ratio was 4.89%, the highest since 2015.

Before the outbreak of the crisis in 2007, the ratio stood at 0.86%.

     The ratio of net bad loans as a proportion of total bank assets (capital

and reserves) fell to 13.36% in January from 17.19% a year earlier, the ABI

said.

     Despite the slight monthly fluctuations, the general downward trend in NPLs

seems to be consolidating, as lenders are cleaning their balance sheets.

Progress has been made in addressing excessive bad loans and bank

recapitalisation needs.

     According to recent Bank of Italy data, the total stock of NPLs, net of

loan loss provisions, has fallen from a peak of E200 billion in 2015 to current

E140 billion.

     --NPL MARKET

     Italy's government passed a law in 2016 aimed at tackling the emergency

through a plan aimed at supporting lenders get rid of risky loans by speeding up

disposal procedures. Bank of Italy's governor Ignazio Visco recently

acknowledged that lenders had made significant efforts in clearing their balance

sheets but he called for the creation of a European level NPLs market.

     Market operators and public authorities have boosted efforts to create a

specific market for NPLs in order to reduce the remaining burden still weighing

on banks' balance sheets, hampering the credit revival.

     The ABI report confirmed a "consolidation" in lending to both firms and

families with a 1.9% y/y increase in February. The trough in the country's

prolonged credit crunch, triggered by the triple-dip recession, was in 2012 when

it fell 4.5%.

     In January, according to latest updated data by ABI, mortgage loans grew

annual +3.2% demonstrating that family consumption rates and purchasing power

were finally recovering as Rome's government expects at least 1.5% GDP growth

for this year.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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