MNI: Italy ABI Sees Net Bad Loans At E65.8 Billion in Sept

By Silvia Marchetti

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

balance sheets slightly increased to E65.8 billion in September, up from E65.3

billion a month earlier, Italy's Banking Association ABI said Tuesday. It is

however still among the lowest levels reached in the last two years as banks are

boosting their financial solidity.  

     September net bad loans dropped significantly compared to the E86.8 billion

peak in December, and by roughly E23 billion compared to November 2015, when

they hit record E89 billion, the ABI said in its November outlook report.

     The ratio of net bad loans as a proportion of total lending stood at 3.82%

in September. 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) was at 15.01% in September from 19.29% a year earlier, the ABI

said.

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

seems to be consolidating, with lenders cleaning their balance sheets. Progress

has been made in addressing excessive bad loans and bank recapitalisation needs.

According to Rome's Treasury, NPLs were reduced by more than 25% in the last few

months. 

     Italy's government last year passed a law aimed at tackling the problem

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

disposal procedures. 

     Bank of Italy governor Ignazio Visco recently acknowledged that lenders had

made significant efforts in clearing their balance sheets, but called for the

creation at European level of a market for NPLs. 

     Market operators and public authorities are jointly working to create a

specific market for NPLs, which Italy has so far lacked, in order to reduce the

total burden of E300 billion still weighing on banks' balance sheets and

hampering credit revival. 

     The plan, which was approved by the European Commission after a long

stalemate in negotiations with Italy, envisages the sale of state guarantees to

market operators willing to purchase bad loans from ailing banks. 

     The public guarantee, however, would be valid only for "senior class" loans

that are most likely to be recovered according to bank ratings. The price of the

guarantee would be set at market conditions, thus ruling-out the risk of any

kind of public aid in favour of lenders which had initially forced the EC to

voice concern and reject a previous draft plan presented by the government. 

     The ABI report confirmed a "consolidation" in the recent lending pick-up to

both firms and households, with a 0.9% annual increase in October. The trough in

the country's prolonged credit crunch, triggered by the triple-dip recession,

was in 2012 when lending fell 4.5%.

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

annual 3.3% demonstrating that household consumption rates and purchasing power

were finally recovering as Rome's government expects 1.5% GDP growth for this

year.  

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

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