MNI: Italy Bank Lobby Sees Net Bad Loans At E66.3 Bln in Nov

By Silvia Marchetti

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

rose to E66.3 billion in November, up from E65.9 billion a month earlier,

Italy's Banking Association said Tuesday.

     It is however still among the lowest totals seen in the last two years, as

banks continue to their financial solidity, with the overall trend of bad loan

stock falling.

     November net bad loans dropped compared to the E86.8 billion peak in

December 2016, and by roughly E23 billion against November 2015 when they hit

record E89 billion, the ABI said in its January outlook report.

     The ratio of net bad loans as a proportion of total lending stood at 3.74%

in November. At the end of 2016 the ratio was 4.89%. 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 15.04% in November, down from 19.24% 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 Rome's Treasury, NPLs were down by over 25%

in recent months.

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

through a plan aimed at helping lenders speed up risky loan disposals.

     Bank of Italy's governor Ignazio Visco recently acknowledged that lenders

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

creation of an NPL market at European level .

     Market operators and public authorities are jointly working to create a

specific market for NPLs in order to reduce the total burden of E300 billion

still weighing on banks' balance sheets and hampering the credit revival.

     The plan, 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 lending pick-up to both

firms and families with a 2.3% annual increase in December. The trough in the

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

2012.

     In November, mortgage loans grew annual 3.4% demonstrating that household 

consumption rates and purchasing power were finally recovering, according to

latest updated data by ABI.

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

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