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Free AccessMNI: Italy Net Bad Loans Seen At E66 Billion in Oct - ABI
By Silvia Marchetti
ROME (MNI) - Total bad loans sitting on Italian lenders' balance sheets
rose to E66 billion in October, up from E65.7 billion a month earlier, Italy's
Banking Association said Friday.
However, the total is still among the lowest levels seen in the past two
years, as banks continue to boost their financial solidity.
October net bad loans have dropped significantly from the E86.8 billion
peak in December 2016, and by roughly E23 billion since November 2015 when they
hit a record E89 billion, the ABI said in its December outlook report.
The ratio of net bad loans as a proportion of total lending stood at 3.79%
in October. 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 15.07% in October, down from 19.25% 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 reduced by over
25% in the last few months.
Italy's government last year passed a decree aimed at tackling the problem
through a plan aimed at supporting lenders remove 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 called for the
creation of a European level NPL market.
Market operators and public authorities are jointly working to create a
specific market for NPLs, lacking in Italy, 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 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 pick-up in lending to both
firms and households, with a 1.3% annual increase in November. The low in the
country's prolonged credit crunch, triggered by the triple-dip recession, was in
2012 when it fell by 4.5%.
In October, according to latest ABI data, mortgage loans grew an annual
3.4%, demonstrating that family consumption rates and purchasing power were
finally recovering as the economy picks up.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MAIDS$,M$E$$$,M$I$$$,M$X$$$,M$XDS$]
To read the full story
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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.