Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 33 n° 335

Italian banks’ asset-quality trends positive through 2018

Posted by fidest press agency su lunedì, 10 settembre 2018

Scope has long indicated that it views the large stock of Italian non-performing exposures (NPEs) as a legacy issue, and manageable for most Italian banks. From their peak, NPEs had declined by a quarter to EUR 258bn by March 2018. In a report out today, Scope says the rapid decline in NPEs will continue and expects gross sector NPEs to fall to around EUR 200bn by the end of 2018 and below EUR 150bn in 2019.Just as growth in 2017 was driven by UniCredit’s EUR 17bn Project Fino portfolio sale, 2018 has seen several mega-deals, including the EUR 24bn GACS-assisted NPL securitisation by MPS; the EUR 18bn NPL sale by the Venetian banks to SGA; and the EUR 10.8bn transaction between Intesa and Intrum. BPM and UBI also completed sizeable transactions (EUR5.1bn and EUR3.5bn, respectively), and several smaller banks transacted significant deals.
Intesa (A, Stable) and UniCredit (A, Stable) have both published business plans which explicitly include NPE reduction as a strategic priority and they have already executed significant actions aimed at such reductions. Both banks are rapidly progressing towards their asset-quality targets and will in Scope’s view over-deliver.In Q2 2018, Intesa reported a gross NPE ratio of 9.3% (net NPE ratio 4.6%). That’s already half way to the long-term target in the first six months of the bank’s four-year plan.UniCredit is only midway through Transform 2019, initially presented in December 2016. Since then, it has improved on its targets twice: in December 2017 it revised down its 2019 NPE ratio target to 7.8% (from 8.4%) and in the Q2 2018 results presentation it slightly reduced the 2018 target for non-core run-down to EUR 19bn from EUR 19.2bn. The run-down of non-core should be completed by 2021.Troiano added a general note of caution, however: “There are some clouds on the horizon, mostly related to policy uncertainty following the March elections,” he said.However, the renewal of the GACS scheme until March 2019 will likely continue to support the market in the last quarter of the year and into the beginning of 2019, according to Scope.On the political front, the agreement between League and M5S seeks to undo a series of reforms that Scope had deemed positive. Specific to banks, the government agreement mentions the suppression of any regulation that allows action against debtors without court authorisation. This would lengthen NPE recovery time and probably lower recovery rates for banks. The roll-back of pension reform is another key point of the government agreement.On top of this, the macroeconomic outlook has softened: in July, the Bank of Italy cut its GDP growth forecast for 2018 from 1.5% to 1.3%, and for 2019 from 1.2% to 1.0%. If the uncertainty has a more prolonged impact on growth, banks could be looking at a new wave of credit deterioration while also reducing investor appetite for NPE sales.

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