The volume of Italy’s banks’ net bad loans fell to €24 billion in August, down from €32 billion a year ago and €40 billion in 2018, Italy’s Banking Association, ABI, said Tuesday in a report.
Since November 2015, when the highest peak in bad loans reached €89 billion, there has been an overall drop of – €64 billion.
The ratio of net bad loans as a proportion of total lending stood at 1.4% in August. At the end of 2015, the ratio was 4.89%. Before the outbreak of the crisis in 2007, the ratio stood at 0.86%.
The ABI report confirmed a “consolidation” in lending revival to both firms and families with a +4.8% annual increase in September. Bank deposits grew annual +€125 billion in September, but bank bonds issuance fell -€15 billion.
Italian banks have been cleaning up their balance sheets since before the outbreak of the COVID-19 pandemic and are currently benefitting from roughly €90 billion in state-backed loan guarantees to support ailing firms.
The general downward trend in NPLs seems to be consolidating, said the ABI. Italy’s banking lobby is pushing for a revision at European level of NPLS classification criteria following the pandemic outbreak.
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 and hampering credit revival. In 2017, Italy’s government cleared a decree aimed at tackling the emergency through a plan aimed at supporting lenders to get rid of risky loans by speeding up disposal procedures.
According to the ABI report, loan borrowing costs in September stood at 2.27%, down from 6.18% at the end of 2007. The yield spread between funding and lending rates was 1.75 in September, down from 3.35 in 2007, added the report.