Tuesday, February 20, 2018 - 09:02

MNI: Italy Net Bad Loans Fall To E64.4 Billion In 2017 - ABI

By Silvia Marchetti

ROME (MNI) - The volume of net bad loans sitting on Italian lenders' balance sheets fell to E64.4 billion at the end of 2017, down from E65.9 billion a month earlier, Italy's Banking Association said Tuesday.

It is among the lowest levels reached in the last two years as banks are boosting their financial solidity and reducing the stock of bad loans.

December net bad loans significantly dropped by 25.8% compared to the E86.8 billion peak of a year earlier, and by roughly E24 billion since November 2015 when they hit a record E88.5 billion, the ABI said in its February outlook report.

The ratio of net bad loans as a proportion of total lending stood at 3.7% in December. 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) fell to 14.83% in December from 19.69% a year earlier, the ABI said.

Despite modest monthly fluctuations, the general downward trend in NPLs seems to be consolidating, as lenders are repairing their balance sheets. Progress has been made in addressing excessive bad loans and bank recapitalisation needs.

According to recent Bank of Italy data, the total stock of NPLs, net of loan loss provisions, has fallen from a peak of E200 billion in 2015 to current E140 billion.

Italy's government passed a law in 2016 aimed at tackling the emergency 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 cleaning 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 in order to reduce the remaining burden on banks' balance sheets, hampering a credit revival.

The ABI report confirmed a "consolidation" in lending to both firms and families with a 1.8% annual increase in January. The trough in the country's prolonged credit crunch, triggered by the triple-dip recession, was in 2012 when lending fell 4.5%.

In December, according to latest updated data by ABI, mortgage loans grew annual 3.2% demonstrating that family consumption rates and purchasing power were finally recovering as Rome's government expects at least 1.5% GDP growth for this year.

--MNI London Bureau; tel: +44 203-586-2225; email:

[TOPICS: MAIDS$,M$E$$$,M$I$$$,M$X$$$,M$XDS$]

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