UniCredit has sold non-performing loans worth €1.54bn in an effort to reduce its exposure to bad debt, as banks come under pressure to clean up their balance sheets in anticipation of a wave of defaults related to Covid-19.
Italy’s largest lender by assets said that the two portfolios of non-performing unsecured loans — made to small and medium-sized enterprises and worth €702m and €840m — had been bought by digital bank illimity, Banca Ifis and a securitisation vehicle managed by digital bank Guber Banca and Barclays.
Last month Monte dei Paschi di Siena offloaded €8.14bn of NPLs to AMCO, a state-owned asset management company.
The pace at which Italian banks have slashed their exposure to NPLs has declined in 2020 compared with the past five years although it is expected to pick up again.
“In the first half of 2020, there was a 65 per cent contraction on NPE [non-performing exposure] transactions compared to the same period of the previous year,” said Andrea Clamer, head of distressed credit investment at illimity.
“The forecast for 2020 and 2021 is around €25bn yearly in terms of gross book value disposed [and] this figure is expected to double for 2022 up to €40bn-€45bn.”
Analysts expect Italy’s NPL levels to grow from the current 6 per cent of total banking assets to 11 per cent next year as businesses struggle to repay their debt because of the extended economic shutdown.
In May, UniCredit made a €1.3bn provision to cover an expected surge in bad loans, the highest figure among Italian banks.
The risk of defaults in the short term has been offset by a government loan-guarantee scheme and moratoria on payments. But several bank executives and economists told the Financial Times that Italian lenders were expected to announce additional loan loss provisions when they publish their third-quarter earnings next month.
“The big question mark on NPLs is what happens when payment moratoria are phased out,” said one banking executive. “Banks are moving quickly to clean up their balance sheet and identify their likely future defaults because the government’s measures give them some breathing space until the end of this year.”
The repayment of debt worth €289bn has been suspended until December, according to Bank of Italy data. Two-thirds of this is held by non-financial corporates, most of which are SMEs.
Rating agency Cerved said Italian businesses with a B to triple B rating, which applies to about two-thirds of SMEs, are the ones facing the highest default risk because of the pandemic.
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