12 March, Blasting News
The Canadian rating agency DBRS has published a report with the title “Italian Banks Make Progress on Restructuring in 2017 and Raise Targets for NPL Reduction” in which it recognizes the efforts by the Italian banks to reduce the NPLs, especially due to increased demands of the surveillance authorities.
The ratio between the gross credits and the total credits, also known as gross NPL ratio, is expected to set at 10% or below for the period 2019-20, if the business plans recently disclosed will be respected. Profitability is still modest, and it will probably necessary to act on the asset quality and on the internal efficiency.
Speeding up the NPL reduction
Analysing the recent activities, Dbrs has observed that the total NPL stock has reduced to 245 billion at the end of 2016, and to 209 billion at the end of 2019 thanks to the combined effect of the fewer new exposures classified as bad loans, as well as the securitisations mostly carried out through Gacs that it’s possible to apply on the senior tranches.
This process reduction should accelerate in the next years, according to the disposal operations recently announced: Intesa Sanpaolo and Unicredit are aiming at a reduction of the gross NPL ratio by 5%.
Other medium-sized banks are aiming at bringing their stocks at 10% by 2019-20, with a total reduction valued 90 billion euro.
Concluding its report, DBRS stresses how profitability is still poor. The causes are the low values of yields at a system level, the high competition, especially for low-risk clients, the changes in the issuance system, the rise of financial brokerage through online channels and brokers other than banks and, finally, the reduction of the returns of state debt securities. As confirmed in many business plans, the solution is the promotion of asset management activities, trying to increase the earnings related to the management fees.
Source: Blasting News
Translator: Cristina Ambrosi