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European banks Still too many NPL. Watch out for Intesa and UniCredit

11 June, Money.it

Non-performing loans are still a big problem for Italian and European banks. According to the latest analysis by Moody’s, the banking sector is far from having recovered.

The Italian and European banks are still struggling with non-performing loans which, despite the efforts, are still abundant in the accounts of the biggest banks.

The Moody’s analysts have assessed 28 European banks, showing the persistence of NPL, especially in the smaller economies.

The reference to Italy is almost obvious. In the country, bad loans were 11.1% of the total loans at the end of 2017, earning to Italy the fourth place in the chart among the countries taken into exam.

“Despite the results reported so far, the NPL level is still relatively high, reflecting the financial and economic crisis that hit Italy harder than other countries”, noted the analysts.

NPL: what’s the situation in Europe?

There have been only Portugal with 15.2%, Cyprus with 38.9%, and Greece with 44.9% to do even worse than Italy, considering that the average in Europe is 5%.

On the overall, the total NPL stock of the European banks was set at 813 billion euro at the end of 2018, while at the beginning of 2015 the value was around 1,120 billion.

Who has improved and who has worsened

Moody’s has also shown the gap between the banks that have improved their accounts and the European banks where the NPL ratio of the total credits has deteriorated.

Regarding the first group, the experts have quoted the performance of Royal Bank of Scotland as an example, which managed to lower the NPL ration from 8.9% to 2.9% from 2013 to 2017. Commerzbank has also done well, going from 6.3% to 2.6%, along with Lloyds, with a reduction from 6.4% to 1.7%.

It’s not surprising to find among the “worse” European banks the Italian Intesa Sanpaolo and UniCredit. At the end of 2017, the NPL ratio of the two banks was the highest, respectively 11.9% and 10.2%, having decreased from the previous 15.5% and 15.4%.

Italian banks didn’t excel either in capital strength. Intesa Sanpaolo has increased from 11% to 14%, while UniCredit from 10% to 14%, considering that the average Tier1 in Europe has grown from 14.2% to 17.2%.

Source: Money.it

Translator: Cristina Ambrosi

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