Banks have reduced risks. The credit has increased

13 June, Il Sole 24 Ore

The credit activity grew in April as loans and deposits grew. According to the outlook, such growth is meant to continue also the second quarter with a 0.3% increase, despite some signs of a slowdown. In the meanwhile, banks continue reducing their exposure risk represented by bad loans and the amounts of state bonds in their portfolios. According to the latest figures by Banca d’Italia published on “Banca e Moneta”, the loans in the private sector, adjusted to take into account of securitisations and other credits that were transferred and thus cancelled from the reports, have increased by 3% on a yearly basis (2.4% in March). Such results are mostly driven by companies (+2.2% for non-financial companies, +1.2% in March). Loans to families have grown by 2.9%, continuing the trend of the previous month.

Since the beginning of 2018, loans to companies have recorded a growth especially for what concerns new investments for big companies operating in the manufacturing and service industries, also thanks to specific refinancing operations by the Eurosystem. We must remember that in 2017 the total loans increased by 1.4% despite the reduction of new loans to the public administration, while loans to privates reached 1,800 billion, a level close to that registered in 2008 but still 16 points below the peak reported by 2021.

Regarding the figures disclosed yesterday, we also note the positive trend of deposit of the private sector (+4.2% on a yearly basis, after the 6% of the previous month), while the bonds market decreased by 17.7% (-17.1% in the last month). Banca d’Italia clarifies that the bad loans have reduced by 10.7% on a yearly basis (the reduction was 10.9% in March). The NPL should further decrease throughout the year thanks to total transfers assessed around 65 billion (35 billion in 2017). According to the plans presented last March to the Surveillance Authority, the impact of bad loans on the total impaired credits is supposed to be of only 5% by 2020.

For what concerns the reduction of state bonds in the banks’ portfolios, there is no risk assessment for these securities. At the end of April, the total of Italian bonds, Treasury bills, Treasury credit certificates and zero-coupon Treasury certificates amounted to 341.8 billion (against the 338 billion in March), namely 53 billion less in comparison with the highest level registered in April 2012, whereas the bonds reduced by 12.5% in 2017. At the end of December 2017, the state bonds stock on the total assets was 9.1%.

Finally, concerning the market conditions, the bank interest rates for loans to families to buy a house, including auxiliary expenses, were 2.20% in April (2.24% in March), while interest rates for consumer credit were 8.34%. The rates for new loans to non-financial companies are also at their lowest, around 1.47% (1.54% in March). More in detail, the interest rates for loans up to 1 million euro have been equal to 1.96%, 1.00% for higher amounts. Finally, the total interest rates receivable for existing deposits have been equal to 0.40%.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Mediobanca: the rise of real estate is almost over

05 February, Requadro

The risk for real estate is on the rise. This is the opinion of the analysts of Mediobanca, according to whom, however, the solid macro foundations of the country might favour the real estate sector still for some time. For the period 2018/2019, the outlook for Italy is positive, both in terms of GDP, cost performance index, namely the efficiency of investments in real estate projects, and employment. However, despite the real estate stocks peaked in December 2017, the growth trend might be over.

In fact, the positive influence of the interest rates is almost finished. Already in December, the nominal rates resumed their growth, as it always happens after having reached the lowest point. Therefore, it’s reasonable to believe, according to the analysts of Mediobanca, that in the next 10 years the risk of an increase in the rates in Europe cannot but to rise. In this way, a not very positive phase for real estate will start.

According to Mediobanca, the commercial real estate in Italy is still solid. The demand from the investors is strong, while the offer, especially of core properties of high quality, is not suitable. As a result, prices and returns remain at interesting levels. For instance, the risk premium is still approximately 300 base points.

More in detail, Mediobanca expects that in Milan rents will grow in the period 2018-2020 by approximately 2-3%, against the +10% registered last year in the core segment, supporting the real estate assets also in periods of standstill. If in 2017 the investments in the commercial real estate in Italy reached a peak of 11 million euro, in 2018 the values will remain stable, with Milan leading the office segment.

Concerning the residential segment, the price reduction has reached 24.2% over the last nine years. This, along with the low interest rates on mortgages and the higher income of Italians, gave new impulse to the purchasing power. In any case, Nomisma expects that in 2018 prices will fall further by 0.3%, followed by a rise in 2019 to the same extent, and a +0.9% growth in 2020. The price rise will concern prime locations, while prices will continue to drop in the other parts, opening to new purchase opportunities.

Regarding real estate stocks, according to Mediobanca, the inclusion of real estate companies into PIRs has been broadly priced between the end of 2017 and the beginning of 2018. On the long-term, the outlook is for a higher liquidity originated by PIRs in the form of more dividend/yields and quality investments, making real estate companies attractive for investments within or outside PIRs.

In this perspective, the most favourite stock by Mediobanca is Coima Res (outperform evaluation with target price raised from 9.2 euro to 10.13 euro). The company, in fact, is well-positioned in the Milan office market, representing 72% of the total. Outperform evaluation also for Igd (with target price at 1.18 euro) that, in any case, will be under pressure till the completion of the capital increase, while the evaluation for Beni Stabili has been downgraded to neutral (target price is 0.78 euro) since its greater exposure to the risk of increase of interest rates due to the composition of its assets.

Source: Requadro

Translator: Cristina Ambrosi

The average fixed mortgage rate is 2.94%

15 January, Corriere della Sera

The average rates published by Banca d’Italia are basically unchanged in the first quarter of 2018. The fixed rate is set at 2.94% while floating rates are at 2.45%. Fixed property leasings are at 3.92% and floating ones are at 3.27%.

Source: Corriere della Sera

Translator: Cristina Ambrosi

Mortgages, the truce is not over

29 December, Il Sole 24 Ore

It will be another good year for Italians that chose the floating rate mortgage, representing two-thirds of the mortgages, even though the fixed rate has been the most popular option in the last three years. Thanks to the ECB that will continue introducing liquidity in the markets, even though a slower pace than in the past, the Euribor, the rate determining the interest rates on mortgages, won’t increase.

We’ll have to wait till the second part of 2019, or even the year after, for a new rise of the interest rates in the eurozone (the first after summer 2011), according to the analysts. For this reason, there are no significant increases of the interbank rates coming up, as they haven’t changed in the last two and a half years and they still have paradoxically the negative sign since then. The market expects to be back to the positive sign in two years and to surpass the threshold of 1% not earlier than 2023.

Therefore, rates will stay well below the average. The payment issues that are still concerning many families, as proved by the over 150 thousand suspension requests received by Abi since March 2015 (more than 2 thousand in 2017), won’t be due to the instability of the rates, rather due to reasons connected with household budgeting and the consequences on the long recession.

For those who’ll have to choose a mortgage in 2018, the rates condition will be rather good, similar to the conditions of 2017. Considered that the Euribor should stay with a negative sign, the levels of Eurirs, used to determine the fixed rate, might increase, as the ECB is going to close the plan for the purchase of government securities. The choice of the instrument will depend on the offers (and strategies) of the banks. Just like 2017, year of the absolute preference of the fixed rate.

We’ll have to consider, however, the decrease of new mortgages, not necessarily due to the debts of banks. In fact, the last year saw a good number of subrogations (basically replacing an already existing product with a new one at better conditions), even though their issuance slowed down over the last months. The reason is very simple: as families see the range of new products agreed at rates close to zero and a competitive spread widening, the chances to improve their current situation reduce.

“The mortgages issued in the last two years are hardly replaceable, and the weight of the subrogations will be heavier in the long term”, confirms Roberto Anedda, marketing director for Mutuionline.it, adding also that in the near future, “the products underwritten for the purchase of a house will have a more relevant role in the future”. But house prices have significantly reduced without giving a new impulse to sales. In fact, many prefer to wait for prices to drop further, favoured also by mortgages destined to stay convenient on the long term: a big paradox.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Mortgage boom thanks to the lowest rates ever

30 October, Il Giornale

The amounts issued grew in August (+2.6%). 2% on fixed rates and floating rates unchanged at 0.6%

In September the interest rates applied on mortgages loans were very low: the average rate on the total of the loans was equal to 2.76%, the lowest ever (2.78% in the previous month and 6.18% before the crisis at the end of 2007). This what the monthly Abi report reads, which also clarified that 1.97% is the new record also for the average rate on new operations concerning purchases of houses (2.1% in August 2017 and 5.72% at the end of 2007). Fixed rate mortgages are two-thirds of the total issuances. The average rate for new funding operations to enterprises is equal to 1.68% compared to 1.60% of the previous month (5.48% at the end of 207).

“We’re expecting rates to maintain these levels for a long period and well beyond the horizon of our net purchases of assets”, stated on 26th October the ECB president Mario Draghi during a press release in Frankfurt at the end of the meeting that officially launched the tapering of new exceptional monetary policy measures. These are the extension and a reduction at the same time of the quantitative easing for 2018.

“This measure extends also the perspective of maintaining the cost of money at the current levels or very close”, comment Roberto Anedda, Marketing director for MutuiOnline.it. Therefore, the period of capital great availability at low costs will last further. Good news for mortgages and for whom is interested in buying a house in the next years: they’ll still be able to benefit of this favourable scenario that characterised the last two years, with rates on mortgages at their lowest point and prices of properties still very convenient. In fact, house prices have been decreasing for the last ten years and they have set at generally very affordable and convenient values, with purchases made easy by a wide range of mortgages with minimum rates available from many banks. Considering the duration of twenty years upwards, the most requested duration concerning mortgages, the best fixed rates are still below 2% and the most convenient floating rates are set between 0.60 and 0.80%.

In the meanwhile, the credit to families and enterprises is strengthening. At the end of September, according to Abi, loans to families and enterprises have grown by 1.4%, following the positive trend of mortgages and obtaining, for the seventh consecutive month, a yearly increase over 1%. For what concerns mortgages, in August, instead, there has been a 2.6% increase compared to the previous year. The total amount of loans issued from banks operating in Italy was equal to 1,763.2 billion euro at the end of September 44.3 billion more than the total amount collected by customers (1,718.9 billion). According to the latest figures from Abi, between March 2015 and August 2017, 15,557 families could suspend for 12 months the capital share of their loans, between mortgages for the first house and consumer credit, for a total value of 451 million. For what concerns companies, starting from the first communication regarding the suspension of the 2009 rates and the launch of the initiative currently in place concerning the credit of 2015, moratorium have concerned 459,757 enterprises with a residual debt of 125.7 billion and an increased liquidity for over 24.8 billion.

Source: Il Giornale

Translator: Cristina Ambrosi