Italy banking outlook negative as asset quality slides: Moody's

MILAN Tue Nov 20, 2012 4:45am IST

Stocks

   

MILAN (Reuters) - The outlook for Italy's banking sector remains negative, Moody's said on Monday, citing rapid asset quality deterioration and limited access to market funding.

In a report, Moody's said the operating conditions for the banks were difficult and would remain challenging.

"Moody's expects that the banks' asset quality will continue to deteriorate over the outlook period, from already weak levels," it said.

Bad loans at Italian banks, a major concern for investors, rose by 15.3 percent in September as the euro zone crisis continues to take its toll on the real economy.

Earlier on Monday, central bank sources said the Bank of Italy had told domestic lenders to make adequate provisions for rising bad loans and keep restructuring their operations to cut costs.

"The banks' already modest profitability will also continue to weaken, as loan-loss provisions will increase and continue to absorb a higher portion of banks' moderate pre-provision earnings," Moody's said.

Italy's two biggest banks Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI) set aside a combined 8.4 billion euros ($10.2 billion) in the first nine months of the year in the face of rising bad loans.

Last week, the chief executive of UniCredit said he did not expect bad loans in Italy to improve before mid-2013 due to a deep recession.

Rising non-performing loans have forced Italian banks to cut lending to businesses, crimping profits and exacerbating a credit crunch in the euro zone's third largest economy.

In its report Moody's said euro area-wide pressures would continue to restrict Italian banks' access to market funding.

It also said that while the banks had strengthened their balance sheets, capital levels remained vulnerable and below those of other large European banking systems.

(Reporting by Stephen Jewkes; Editing by Leslie Gevirtz)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Consumer Confidence Index

REUTERS SHOWCASE

Food Scandal

Food Scandal

Starbucks, Burger King dragged in as China food scandal spreads.  Full Article 

Bigger iPhones

Bigger iPhones

Apple asks suppliers to produce up to 80 mln large-screen iPhones - WSJ.  Full Article 

Gaza Conflict

Gaza Conflict

Israel keeps up Gaza assaults, Kerry presses for truce.  Full Article 

Ukraine Crash

Ukraine Crash

Bodies, black boxes handed over from Ukraine crash site.  Full Article 

Bali Trade Deal

Bali Trade Deal

India keeps world guessing in countdown to landmark trade pact deadline.  Full Article 

Bangalore Sex Abuse

Bangalore Sex Abuse

Modi's BJP puts political twist on local sex abuse case   Full Article 

Yahoo to buy Flurry

Yahoo to buy Flurry

Yahoo to buy analytics startup Flurry to bolster mobile ad business.  Full Article 

Wholesale Biz

Wholesale Biz

Wal-Mart adds $102.9 million in Indian wholesale business in June.  Full Article 

Monsoon Effect

Monsoon Effect

Thailand to reclaim top rice exporter spot after poor Indian rains.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage