MILAN, Nov 8 (Reuters) - Private sector deposits held at Italian banks jumped in September but loans to businesses continued to decline sharply, Bank of Italy data showed on Thursday.
Italian lenders are cutting their loan books to plug a funding gap that has become costly because of the sovereign debt crisis, but that in turn is exacerbating a credit crunch in the euro zone's third largest economy, which is in the throes of a recession.
Data from the central bank showed that private sector deposits rose by 5.7 percent in September compared with a year earlier, the biggest increase in more than one year. Lenders however did not pour that money back into the economy, and loans to non-financial firms fell by 3.2 percent - the fifth consecutive monthly decline and the steepest decrease in more than a year.
Bad loans at Italian banks, a major concern for investors, rose by 15.3 percent in September, compared with a 15.6 percent increase in August.
Reporting By Silvia Aloisi; editing by Antonella Ciancio