MILAN, Aug 21 (Reuters) - UniCredit is seeking non-binding bids to sell up to 1 billion euros ($1.1 billion) in so-called “unlikely-to-pay” (UTP) loans by the end of September, a source close to the matter said, as Italy’s top bank steps up its clean-up efforts.
After shedding their worst-performing loans in recent years to comply with regulatory demands to tackle the legacy of a deep recession, Italian banks have turned to UTPs which are not yet in default but are unlikely to be recovered in full.
The source said UniCredit aimed to complete the 1 billion euro UTP loan sale by the first half of next year. The bank declined to comment.
UniCredit still had 34.4 billion euros in impaired loans, including UTPs, at the end of June, of which 15.7 billion were held in a non-core unit which the bank plans to run down by 2021.
Earlier this month it said it aimed to cut soured debts in the non-core unit to close to 10 billion euros this year, down from a previous end-of-2019 target of 14.9 billion euros.
The source said UniCredit was looking for co-investors in the 1 billion euro UTP loan portfolio, dubbed ‘Project Dawn’, which comprises small-ticket corporate loans.
UTPs have a higher book value than defaulted loans and expose banks to potentially larger losses in the event of a sale. Lenders have also been reluctant to sell them to preserve the commercial relationship with borrowers.
Intesa SanPaolo last month struck Italy’s biggest UTP deal so far, handing over management of 10 billion euros in UTP loans to Prelios, a bad loan specialist owned by U.S. hedge fund Davidson Kempner, which bought 30% of the loans. ($1 = 0.9010 euros) (Reporting by Valentina Za; Editing by Susan Fenton)