Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By Hang the Bankers
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

Italian banks are going bust

% of readers think this story is Fact. Add your two cents.


http://www.hangthebankers.com/

Italian banks face some big problems. The thing is they are pretty much the same as last year.

Shares in Italian banks have slumped this year, amid fears that lenders need more capital to manage losses on bad loans. While some banks could do with raising capital—UniCredit for one has a thin cushion—there isn’t need for a wave of loan losses as implied by the drop in market values.

Instead, it is Italian savers’ worries about their exposure to the banking system that has fueled the selloff.

Take, for example, UBI Banca: its shares have fallen almost 25% this year, one of the worst performers in Italy or Europe.

More than 15% of UBI’s total loans are bad and it has limited provisions against these with just 39% covered. If it were forced to sell its bad loans at market prices today, it might have to lift provisions to 80%. The losses implied by that, adjusted for tax-relief, would be equivalent to one-quarter of its forecast 2015 year-end common equity tier 1 capital.

That sounds bad. But is it likely? The answer is no. First, like peers such as Banca Popolare dell’Emilia Romagna or Banca Popolare di Milano, UBI has plenty of real estate collateral against these loans. Its collateral was worth 116% of bad loans at the end of 2014: Cut the property values in half and, with provisions, its bad loans are still covered.

Also, like Intesa Sanpaolo, UBI’s common equity capital ratio is comfortably ahead of what it needs. It was 12.6% at the end of September against its current regulatory requirement of 9.25%. It has a healthy margin of error.

Regardless, neither UBI nor its peers are going to be forced to sell all their bad loans at market prices.

True, there is still talk of an Italian bad bank. That would have to buy assets using private funds at market prices, so as not to infringe state-aid rules. The government might offer some insurance to private investors, but that would also have to be at market rates.

But low market prices for bad loans reflect the length of the legal process required to compel payment, as much as the quality of the assets. For that reason, banks have resisted selling and will continue to do so.

What is new is that when four small Italian banks were restructured by regulators in November, Italian savers suffered heavy losses on their bonds.

Retail savers own about one-third of bank debt, Royal Bank of Scotland estimates. They are rightly—and hurriedly—spreading their savings more widely. They should have done so sooner.

Italian banks will have to pay more for their funding as a result. Consolidation is also going to take longer than hoped. Both are bad for profits.

But for UBI and many of its peers, this year’s share price falls are pricing in bad loan write-downs that simply aren’t needed. Italy’s problems just haven’t changed that much.

SOURCE

http://www.hangthebankers.com/


Source: http://www.hangthebankers.com/italian-banks-bust/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.