Italy's banking system is set to have another difficult year in 2010 and there could be some individual downgrades of lenders, Moody's Italy bank specialist Henry MacNevin said in a newspaper interview on Saturday. He added that overall, Italian banks are relatively well capitalised and profits should stabilise in 2010.
"For sure, 2010 will be a difficult year ... the Italian banking sector will stay under pressure until 2011 and bad loans will have a heavy impact on bank balance sheets, but not enough to unleash a crisis," MacNevin said in an interview with Borsa & Finanza newspaper. "Italian banks are relatively well-positioned and we don't expect a big move in ratings, but there could be some downgrades at the level of individual institutions," he added.
Very few of Italy's banks have used government help to see them through the global financial crisis as the country's conservative lending markets have helped them limit the impact of bad loans. UniCredit, one of the country's biggest banks, is currently raising 4 billion euros from shareholders through a rights issue and its leading rival Intesa Sanpaolo is busy selling assets to bring in funds.
"In general it would be useful to continue with initiatives aimed at reinforcing capital a bit," MacNevin said. "We are not in an emergency situation but it's good to retain a bit of prudence." He added that asset quality in the sector had deteriorated less than Moody's had expected.
The Bank of Italy said on Friday that new bad loans in the third quarter of 2009 accounted for 2.2 percent of all credit, the highest rate since 1998 while the rate rose to 3.1 percent of loans to companies. "We see a greater risk on the corporate front, because company debt tends to be shorter term: so here the impact could be heavier" than in consumer lending, credit cards and mortgages, MacNevin said.