Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Categorized | Banks

Italy expects big interest in bad loans


Posted on January 31, 2016

Tourists take in the view from the top of St Angelo's castle as an Italian national flag flies from a flagpole nearby in Rome, Italy, on Sunday, May 5, 2013. Italian banks' corporate loan book will worsen this year as the euro region's third-biggest economy remains mired in its longest recession in two decades, according to the nation's central bank. Photographer: Alessia Pierdomenico/Bloomberg©Bloomberg

A senior Italian finance official has claimed the finance ministry expects strong interest from would-be buyers of distressed debt held by the country’s banks, rejecting concerns that last week’s deal to let Rome guarantee the loans will fall flat.

In an interview with the Financial Times, Alessandro Rivera, director-general for the banking and financial system at Italy’s finance ministry, said that while the government guarantee plan was not a “silver bullet” for Italy’s struggling banks, neither was it inherently flawed.

    “The tool will be effective to bridge the gap that exists between demand and supply for non-performing loans,” Mr Rivera said. “It will narrow the distance and simplify discussions between buyers and sellers, lowering the cost of funding, and we expect to see a growing number of transactions.”

    Italian banks are saddled with about €350bn in non-performing loans as a legacy of a lengthy recession, which ended late in 2014. After months of tortuous negotiation with the EU, an agreement was reached last week with Rome to ensure the loan guarantee scheme does not breach EU competition law.

    The plan is designed to clear one of the most persistent clouds hanging over the eurozone’s third-largest economy, with the $350bn worth about 17 per cent of total loans and the same share of gross domestic product.

    That pile of bad loans made the country’s financial institutions especially vulnerable in the recent market sell-off, causing alarm among investors and policymakers. Stocks in Italian banks tumbled last week even after the deal was announced.

    The bad loans will not be sold individually under the new plan but will be packaged through securitisation — a market that has been lacklustre in Europe over recent years — and sold to private investors.

    “These transactions are not frequent in Italy, but there is increasing activity,” Mr Rivera said. “[Securitisation] allows us to streamline the process and industrialise it and allows the involvement of the rating agencies, which are a key pillar of the scheme,” he said.

    Doubts remain about how effective the plan will be, as the government has said its guarantees will apply only to the least risky, or senior, tranches of debt that are given an investment-grade rating.

    “It’s unclear how many senior notes they can create from a given pool of non-performing loans, and how many junior notes they can sell,” said David Covey, head of European ABS strategy at Nomura.

    The scheme is also voluntary for Italian banks, which Fitch, the rating agency, suggested last week “may limit take-up”.

    However, Mr Rivera suggested there was plenty of appetite from potential buyers — mainly hedge funds and private equity firms — and predicted a “snowball effect” of transactions.

    “We know they have collected large amounts of money from their investors: the pressure is on them to do something and the money is there,” Mr Rivera said. “They are extremely interested and we are receiving a number of calls for clarifications and will proceed to explain [the scheme] better,” he said.

    Italy has refused to say what share of the €350bn in bad loans it hopes to see removed from banks’ balance sheets under the plan, and Mr Rivera said he was “not in a position to predict” an ideal target. However, the aim is to facilitate the sale of as many of the €200bn or so worst off loans — called sofferenze — as possible.

    The first loans sales with the new guarantees are expected to take place around April, Mr Rivera said.