The editorial staff of ProiezionidiBorsa intends to continue to inform readers about the conditions of Italian banks. The goal is to update account holders and savers on any risks that their savings could run. In a recent article, we delved into the CET1. It is one of the most used indicators to assess the health of banks, but it may not always be reliable. To understand if our savings are safe we should thoroughly analyze the balance sheets of our bank. A very complex operation, certainly not for everyone. Account holders can still count on the Interbank Deposit Protection Fund for stocks up to 100,000 euros. In short, what will happen to savers today if there is another bank in decline? Italy and its cemetery of non-performing loans often stir the markets.
Non-performing loans
The loans that banks provide to customers unable to repay them are called non-performing loans. In recent years, the excessive ease of granting credit has led to the bankruptcy of several institutions. Following an intervention by the Bank of Italy, banks are strongly reducing non-performing loans. The reduction occurs through their sale at balance prices to specialized companies and by decreasing the new disbursements. However, both activities significantly lower banks’ earnings. In fact, many of them are now in precarious conditions. I mean, could we soon see another bank in decline? Italy and its cemetery of non-performing loans seem to have no peace. New small savers left “in canvas pants” would create further panic in our already suffering economy. Less competition would then lead to a worsening of conditions for customers. Banking crises must therefore be avoided. But how can we protect ourselves?
Another bank in decline? Italy and its cemetery of non-performing loans
The ProiezionidiBorsa Experts have repeatedly highlighted the risks associated with unlisted securities. The markets in fact highlight those critical issues that small savers would otherwise not see. Thus allowing you to run for cover by selling your titles before it’s too late. On the other hand, subscribers of unlisted shares and bonds would risk not being able to liquidate their investments in times of difficulty. Thus remaining prisoners of continuously descending titles. This is what is happening to the shareholders of Banca Popolare dell’Alto Adige, who have seen the stock drop by more than 60% in four years. As reported by the official site of Volksbank-Banca Popolare dell’Alto Adige. A saver who had invested € 10,000 in 2016 could have bought 520 shares at € 19.20 each. Today that same share is worth € 7.31 and € 10,000 would have become about 3,800: a loss of more than 61%.
The difficulty in selling unlisted securities
The South Tyrolean Institute, with great responsibility, has appointed a specialist to support the liquidity of its shares. A help for those wishing to sell the securities, but perhaps also an implicit admission of the difficulty in finding buyers. In fact, at the current pace of trading, it would take about five years to be able to liquidate the shares. A further confirmation after the sentence of the Court of Bolzano in January 2019 which reaffirmed the obligation for the bank to pay the withdrawing shareholders. Another bank in decline? Italy and its cemetery of non-performing loans would suffer. We obviously hope that the institute will recover and with it the investments of savers.
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