Moody’s launches an alarm on Italian banks. The US rating agency downgrades its outlook, which changes from stable to negative, a prelude to a possible downgrade. The new restrictions imposed by the Italian government will have an impact on tourism and the hotel sector. With the consequence of increasing the level of Non-performing loans (bad loans, or Npls) in the coming months. The winter season is worrying, with the Italian Alps that cannot count on the usual influx of tourists.
Italian credit institutions are exposed for just over 50 billion euros on tourism. And most of them could become doubtful loans, or in default, with the latest recommended containment measures from the Covid-19 pandemic. Hence the decision of Moody’s, which sees black for Italian banks. Not only for tourism and hospitality, about 7% of loans to non-financial companies, but also for related activities. “Other sectors are likely to be affected indirectly, such as retail, commerce and commercial real estate,” explains the rating agency.
The prospects are not rosy. “We anticipate a substantial increase in bad loans as a result of the pandemic,” Moody’s points out. Unfortunately, but it is a situation common to other eurozone countries, the government measures to mitigate the deterioration in asset quality are considered insufficient. In particular, “it is unlikely that most of the increase in doubtful loans will materialize until after the end of the loan moratoriums, now in effect until the end of January 2021, although an extension until June 2021 is being considered”.
Despite the health emergency, it is difficult for Moody’s to return to the level of the end of 2015, when NPLs were at € 341 billion. However, there may be significant pressure on bank profitability, capable of reducing margins for supporting the real economy.
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