Banks, Abi: more loans, less non-performing loans

In October 2016, bank loans were significantly higher than funding. It is what emerges from monthly report of the Abi, the association of Italian banks, according to which the amount of loans to customers disbursed by banks operating in Italy, 1.804,3 billion euros (see Table 1), is clearly higher, by over 142,5 billion, than the amount total customer deposits, 1.661,7 billion euro (see Table 2).

The data of October 2016 confirm the continuation of improvement in the dynamics of the stock of loans existing to households and businesses, whose percentage change on an annual basis is close to zero (-0,3% compared to October 2015), an improvement both compared to the last few months (-0,4% in September 2016) and, above all, in comparison with the negative peak of -4,5% reached in November 2013.

On the basis of the latest official data, relating to September 2016, it is confirmed, also for existing loans, the recovery of the mortgage market, initially captured by the surge in new mortgages. The total amount of outstanding household mortgages recorded a positive change of +2,1% compared to September 2015 (when there were already signs of improvement).

Overall, total loans to the economy (the aggregate which includes households, businesses and the public administration) recorded an annual change close to zero in October 2016 (-0,1%, -0,6% the previous month, cf. Table 1). From the end of 2007, before the start of the crisis, to today loans to the economy grew from 1.673 to 1.804,3 billion euros, those to households and businesses from 1.279 to 1.402,5 billion euros.

In October 2016, i interest rates applied to customer loans: the average rate on total loans was 2,94%, reaching a new all-time low (it was 2,97% the previous month and 6,18% before the crisis, at the end of 2007). The average rate on new home purchase transactions stood at an all-time low of 2,02%, the same value as the previous month (5,72% at the end of 2007). Of the total new mortgage disbursements, approximately two-thirds are fixed-rate mortgages (see Table 3). The average rate on new business financing operations was also at an all-time low at 1,45%, it was 1,50% the previous month (5,48% at the end of 2007). 

Le net suffering (i.e. net of the write-downs already made by the banks with their own resources) at the end of September 2016 stood at 85,1 billion euro, a slightly lower value than the 85,4 billion in August, thus continuing the reduction in net non-performing loans which were equal to 89 billion in December 2015 (see Table 4). The ratio of net bad loans to total loans was 4,79% in September 2016, from 4,81% in August 2016 (it was 4,94% at the end of 2015 and 0,86% before the start of the crisis) .

In Italy i deposits (current accounts, certificates of deposit, repurchase agreements) increased, at the end of October 2016, by over 32 billion euro compared to a year earlier (change equal to +2,5% on an annual basis), while confirming the decrease in medium and long-term funding, i.e. through bonds, by almost 63,5 billion euro in absolute terms in the last 12 months (equal to -16,4%). The trend in total deposits (deposits from resident customers + bonds) recorded an annual change of -2016% in October 1,8, it was -1,5% the previous month (see Table 2).

From the end of 2007, before the start of the crisis, to today customer deposits grew from 1.513 to 1.662 billion euro, marking an increase – in absolute value – of over 149 billion. In October 2016, the average interest rate on total bank funding from customers (sum of deposits, bonds and repurchase agreements in euro for households and non-financial companies) in Italy stood at 1,01% (it was 1,03 % the previous month and 2,89% at the end of 2007) with effect:

– the rate charged on deposits (current accounts, savings deposits and certificates of deposit), which stood at 0,41% (from 0,42% in September);

– the rate on repurchase agreements equal to 1,25% (from 1,30% in September);

– the yield on bonds, equal to 2,75%, slightly down from 2,79% in the previous month (see Table 5).

The margin (spread) between the average rate on loans and the average rate on deposits from households and non-financial companies remains at particularly low levels in Italy, in October 2016 it was 193 basis points (194 basis points the previous month), a marked down from over 300 basis points before the financial crisis (329 basis points at the end of 2007).