The cleaning up of the accounts carried out by Italian banks in their 2013 balance sheets "improved the health of the credit system at a time when the operating environment is stabilising, but it remains to be seen whether further efforts will be needed". Fitch analysts write this, noting that so far Italian banks have announced more than 20 billion euro of write-downs on loans in 2013, mostly in the fourth quarter.
Non-performing loans reached 156 billion euros, the highest level since the end of the 90s. Italian banks are moving ahead of the recovery and also of the ECB's asset quality review and their initiatives - notes Fitch - therefore reflect the effort them and the Bank of Italy to reduce the impact of the review by the European Central Bank. This was in particular the case of Unicredit, which carried out 70% of the total loan write-downs announced so far.
Fitch points out that Unicredit's credit quality risks have significantly reduced as the bank has been "stricter" than many others in increasing provisions for its risk exposures. Italian banks that haven't cleaned up their loan books as much as Unicredit will likely see high levels of loan charges again this year, albeit lower than 2013's level. Fitch said Intesa Sanpaolo will announce results next week. The agency expects the accounts will confirm that the bank has greater capital and earnings-generating capacity than its Italian peers.
