“The expected wave of Npl has not yet arrived thanks to the moratorium shield, but it will come. It will probably be in 2022: it's fine to have postponed the problem, but then we will also have to face it ". Talking to FIRSTonline about non-performing loans is one of the leading Italian experts on this market: John Bossi, a long past as CEO in Banca IFIS and just over a year ago founder of Cherry 106, a financial intermediation company specializing precisely in the management of difficult loans. "With Chery 106 we set off without knowing about Covid but despite this we went very well, better than expected", says the Trieste manager in taking stock of his new adventure. “In 2020 we acquired 18 NPL portfolios, with purchases for 300 million in the second half alone”.
Doctor Bossi, months ago you predicted a new wave of NPLs on the Italian market: is that what's happening? Is it just the result of the pandemic recession that is putting businesses and families in great difficulty or is there something else?
“Currently there is still no wave but this shouldn't surprise us: the institutions have set up a particularly strong defense, with moratoriums on mortgages, to prevent companies from going into crisis. However, the defense has a deadline, certainly until June 30th even if it will probably be extended until December 31st. I absolutely agree with the fact of postponing the problem to sterilize the effects of the crisis at least for now, but sooner or later there will be a wave and we will have to deal with it. As for the causes, I would say no, there is nothing other than Covid: the wave of non-performing exposures that awaits us is the result of the significant decline in GDP, which is entirely due to the pandemic. Otherwise, for 2020 we would have talked of slight growth".
When do you think the wave will arrive and how will it be faced?
“No one has a crystal ball, but if I really had to say too much, I'd say that something could come as early as the second half of the year onwards. Do not mislead some indicators: the fact, for example, that bad debts fell in November is not a reliable indicator, because it is only the consequence of the safety net put in place by the authorities. On how to deal with it, I would like to say that we must be found with a toolbox ready, each one for the role he has. From a government perspective, it would be nice to be able to do a lot of public debt to support the economy, but we can do a little, not a lot. As far as entrepreneurs are concerned, my advice is to carry out an in-depth analysis of the business and ask yourself if it is better to bite the bullet and continue or if it is better to change the business model”.
And the banks?
“Banks need to be extremely aware that the response to the NPL crisis will depend on the quality of loans and interlocutors. The banks will not be able to bail out everyone, but neither will they be able to abandon everyone: they will have to discriminate. Unfortunately we are in a phase in which we need to support only those who are deserving and those who have a future, otherwise further losses will accumulate, and further non-performing loans will be created".
Are the rules governing the difficult credit market adequate or should they be changed? Do you see new signs of reflection in the Authorities (Bank of Italy, ECB and EBA) on this terrain?
“There are signs of opening up by the authorities. The criticisms of these entities were that they were "procyclical": that is, when things went wrong, the ensuing regulatory tightening made things worse. However, the regulatory system is changing, even if patchily, not always and not for everyone, also because there is a regional theme in the European banking universe: in some countries the banks are less exposed; in Italy, for example, the bank/company relationship is very strong, elsewhere less so. What is not good is the excessively rigid attitude on the part of the regulator and above all the attempt to standardize the rules too much throughout Europe. In fact, the latter attitude becomes an industrial policy action: pushing the banks to behave in all countries in a uniform manner encourages the industrial systems to conform and this overturns national specificities. For example, in Italy we have a network of SMEs with different needs than most of the rest of Europe. In any case the debate is ongoing and there seems to be a new awareness on the part of regulators. In my opinion, the best thing is an interpretative approach, because changing the rules would waste too much time between the various passages in the European Parliament and in the commission".
From your observatory, what signals do you see on the Italian economy? After the strong recession of 2020, within the second half of the year, pandemic permitting, will we be able to see a reasonable rebound?
“This year I have seen a tremendous ability to innovate and change the business model. Perhaps it is precisely the fact of having a productive fabric made up of small and medium-sized enterprises that favors this flexibility in reinventing and adapting. As for the rebound, obviously there will be but in my opinion we will see it fully only when the vaccine has been disseminated in sufficient quantity to guarantee immunity to the entire population, therefore not before 2022 I think ".
Europe will flood us with money if we present adequate projects for the Recovery Plan but Europe is also asking us to make more investments than welfare bonuses and above all it is asking us for reforms of which we cannot see a trace: what do you think? Can Italy still take the field as Europe asks us or do we risk losing a historic opportunity?
“We need to take the situation into account and invest above all in health care, because this is how we can instill trust among citizens today. And then there are two major themes, education and digital. As far as schools are concerned, the news we have read in recent months is depressing: we are in danger of losing a generation, a profound work of acculturation and training is needed. On digital, it is enough for me to say that the sectors that have withstood the crisis best are those that have been able to make intensive use of technology, as indeed we at Cherry 106 have also done”.
When you were at the helm of Banca Ifis, you identified teller letters as one of the chronic ills of Italian banks that needed to focus more on digital. Is he still of the same opinion? But then why do you want to enter Banco delle Tre Venezie as a reference shareholder?
“Sportellite is when there is an excess of branches: Banco delle Tre Venezie has few, which are necessary points of presence in the area. Perhaps even the supervision, in the future, will be done entirely digitally, but for now, in dialogue with the real economy, we are also dealing with interlocutors who do not have technological skills. However, the transaction with Banco delle Tre Venezie is not yet closed, we are working on it and await the go-ahead from the authorities this year. For us, this is a project that we consider very innovative, there is the possibility for the bank to make high-yield and risk-aware investments, therefore a win-win situation that can create well-being for anyone who comes into contact with the institution”.
How is your entrepreneurial bet and your Cherry group, which has just turned one year old, going?
“We are very happy. Shortly after the debut we were overwhelmed by a complex situation, that of the pandemic, which we could never have foreseen, but we have shown great adaptability, great harmony in a team that has also grown a lot in terms of numbers: at the beginning we were 13, today we are about fifty. We have passed the break even, from here on the road is well underway. I have to say that even before the pandemic I wouldn't have bet that we would have gotten this far, instead we did it despite the Covid. For 2021 we have three keywords: growth, growth, growth. And then, as we said, there is the integration with Banco delle Tre Venezie. I would like to add that our vision always remains attentive to the common good, we believe that our activity can and must also be good for the economy in which we operate. The good of the company is also the good of the economy”.
