"The wave is swelling, but with the dam of the moratoriums: high water will arrive in 2021. 2020 will be the year of calm before the storm". With these words, alluding to the new wave of non-performing loans that is about to hit the Italian banking system, the managing director of Banca IFIS Luciano Colombini opened the traditional September appointment of theNpl Meeting, this year for the first time not in Venice but in Villa Erba, on Lake Como, with a live meeting, respecting the anti-Covid safety protocols. As always, various players in the Npl market participate in the debate, including Corrado Passera, CEO of Illimity Bank, Mark Knothe, CEO of Intrum Italy, Riccardo Serrini, CEO of Prelios, and Andrea Mangoni, CEO of DoValue.
"We estimate - Colombini continued in his opening remarks -, net of a possible new lockdown, which the negative results of this crisis will be less than the previous one: there have been timely and important interventions by institutions and central banks, and this time the banks have been ready". Before presenting the updated edition of Market Watch Npl, the CEO of Banca Ifis also spoke on some issues. Meanwhile, the freeze on dividends: “Not allowing any bank to distribute dividends, regardless of the results, is a serious matter. Who puts money into a structure that doesn't pay you then?”. And on the entry into the market of the public player Amco: “A public entity is welcome, but under market conditions. Let us remember that the Npl industry must be protected: it employs 8.000 people and manages 230-240 billion”.
MARKET WATCH NPL
What will happen to the non-performing loan market in 2021, i.e. in a few months? The picture is punctually traced, like every year, from Banca Ifis Market Watch. Meanwhile, the overall stock of NPEs to be managed in Italy is expected to grow as early as 2020 (+5% y/y), with a strong increase expected in 2021 which could lead to a total amount of 385 billion euros (from around 335 expected this year) and a probable further increase in 2022.
In 2021, therefore, a significant increase in new non-performing flows is expected in bank balance sheets, with an impairment rate rising from 1,3% in 2020 to 2,8% in 2021 due to the economic contraction in 2020. The expected increase of bank non-performing will lead to an increase in the NPE Ratio to 7,3% in 2021, compared to 6,2% in 2020 which, thanks to the disposal of NPL portfolios, records an improvement index compared to the past. In short, everything will have to be redone, after a phase in which the banks had managed to lighten up.
However, as explained by Colombini, this deterioration will not be comparable to that of 2013, when the annual flow of new defaulted loans exceeded 71 billion (compared to only 15 in 2019 and 18 estimated in 2020) and the deterioration rate reached 4,5%, the highest since 2009, the year in which the data began to be collected by Market Watch Npl. Instead the default rate (from UtP to NPL, i.e. from probable default to outright non-performing) in 2021 it is expected to be in line with the percentage values recorded in 2013 but with lower absolute amounts thanks to the management of non-performing banks in recent years.
Banca Ifis' analysis was based, the study points out, on a moderately optimistic scenario, i.e. one which imagines a GDP down by 9% this year and recovering by 5% in 2021, and above all the absence (for now probable) of a new generalized lockdown. The Market Watch also imagines the extension until January 2021 of the moratorium on loans and the freeze on layoffs and also the distribution over several years, perhaps between 2021 and 2022, of the materialization of the new non-performing flows. However, the scenario is more or less comforting thanks to the timely intervention by politics and monetary institutions.
In particular, Banca Ifis recalls prompt intervention by central banks with liquidity injections at historic highs; the plans to support the economy and debtors (moratoria, loans guaranteed by the state) activated by world governments; the shorter duration of the economic crisis which foresees a recovery already in 2021, while the 2009-2010 financial crisis was followed by the sovereign debt crisis of 2011-12; the greater solidity of the banks in terms of underwriting new loans and managing non-performing loans
