The Italian NPL Market - The Calm before the Storm pwc.com/it December 2020
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The Italian NPL Market The Calm before the Storm pwc.com/it December 2020
The Calm before the Storm
In the last 5 years, the NPE market has gradually moratoria will end, and the combined effect of the
headed towards a medium-term steady state. decrease in revenues and a worsening financial
Deleverage activities have reduced sharply bad position of many companies will lead to a severe
loans and, as a result, market participants were scrutiny of the capability to pay creditors which will
starting to focus on Unlikely to Pay (UtP) and on turn into an unavoidable reclassification to default
how to manage the tail of the huge non-performing of a significant number of counterparties. It is still
stock cumulated during the past decade. very difficult to make reliable forecasts, but market
consensus is that NPE new inflows will be in a range
Italian banks, in response to market and between € 60 and 100 bn in the next 24 months.
regulatory pressure, have halved the total stock This value will be mitigated by banks’ workout, UtPs
of NPL (€ 130bn in H1-2020 vs € 341bn in 2015) backed to bonis and by legislative measures.
and, at the same time, they have set up NPL Given this, the net new inflows are assumed in the
platforms and organizational controls that will range € 50 - 70bn.
allow to manage non-performing loans more
quickly and efficiently and thus face the incoming Furthermore, notwithstanding a general relief of
economic crisis in a more resilient way. supervisory and regulatory pressures on banks in
this “emergency” situation, the focus on a rigorous
The COVID-19 crisis, needless to say, has valuation of the credit quality of banking portfolios will
surprised everybody, reshuffling the cards and be high and increasing in the next few months. Banks
bringing back to the table all participants that will be forced to assess the ability to pay of their
are now trying to understand how the market will clients, and with objective or subjective indicators
evolve in the next few months and years. of financial difficulties emerging, many exposures
will need to be reclassified. The confirmation of this
Despite several economic forecasts, released expectation can be found in the increasing provisions
by public institutions or private research centres that some large banking groups have already posted
(one of the latest, by the European Commission, in their balance sheets to account for future losses.
points at a 9.9% and a 7.4% decrease in
GDP in 2020 respectively for Italy and EU) Unlikely to Pay (€ 59bn in H1-2020) will probably
the situation is still largely unpredictable both be the most relevant and complex asset class that
due to its complexity and incomparability with will need to be addressed. Banks will have to come
previous economic downturns. Looking at the up with some reliable drivers in order to identify
near future it is assumed that the virus control those clients to support and those which will not be
measures will remain in force, however their able to be restored. Banks and servicers, because
stringency will gradually ease in 2021 thanks to the number, granularity and sectorial composition
the arrival of a vaccine. of UtP will probably be different than in the past,
will need to deploy new servicing capabilities and
The economic downturn will lead to an increase strategies. Investors, with an appetite for new
in NPL in the short to medium term. When, how finance which will be increasing, will be able to
much and how will this increase materialize? find potential new opportunities when economic
Probably not in the next few months, during recovery will show up. Many private equity funds
which the shield of payment holidays and public specialised in UtP portfolios and restructuring/
support through the release of state guarantees turnaround move in this direction, with the aim to
will largely “freeze” the portfolios, delaying and help industrially solid companies which are now in a
possibly reducing the flows to NPE. Nevertheless, situation of financial distress.
2 | PwC
Contents
Macroeconomic Scenario 4
Recent market activity and outlook 8
The debt purchaser and debt servicing market Italian Real Estate Market 14
will also be affected, turning the industry from
Regulatory framework update 20
a focus on the stock, which considering the
primary and secondary market will amount to Italian NPL Market 26
about € 350bn by the year end, to a new focus
Focus on GACS 32
on how to manage the upcoming flows. Luckily,
one of the legacies of the last crisis is the Italian Banks Overview 36
presence, now, of a sustainable NPL industry
Focus on Italian UtP market 42
that will be able, more rapidly and effectively
than in the past, to manage increasing volumes, The Servicing Market 46
supporting the economy and, when possible,
Appendix 58
helping to bring back to viability some of
the companies that will experience financial
difficulties. In the period 2021-2022 we expect
a € 30 – 40bn of transactions per year, and
this trend is expected to continue in 2023. For
these reasons, we do not expect a peak of NPL
stock like in 2015 but an amount in line with the
one registered at H1-2020 because financial
services sector is now more resilient.
The crisis will have other clear market
implications. On the price of collaterals, with
Real Estate prices potentially decreasing, at least
for a temporary period, and with geographical
and sectorial evolutions which will have to
be carefully assessed by investors. On NPLs
recoveries, which have slowed down due to
the stop of Courts activities in these months,
and that will lead to a review of the underline
business plans of the serviced portfolios.
Finally, the “NPE issue” will be deeply influenced
by the effectiveness of public support and
economic recovery schemes, by the timing and
intensity of the removal of the current regulatory
relief measures and by the implementation of
“systemic” solutions. Such solutions could
be especially important for the UtP positions
where a mobilization of the main economic
stakeholder could be a game changer for the
Italian economy. The solution must be rapid, at
market conditions and need to leverage on local
economies and stakeholder.
3
The Italian NPL market
Macroeconomic Scenario
Key Message
The outbreak of COVID-19
represents a major shock
for the Italian economy with
an extensive impact on
national gross domestic
product, which the
European Commission
predicts will drop by 9.9%
this year.
Despite the policy response
at both European and
Italian level, the crisis is
likely to revamp the trend of
NPEs new inflows.
4 | PwC
Macroeconomic Scenario
Chart 1: Key EU economic drivers
The COVID-19 pandemic shocked the
European economy and constitutes
8.6
an unprecedent challenge that will 8.0
7.2 6.7 7.7
have important socio-economic
consequences in the next years. 4.1
3.0 3.4 3.2
2.11.5 2.52.5 2.7
1.8 1.4 1.3 1.5
In spring almost all market activities 0.7
in Italy and in Europe were in stand-
-0.6
by because of lockdown and social -0.7
distancing measures to contain the
spread of the virus which has claimed -4.5
millions of lives worldwide. As a direct -6.1
-7.4
consequence, this led to a strong crises -8.4
and the economy contracted sharply: Real GDP (%) e e e e cc e ce
f ce (% GDP) (% GDP)
in the first half of 2020 real GDP fell
at double digit rates in the European 2018 2019 2020F 2021F 2022F
Union. Employment also declined more
Source: PwC analysis on European Commission institutional paper “European Economic Forecast – Autumn 2020”.
than ever, although, thanks to policy Unemployment rate calculated as a % of total labour force, current account balance and budget balance as a % of
support, less than expected. GDP. Displayed data and forecasts for the EU refer to the EU27.
The easing of restricting measures
during the summer caused a peak of
growth in the third quarter, however,
Chart 2: Key Italian economic drivers
shortly after, infection rates started
increasing again, leading to the
reintroduction of containment measures. 11.6
10.6 9.9 11.1
Initially governments tried to adopt 10.0
local and targeted restrictions, but the
rise of the second wave led to stricter 4.1
2.8 2.5 3.02.93.1 2.9
measures. The combination of renewed 0.9 0.3 1.20.6 0.71.0
fear about the pandemic and lockdown
-0.1
measures are putting the nascent -1.6
-2.2
recovery on hold.
-6.0
-7.8
This unstable situation makes -9.9
-10.8
economic forecasting more challenging
than usual and the impact will differ Real GDP (%) e e e e cc e ce
f ce (% GDP) (% GDP)
across countries depending on the (I)
stringency of public health measures, 2018 2019 2020F 2021F 2022F
(II) sectoral composition of national Source: PwC analysis on European Commission institutional paper “European Economic Forecast – Autumn 2020”.
economies and (III) domestic policy Unemployment rate calculated as a % of total labour force, current account balance and budget balance as a % of GDP.
responses. EU Member States have
extended an unprecedent fiscal
and liquidity support to protect the
economy and, differently from the
previous crises of 2008, the economic
policy response in the EU has been the support to mitigate unemployment The recent increase for the
timely and sizable. The ECB’s quick risks in an emergency (SURE) and the pandemic emergency purchase
response in May was complemented European Council agreement on the programme (PEPP), initiated in
by the activation of the “general escape Next Generation EU (NGEU) plan to March 2020, is moving in the same
clause” in the EU’s fiscal rules which support member states with a € 750bn direction (with an original envelope
has helped all Member States to provide fund has shown an increasing degree of € 0,6bn) from € 1.3bn (as set on 4
a strong support to their economies. of commitment, and solidarity between June 2020) to € 1.8bn (as set on 10
Furthermore, rapid agreements such as member states. December 2020).
5
The Italian NPL market
Chart 3: Total investments volume trend (% change)
Looking at the future it is assumed
that the virus control measures
15
will remain in force, however, their
stringency will gradually ease in 10
7.2%
2021 thanks to the vaccine which is 5.7% 5.6%
5 3.5%
expected in the forthcoming months. 1.6% 5.6%
4.2%
Moreover, the economic impact of 3.1%
0
restrictions is expected to decline
over time as the health and economic -5
-10.3%
system adapt to a new normal. -10
Another factor of uncertainty -15 -13.6%
is related to the future trading -20
relationship between the UK and the 2018 2019 2020F 2021F 2022F
EU. A Brexit without an agreement, Italy EU
implies a much less beneficial trade Source: PwC analysis on European Commission institutional paper “European Economic Forecast – Autumn 2020”.
relationship with economic costs Displayed data and forecasts for the EU refer to the EU27.
both for the UK and the EU.
Table 1: Government gross debt ratio per country
EU GDP is forecast to contract
by about -7.4% this year before
rebounding by 4.1% in 2021 and "Government 2018 2019 2020F 2021F 2022F Trend 2019
gross debt ratio - 2022F
by 3.0% in 2022 returning to pre-
(% GDP)"
pandemic level. As said before,
there will be significant divergences EU 81.2 79.2 93.9 94.6 94.9
across countries and Italy, due to the Italy 134.4 134.7 159.6 159.5 159.1
stringency of lockdown measures Spain 97.4 95.5 120.3 122.0 123.9
and differences in economic France 98.1 98.1 115.9 117.8 119.4
structures, will pay a high cost. The Germany 61.8 59.6 71.2 70.1 69.0
European Commission forecasts UK 85.8 85.4 104.4 111.0 113.7
a downturn of the Italian GDP by Source: PwC analysis on European Commission institutional paper “European Economic Forecast – Autumn 2020”.
a record -9.9% in 2020 before Displayed data and forecasts for the EU refer to the EU27.
rebounding by 6.5% in 2021 and by
2.8% in 2022 (still below 2019 level).
Looking at unemployment, the Due to the extraordinary level. However, a credible fiscal
successful implementation of public expenses to contain the consolidation strategy will be crucial
ambitious policy measures will imply consequences of the pandemic for the future of the economy.
no mass lay-offs. None the less disease, public debts increased
the, unemployment rate in the EU significantly in 2020. Italian budget
is forecast to rise reaching 7.7% in balance is expected to be around
2020, 8.6% in 2021 and 8.0% in 2022. 10.8% of the GDP and therefore the
Italian unemployment rate is expected public debt is expected to reach a
to reach 9.9% in 2020, 10.7% in peak of 160% of the GDP in 2020,
2021 and 11,1% in 2022. Economists significantly higher than EU average
expect a reallocation of workers of 94%. Italy has a large and
across sectors from the hardest hit diversified economy, a low private
activities towards new ones. debt and high household wealth
6 | PwC
Macroeconomic Scenario
Chart 4: Trend of FTSE All Share Banks index and BTP-Bund spread
Among major rating agencies,
Standard & Poor's recently
11,000 400 bps
confirmed its BBB rating for
Italy's sovereign debt, upgrading
10,000 350 bps
the negative outlook to stable,
while Moody's and Fitch assign
9,000 300 bps
a BBB- rating, just one notch
above junk, but with a stable
8,000 250 bps
outlook as well.
7,000 200 bps
However, thanks to ECB's
expansive monetary policies
6,000 150 bps
to mitigate the impact of rating
downgrades to ensure the
5,000 100 bps
smooth transmission of its
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Jan-19
monetary policy in all jurisdictions
of the euro area, the spread BTP- FTSE Italia All Share Banks Spread BTP-BUND
Bund is now at the lowest levels
in a long time. Source: PwC analysis on data provider information.
7
The Italian NPL market
Recent market activity and outlook
Key Message
The outbreak of COVID-19
and the consequent
lockdown could potentially
impact deleveraging
strategies for 2021-2022
where uncertainty about
potential investors’
appetite, pricing
expectations and recovery
strategies should be
compensated by
government stimulus that
would preserve the level
of NPEs transactions in a
range between € 30-40bn
in the next years.
8 | PwC
Recent market activity and outlook
Despite the pandemic, the first half of The outbreak of COVID-19 and by legislative measures. Given these
2020 have seen closed transactions for lockdown measures will have assumptions, the net new inflows are
a total GBV of € 8bn, € 2bn more than important consequences in the assumed in the range € 50bn - € 70bn.
H1-2019. evolution of the NPL market in the
following years. So, what’s next? We Main Italian banks have already set
However, COVID-19 has still to show a can state that there are similarities with aside extra provision in 2020 to prevent
full impact on the economy. the 2008 global financial recession. balance sheets impacts as shown in
However, the Italian banking system, Chart 5.
In the last five years, we have seen the thanks also to European polices, is
explosion of the NPL market, registering now much more solid and resilient as a Concerning future NPE transactions,
volumes never seen before. 2015 to whole even though it is still challenged we think that the uncertain investors’
2019 registered NPE transactions in by a level of non-performing loans appetite, pricing trends and recovery
terms of GBV for around € 230bn, while above the EU average. Furthermore, strategies, will stabilise in 2021 as
the NPE stock as of YE-2019 (GBV € the market, thanks to an increasing soon as the current health crisis have
135bn) has fallen by more than half number of operators, is now better normalised. In the period 2021-2022
since the peak in 2015 (GBV € 341bn). prepared to absorb the wave of we expect € 30 - 40 bn of transactions
distressed credits. per year, which seems to be consistent
In H1-2020 the NPE stock amounted to with the market consensus. This trend
€ 130bn. What we expect? Regarding new is expected to continue in 2023.
inflows, as a result of the still ongoing
Why did the NPL market reach the peak spread of the COVID-19, it is very As a result, we do not expect a peak of
of € 341bn in 2015? We have identified difficult to make reliable forecasts. NPL stock like in 2015 but an amount in
three main factors: (i) banks’ lending Following the precedent recession, line with the one registered in H1-2020,
policies were ultra-expansive before the NPE peak was only reached in as the system is now resilient and able
2008 and banks were less regulated; 2015 (7 years later). We expect a to absorb the wave of distressed credits.
(ii) the great 2008 recession lead to shorter time for the new inflows wave,
an increase of debtor’s default rate; maybe between 2021 and 2022, with
(iii) NPL transactions were something a cumulative amount of distressed
extraordinary and the market was not credits between € 60bn and € 100bn.
ready to assimilate the big wave of This value will be mitigated by banks’
distressed credits. workout, UtPs backed to bonis and
Chart 5: Top 10 Italian banks - Additional buffers built up for future COVID-19 impacts (€mln)
1,300
902
300
70 91
50 52
UCG ISP Banco BPM MPS UBI BPER Credem
Source: PwC estimates on public information.
9
The Italian NPL market
Regarding 2020 transactions:
2020 has registered a contraction • UniCredit, in line with its latest industrial plan, is one of the top
of NPE transactions compared to players in the 2020 NPE market with approximately € 4.5bn of closed
previous year due to the uncertainty of transactions of which € 3bn of bad loans (Projects Lisbona, Tokyo,
the evolution of the pandemic which New York, Loira and Elba) and € 2bn of UtP (Project Dawn and
caused the postponement of many Sandokan 2). Furthermore, UniCredit sold a leasing portfolio of € 1.6bn
deals. However, we are positive about and will continue to be one of the most active sellers also in 2021 with
a quick market recovery: investors approximately € 4bn in pipeline according to its latest industrial plan.
have high liquidity and the market
sentiment is improving thanks also to • Intesa Sanpaolo in 2019 was one of the most active players in the
the arrival of a vaccine. In 2020, we market, selling UtP for approximately € 3bn (with Project M which
count approximately € 29bn and € 2bn also included the servicer platform). In 2020, the bank sold a mixed
of closed and ongoing transactions NPL / UtP portfolio with a GBV of € 0.5bn to Ifis NPL and, following
respectively. the completion of the merger with UBI, announced to be working on
a jumbo deal for a total GBV of € 12bn of which € 7bn and € 5bn of
Intesa and UBI respectively.
• MPS closed with AMCO a jumbo deal of approximately € 8bn (€
5bn and € 3bn of bad loans and UtP respectively) as part of its
deleveraging strategy.
• On the GACS side, Iccrea, UniCredit (with a leasing portfolio), BPER
(Project Spring), Banca Popolare di Sondrio (Project Diana) and Gruppo
Cassa Centrale closed five important deals of respectively € 2.4bn,
€ 1.6bn, € 1.4bn, € 1bn and € 0.7bn in 2020. Furthermore, Alba Leasing
and Banco BPM (Project Titan, leasing) will likely ask for the public
guarantee for the NPL securitisation they are currently working on.
• Last but not least, the secondary market is in great ferment.
Moreover, we have to take into consideration the role of secondary
market as an alternative recovery strategy to accelerate the
collections needed to repay Senior notes outstanding principal
(often secured by GACS).
Chart 6: NPL transactions trend in the Italian market (€bn)
84.1
2.0
2.6
67.7
2.2
10.5
37.1
6.0 31.3
2.3
18.3 20.7 7.1
4.6
1.4
8.0
4.0 18.3 14.7 55.0 79.4 31.1 21.2
4.0 8.0
2013 2014 2015 2016 2017 2018 2019 2020
Bad Loans UtP Mixed Ongoing
Source: PwC estimates on public information and market rumours.
10 | PwCRecent market activity and outlook
Table 2: Main closed transactions as of December 2020
Date Seller Volume NPE category Macro asset class Buyer Primary /
(€ m) Secondary
market
Transactions closed in 2020:
2020 Q4 Gruppo Cassa Centrale 680 Bad Loans Mixed secured / Buonconsiglio 3 SPV Primary
unsecured
2020 Q4 UniCredit 1,600 Bad Loans Secured Relais SPV Primary
2020 Q4 Iccrea 2,400 Bad Loans Secured n.a. Primary
2020 Q4 Banca Monte dei Paschi 4,900 Bad Loans Mixed secured / AMCO Primary
di Siena unsecured
2020 Q4 Banca Monte dei Paschi 2,600 UtP Mixed secured / AMCO Primary
di Siena unsecured
2020 Q4 Banco BPM 1,017 UtP Mixed secured / AMCO, Credito Fondiario, other Primary
unsecured
2020 Q4 UniCredit 600 UtP Mixed secured / illimity Primary
unsecured
2020 Q4 Intesa Sanpaolo 553 Bad loans & UtP Unsecured Ifis NPL Primary
2020 Q4 UniCredit 692 Bad Loans Secured illimity Primary
2020 Q4 UniCredit 1,000 UtP Mixed secured / Pimco, GWM, Aurora Recovery Primary
unsecured Capital (AREC)
2020 Q3 Banca Carige 324 UtP Secured AMCO Primary
2020 Q3 illimity 266 Bad Loans Unsecured Ifis NPL Secondary
2020 Q3 Grandi Lavori Fincosit 1,300 Bad Loans Unsecured Apeiron-Apollo Primary
2020 Q3 Credito Valtellinese 108 UtP Unsecured AMCO Primary
2020 Q3 Credito Valtellinese 162 Bad Loans Unsecured AMCO Primary
2020 Q3 Credito Valtellinese 102 Bad Loans Unsecured MBCredit Solutions Primary
2020 Q3 UniCredit 840 Bad Loans Unsecured IFIS NPL, Guber, Barclays Bank Primary
2020 Q3 UniCredit 702 Bad Loans Unsecured illimity, Guber, Barclays Bank Primary
2020 Q3 Confidential 335 Bad Loans n.a. MBCredit Solutions Primary
2020 Q3 Public Administration 180 Bad Loans Unsecured Credito Fondiario Primary
2020 Q2 Banca Popolare di Bari 1,200 UtP Mixed secured / AMCO Primary
unsecured
2020 Q2 Banca Popolare di Bari 800 Bad Loans Mixed secured / AMCO Primary
unsecured
2020 Q2 UniCredit 335 Bad Loans Unsecured Banca IFIS Primary
2020 Q2 Banca Popolare di 1,000 Bad Loans Mixed secured / Diana SPV Primary
Sondrio unsecured
2020 Q2 BPER Banca 1,377 Bad Loans Mixed secured / Spring SPV Primary
unsecured
2020 Q2 Deutsche Bank 270 Bad Loans Unsecured MBCredit Solutions Primary
2020 Q2 Credito Valtellinese 250 Bad Loans n.a. Confidential Primary
2020 Q2 J-Invest 1,701 Bad Loans Unsecured NPL Securitisation Italy SPV srl Secondary
2020 Q1 UniCredit 115 Bad Loans Secured illimity Primary
2020 Q1 Credito Valtellinese 177 Bad Loans Secured AMCO Primary
2020 Q1 Credito Valtellinese 357 Bad Loans Unsecured Hoist Finance Primary
2020 Q1 illimity 182 Bad Loans Unsecured Sorec Srl, Phinance Partners Secondary
Spa, CGM Italia SGR Spa
2020 Q1 Confidential 170 Bad Loans Secured illimity Secondary
Other transactions with 702
deal value < € 100m
Total (2020) 28,997
Source: PwC estimates on public information and market rumours of primary and secondary market. Data refer to transaction from January 2020
to December 2020. Some transactions involved groups of different investors; the volumes of these transactions have been allocated to each
player, when possible. Otherwise, they have been assigned to the main investor. In case of securitization transactions, the total volume has been
allocated to the main buyer, without taking into account eventual notes subscribed by the banks themselves and/or third parties (e.g. senior).
11The Italian NPL market
Table 3: Main announced NPE transactions as of December 2020
Status Seller Volume (€ m) NPE category Macro asset class Primary / Secondary
market
Ongoing BPER 282 UtP Secured Primary
Ongoing Iccrea 108 UtP Mixed secured / leasing Primary
Pipeline Prelios Innovation 300 n.a n.a Secondary
Pipeline Intesa Sanpaolo 12,000 Mixed Npl / UtP n.a Primary
Pipeline UniCredit 3,900 Mixed Npl / UtP n.a Primary
Ongoing Banco BPM 450 Mixed Npl / UtP Secured Primary
Pipeline CreVal 443 Bad Loans n.a. Primary
Ongoing Alba Leasing, Banco BPM 400 Bad Loans Leasing Primary
Ongoing Banca Popolare di Sondrio 400 Bad Loans Mixed secured / unsecured Primary
Ongoing Credit Agricole - Cariparma 300 Bad Loans Secured Primary
Ongoing Banca Carige 177 Bad Loans Leasing Primary
Ongoing CR Volterra 80 Bad Loans n.a. Primary
Ongoing Banca Chianti 70 Bad Loans Mixed secured / unsecured Primary
Ongoing ATC Piemonte 25 Bad Loans Unsecured Primary
Total 18,935
Source: PwC estimates on public information and market rumours.
12 | PwC13
The Italian NPL market
Italian Real Estate Market
Key Message
In the first half of 2020,
transactions in the
Italian real estate market
fell sharply by -22%
compared to the same
period of the previous
year.
Real estate executions
had an important
slowdown, lengthening
the recovery time.
Institutional investments
in the non-residential real
estate sector reached
€ 5.9bn in Q3 2020,
a decrease of 20%
compared to the same
period in 2019, with the
office sector dominating
the Italian market.
14 | PwCItalian Real Estate Market
Table 4: Italian NTN1 comparison by sector
Asset type Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 H1 2019 H1 2020 "Delta (%)
H1 20-19"
Residential 138,525 159,619 137,099 168,298 117,047 116,174 298,144 233,221 -21.8%
Office 2,201 2,636 2,225 3,416 1,821 1,812 4,837 3,633 -24.9%
Retail 7,175 8,137 6,823 9,301 5,917 5,014 15,312 10,931 -28.6%
Industrial 2,529 2,995 2,680 3,919 1,951 2,069 5,524 4,020 -27.2%
Total 150,430 173,387 148,827 184,934 126,736 125,069 323,817 251,805 -22.2%
Appurtenances 97,491 112,848 95,490 122,562 81,716 84,249 210,338 165,965 -21.1%
Other 13,491 16,160 14,218 18,943 11,294 10,893 29,652 22,187 -25.2%
Grand Total 261,411 302,395 258,535 326,439 219,746 220,211 563,807 439,957 -22.0%
Source: PwC analysis on Italian IRS data
1. NTN is the number of standardized real estate units sold, taking into account the share of the property transferred.
2. Appurtenances include properties such as basements, garages or parking spaces.
3. The sector “Other” includes hospitals, clinics, barracks, telephone exchanges and fire stations.
Table 5: Residential NTN by geographic area
Volume of real estate
transactions in H1-2020 Area Region Year 2019 H1 2019 H1 2020 Delta (%) H1 19-18 Delta (%) H1 20-19
North Provinces 104,271 51,910 41,213 6.7% -20.6%
In H1-2020, compared to the NoProvinces 225,125 109,708 87,286 6.8% -20.4%
previous year, the Italian real estate Total 329,396 161,619 128,499 6.8% -20.5%
market has undergone a remarkable Center Provinces 56,749 28,650 22,835 5.7% -20.3%
contraction with a decrease NoProvinces 66,246 32,963 26,011 8.4% -21.1%
in -22% in total transactions. Total 122,994 61,613 48,846 7.1% -20.7%
The most significant decrease, South Provinces 43,705 21,908 16,755 1.2% -23.5%
compared to the same period of the
NoProvinces 107,446 53,004 39,121 5.0% -26.2%
previous year, was recorded in the
Total 151,151 74,912 55,876 3.9% -25.4%
commercial real estate class, with a
Italy Provinces 204,724 102,469 80,803 5.2% -21.1%
decrease of -28.6%. See Table 4.
NoProvinces 398,817 195,676 152,418 6.6% -22.1%
Total 603,541 298,144 233,221 6.1% -21.8%
Residential real estate sales in H1-
2020 decreased in each area of Italy Source: PwC analysis on Italian IRS data.
compared to the same period in
2019. The South recorded the worst
Table 6: Non residential NTN by geographic area
result with a decrease of 25.4%,
followed by the Centre and the North NTNH12020Office Q12019 Q22019 Q12020 Q22020 H12019 H12020 Delta(%)H120-19
with a decrease of -20.7% and North 1,358 1,653 1,105 1,159 3,011 2,264 -24.8%
-20.5% respectively. See Table 5.
Center 425 480 354 338 905 692 -23.5%
South 418 503 362 315 921 677 -26.5%
During H1-2020 the number of non-
4,837 3,633 -24.9%
residential transactions decreased
by 27.6% compared to H1-2019. NTNH12020Retail Q12019 Q22019 Q12020 Q22020 H12019 H12020 Delta(%)H120-19
The largest decrease is attributable North 3,463 4,027 2,802 2,431 7,490 5,233 -30.1%
to the retail sector, especially in the
Center 1,639 1,850 1,385 1,193 3,489 2,578 -26.1%
northern area where the highest
South 2,073 2,260 1,730 1,390 4,333 3,120 -28.0%
reduction was registred (– 30.1%).
15,312 10,931 -28.6%
See Table 6.
NTNH12020Industrial Q12019 Q22019 Q12020 Q22020 H12019 H12020 Delta(%)H120-19
Appurtenances (including garages, North 1,683 2,025 1,339 1,323 3,708 2,662 -28.2%
basements and parking lots) and
Center 392 478 294 375 870 669 -23.1%
other sectors continue to perform
South 453 492 318 371 945 689 -27.1%
well. See Table 4.
5,524 4,020 -27.2%
25,673 18,584 -27.6%
Source: PwC analysis on Italian IRS data.
15The Italian NPL market
Investments in the non-residential
real estate market
In the first 9 months of 2020 the noted that the increase in the
volumes of investments in commercial total amount of the last category
Real Estate amounted to € 5.9bn, is attributable to the closure of
showing a reduction of about 20% residential development operations.
compared to the corresponding period
of the previous year. Due to the restrictions related to the
pandemic, the presence of foreign
In the Real Estate commercial sector, capital, although representing about
the Office sector is confirmed at the 60% of investments (at Q3 € 3.5bn
first place with 45% of volumes, international investments compared
followed by Retail with 19%, Logistics to 2.4bn Italians), has decreased
with 14%, Hospitality with 12% and compared to previous years (75%
Alternatives with 10%. It should be in 2019).
Chart 7: Investments in non-residential real estate – Investor type
12,287
11,100
17%
27% 26%
9,100 8,857
8,100
60%
5,900
5,130 5,211 60%
65%
4,383 70% 70%
4,130
73% 75%
78%
1,744
73% 83% 74% 30% 22% 27% 40% 30% 35% 25% 40%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3-2020
Italian investors Foreign investors Total investment (€m)
Source: Nomisma elaborations on Nomisma, BNP Paribas RE, CBRE and Colliers data.
Chart 8: Investments in non-residential real estate – Asset class
Q3-2020 Y-2019
10% 6%
Office
12%
Retail
27% 41%
Industrial
€ 5.9bn 45% € 12.3bn
Tourist
14% Other
11%
19% 16%
Source: Nomisma elaborations on Nomisma, BNP Paribas RE, CBRE and Colliers data.
16 | PwCItalian Real Estate Market
Chart 9: Closed Secured Portfolio by Area
The blockage of the courts caused
a lengthening of the execution
time and during the first COVID-19 North 56%
lockdown period alone, 30,815
auctions were postponed for a Center 23%
value of € 3.7bn, which will lead South and
to a lengthening of the average Islands 21%
execution time.
The future scenario appears
uncertain and will mostly depend
on the future economic situation
of the country and the response of
the real estate market to auctions
i.e. the assessment of investors'
purchase intentions compared to the
economic scenarios proposed by
the COVID-19 crisis.
Source: PwC analysis on Associazione T.S.E.I. data
Closed Secured Portfolio
Chart 10: Closed Secured Portfolio by City Size (residents)
From analyzing the closed secured
4%
portfolio managed by servicers, 8%
it can be seen that the greatest
concentration is located in Northern 1M
In addition, analyzing the data by
city size, it shows that 38% of the 100-250
assets are located in small towns 13% 250-500
14%
with less than 25,000 residents,
14% are in cities with a population
between 25,000-50,000, and only
4% are in cities with a population
between 250,000-500,000. See
Chart 10.
Source: PwC analysis based on data provided by Servicers as of 30/11/2020; data has been directly provided by
Servicers and has not been verified by PwC; Servicers’ organizational, industrial and operating structures vary
greatly. Comparing the information presented above requires a correct analysis and understanding of the competitive
landscape and servicer business model.
17The Italian NPL market
The below graphs show the closed Considering the recovery rate by
portfolios by the Servicers, considering each asset class, offices show the
the recovery strategies and the highest performance (71%) followed by
recovery rate by asset class. For all industrial (57%). The asset class with
recovery strategies, the main asset the lowest recovery rate is development
class is residential. The asset class in at 36%. See Chart 12.
closed portfolios with the lowest share
over the total volume is development.
See Chart 11.
Chart 11: Closed portfolio by asset class (GbV)
Extrajudicial Judicial Loan-Sale Residential
1% 6% 1% 3% 2%
11% Retail
10%
6% Industrial
23% 9%
7% Others
6% Land
63%
55% Office
12% 6% 51% 8% Development
7%
8%
6%
18 | PwCItalian Real Estate Market
Chart 12: Recovery rate by asset class on closed portfolio
17%
27% 26% 71%
57%
50%
45% 47%
36% 38%
Development Others Land Residential Retail Industrial Office
Source: PwC analysis based on data provided by Servicers as of 30/11/2020; data has been directly provided by Servicers and has not been verified by PwC; Servicers’ organizational,
industrial and operating structures vary greatly. Comparing the information presented above requires a correct analysis and understanding of the competitive landscape and servicer
business model.
The analysis in Chart 12 is based on data from 9 players and returned with arithmetic averages.
19The Italian NPL market
Regulatory framework update
Key Message
In the last months a mix of
both government measures
and regulatory evolutions
have emerged in support
of the banking system,
in terms of capital relief
measures and facilitation of
NPE management, as to be
able on its turn to sustain
the economy in a time of a
global emergency situation.
20 | PwCRegulatory framework update
The prudential treatment
of software assets EBA’s main considerations
• The European Banking Authority • EBA’s aim is to minimize the
(EBA) published in October 2020 regulatory gap with some 1.
a set of new Regulatory Technical international players who are often
Standards (RTS) in order to specify not required to deduct software Differences in valuation and
the methodology to be adopted by assets from CET1 as they are not amortisation of software assets and
institutions concerning the prudential considered intangible assets. their realizable value at liquidation.
treatment of software assets.
• Moreover, the objectives of the new
• In line with the “Risk Reduction RTS are: 2.
Measures” approved in May
2019, art.36 (1) (b) of the Capital 1. to maintain a conservative International developments and
Requirement Regulation (CRR) is margin, in light of the volatile differences in prudential treatment of
modified, introducing the possibility nature of the software assets’ investments in software assets.
to be exempted form the deduction value given the technological
of «prudently valued software assets advancements, while
the value of which is not negatively 3.
affected by resolution, insolvency 2. encouraging the investment in
or liquidation of the institution» from software assets as the new tool in Different prudential rules applicable
CET1. the modernization of the banking to insurance companies.
sector in Europe.
• EBA’s motivation for such
intervention follows the current wave 4.
of digitalization and technological
advancements noted in the Diversity in the financial sector
European banking sector. of the European Union, including
unregulated fintech companies.
Illustrative
EBA, following an impact assessment the prudential (calibrated to a maximum
it carried out, opted for the introduction of 3 years) and the accounting
of a prudential framework based on the amortisation is deducted from CET1
amortisation of the software’s value, while to the residual portion of its
where the positive difference between carrying amount a risk weight is applied.
Prudential Amortisation = Software value x Number of Days
Software value Number of days CET 1 deductions Residual carrying amount
On balance amount Number of days that have Deduction from CET1 of The portion of the carrying
divided by the minimum passed from the date the difference, if positive, amount not deducted
between the useful life (in in which the software is between the prudential from CET1, resulting from
days) and 3 years (in days ready for use and starts amortisation calculated the application of the
calculated from the date being amortised for and the sum of the prudential amortisation, will
in which the software is accounting purposes. accumulated amortisation be subject to a risk weight
ready for use and starts and potential impairment of 100% in line with what
being amortised for losses results form the is foreseen by the CRR.
accounting purposes). software assets.
21The Italian NPL market
Illustrative non exhaustive
Context and objectives The supervisory approach Favorable and measurable prudential
for consolidation treatments for banks
The European Central Bank The assessment process consists P2R e P2G
(ECB) published in July 2020 of 3 phases and it clarifies the ECB The guide sets Pillar 2 requirement and
a guide for consultation on the expectations on M&A transactions guidance to be based on the actual risk
supervisory approach adopted for profile of the combined entity. The target
the assessment of consolidation • Early communication: levels are expected to be calculated
projects within the banking sector. it is the preliminary phase starting from the weighted average of
The main objectives of the guide where the institution exchanges the P2R and P2G levels applicable to the
can be outlined below: the initial information of the two entities prior to the consolidation.
transaction with ECB, requests
1. clarify the supervisory tools a preliminary feedback and Badwill
adopted to assess consolidation performs a preliminary analysis It will be possible for institution to
transactions. on the main features of the recognize the accounting value of
business combination. badwill generated by the transaction in
2. enhance the predictability of order to increase the sustainability of the
supervisory actions, reducing • Application: new business model (e.g. provisioning
some elements of uncertainty. during this phase the final for NPL, covering of integration costs
integration plan is submitted or other investments). Profits from
3. foster sustainable operations to and a notification of a proposed badwill to the shareholders will not be
achieve economies of scale and acquisition of a qualifying holding distributed until the sustainability of the
address new challenges (e.g. or formal application to obtain business model is reached.
digitalization). permission for the business
combination is sent. Internal models
The guide introduces the possibility for
• Implementation a temporary approval to continue using
and monitoring: internal models that were in place before
this phase concerns the the merger, notwithstanding the principle
implementation integration of non transferability of approval from
plan defined for the business one entity to another. However, the use
combination along with an of internal models will be subject to a
ongoing monitoring and reporting clear model mapping and a credible
to ECB. internal model roll-out plan.
The Italian approach on consolidation
• The draft 2021 Italian Budget foresees tax • A quarter of the tax benefit can be realised
incentives to promote business combinations within the first year while the rest on the second
among other benefits. year. Such incentive, that cannot be used more
than one time, is deductible for IRES and IRAP
• The new provisions will allow M&A operations in purposes by an amount equal to 25% of the
2021 to convert DTA into tax credits up to 2% of the total DTA converted.
sum of the accounting value of the assets involved.
The expected provisions, still under review, are expected to come into force from January 1st 2021 subject to the final approval of the Italian parliament by the end of the year.
22 | PwCRegulatory framework update
EU securitisation framework
The European Commission published in Illustrative non exhaustive
July 2020 two proposals that aim to further
encourage a broader use of securitisations by Capital Requirements Regulation (CRR)
freeing up capital and supporting the financial
institutions in their effort to sustain the economy. • Introduction of article 269a (CRR) where the senior tranche
The amendments, to the Capital Requirements of a traditional NPE securitisation would be subject to a flat
Regulation and to the Regulation 2402/2017, risk weight of 100% (provided the NRPPD is at least 50% of
have as an objective to: the gross book value of the exposures). All other tranches
would be subject to the general framework with the following
• Extend the STS framework to on-balance- adjustments:
sheet synthetic securitisation and
1. A risk weight floor of 100%
• Remove regulatory obstacles to the NPE
securitisations. 2. Prohibition to use the foundation IRB parameters
under SEC-IRBA
• Extension of the preferential treatment to senior tranches of the
EBA published in November 2020 a report on STS on balance sheet securitisation by extending the treatment
significant risk transfer (SRT) in securitisation currently provided in article 270 (CRR) to a wider range of
transactions, which includes a number of underlying assets by removing the condition that at least 70%
detailed recommendations to the European of the securitized exposures must be SMEs and the limits on the
Commission on the harmonisation of practices credit risk transfer.
and processes applicable to the SRT following
the 2017 SRT discussion paper. The report • Amendment of article 249, par. 3 (CRR) as to align the credit risk
addresses three main areas, which can be mitigation rules applicable to the securitisation exposures to the
summarised as following: general framework in line with what was agreed at international
level by the BCBS. It aims to improve the effectiveness of the
Assessment of structural features public guarantee schemes which assist the NPE securitisation
• Securitisation transactions with ineligible strategies following the pandemic.
structural features, other than those
specified, should not be recognized as SRT
• A set of safeguards should be met for SRT Regulation 2402/2017
recognition.
• Submission by the originator of a quantitative • Definition of an NPE securitisation: the definition under the
analysis on the impact of the structural features proposal is aligned with the work of the Basel Committee on
on the SRT and on the transaction overall. Banking Supervision (i.e. there is a percentage of at least 90%
of defaulted assets in the portfolio at inception).
Application of SRT quantitative tests
• Recommendations are outlined to address • Risk retention: proposed to be calculated on the basis of
the limitations of the two tests used by the the discounted value of the exposures transferred to the
CRR to measure SRT, which aim to reduce securitisation SPV and to maintain a material net economic
the scope for differing interpretations. interest of not be less than 5% of the net value of the NPE
securitised exposures (article 47 bis CRR).
Supervisory process
• Recommendations are outlined with regards • Credit granting: proposal for the verification duties on
the harmonization of the supervisory process originators to not apply when it concerns NPE securitisations
for assessing SRT in individual transactions purchased from a relevant third party.
which should be subject to a dual-track
process that would enable a fast track for • Inclusion of a new section containing the criteria for STS
“qualifying securitisations”. balance-sheet synthetic securitisation.
• Harmonization of the preliminary SRT
notice and transaction documents is also
recommended on the report.
23The Italian NPL market
To make up for the shortage of Likewise remarkable are the equal to the greater value between 25%
cash flow faced by households and moratoriums for SMEs and micro of the annual turnover of the company
companies due to the COVID-19 companies introduced by the "Cura itself and the double of the annual costs
emergency, the Italian State, through Italia" Decree, whereby beneficiaries for employees and the percentage of
a series of regulatory provisions, has are entitled, until 31 January 2021, to coverage can vary from 70% to 90%
adopted several measures aimed at not having their credit lines or credit depending on the number of employees
preventing that temporary financial openings terminated, as well as and turnover.
stress situations would become obtaining an automatic postponement
permanent. of non-installment loans, as well as to Impacts of the aforementioned provisions
suspend the payment of mortgage loan, can be seen by examining the quantitative/
For this purpose, through the Decree- leasing and other installment loans. qualitative data as at 25 November 2020
Laws "Cura Italia" of March 17, published by the Bank of Italy.
2020, "Liquidità" of April 8, 2020, Otherwise, micro, small and medium
and "Rilancio" of May 19, 2020, companies based in Italy can take In this respect, the monetary value of
both welfare and economic support advantage of the moratorium provided the applications submitted in order to
measures were introduced by issuing by the Italian Banking Association join the moratorium on loans - about 2.7
state guarantees, moratoriums and (ABI), under which they can request a mln applications accepted for 94% - is
aid to medium and large enterprises, 12-month moratorium in the payment of equal to € 302bn; of these, 44% come
SMEs, self-employed workers the principal of the loan installments, or from non-financial companies (1.3 mln
and families affected by the health an extension of the duration of the loan. applications from SMEs involving €
emergency; in addition to the above- 156bn of loans).
mentioned measures, there have Finally, the "Liquidità" Decree has
also been specific banking industry authorized SACE SpA (a company The value of applications for public
initiatives as well as those offered owned by the Ministry of Economy guarantees covering new bank financing
bilaterally by individual banks to their and Finance through Cassa Depositi for micro, small and medium-sized
customers. e Prestiti) to grant, by 31 December enterprises submitted to the Fondo
2020, guarantees - on first demand, di garanzia per le PMI amounts to
With the "Cura Italia" decree and unconditional, irrevocable and against approximately € 107bn, of which about 1.3
the "Liquidità" decree, companies payment – for financing entities (banks, mln applications (€ 19.5bn) for financing
can benefit from State guarantee national and international financial with a maximum amount of € 30,000
mechanisms to facilitate the granting institutions and/or other entities (100% covered by that guarantee).
of new financing, with more convenient authorized to exercise lending in Italy)
conditions and evaluation criteria, until that provide new purpose finance Instead, the volume of loans guaranteed
31 December 2020. on behalf of large, medium or small by SACE is about € 17.2bn, equal to 981
enterprises. The maximum value for financing operations, of which about €
The aforementioned guarantees, the amount of the guaranteed loan is 7.8bn referable to only 4 operations.
provided by the "Fondo di garanzia
per le PMI" managed by Mediocredito
Centrale (MCC), are offered free of
charge and the maximum amount
guaranteed for each company, also
referring to restructuring operations to
be carried out through the disbursement
of new finance, is € 5mln.
The standard warranty coverage is
90%. However, there are adjustments
in place so that the coverage can
be reduced to 80% in case of debt
restructuring and, on the other hand,
extended to 100% with regard to
financing for the maximum amount of
€ 30,000 granted to, among others,
SMEs, self-employed and craftsmen.
24 | PwCRegulatory framework update
As shown by the Bank of Italy, without the new definition of prudential default according to which, the flows of NPE
the aforementioned provisions, about that will come into force on 1 January originating from 26 April 2019 must
13.8% of the companies operating in 2021 and the EU framework of the so- be fully covered (or released) within 4
Italy would have entered into crisis by called "calendar provisioning". years if unsecured and within 9/10 if
2020; in addition, the sectors with the secured by real estate, it is expected,
greatest drops in turnover are those According to the first measure unless the application of the legislation
of hospitality and restaurant (-41.2%), mentioned, a debtor is considered to is suspended, an increase of NPL
entertainment activities (-33.8), energy be in default if, under absolute terms, positions releases.
and mining (-14.8), real estate (-12.4%), it has a past due date of more than 90
food and textile industry (-10.1%). days equal to € 100 for retail exposures Finally, turning now the focus onto the
(individuals and SMEs) and € 500 for recovery of credit exposures, it should
Given this, it seems likely that the loans companies and, under relative terms, be noted that with Decree-Law no.
disbursed as a result of the measures the above amount corresponds to at 137 of 28 October 2020 (the so-called
described earlier, once the moratorium least 1% of all the client's exposures to "Ristori" decree) the prohibition to
has expired and become payable, will the bank, with no possibility of clearing undertake enforcement procedures
increase the borrowers' exposure to with cash available on other undrawn involving the debtor's main home has
banks and thereby the number of NPLs credit lines. been extended until 31 December 2020.
outstanding.
It should be noted that the measures
Due to the magnitude of the outlined above may have, inter alia,
phenomenon, one solution could a significant impact on factoring
potentially be the release of receivables receivables, amounting to € 255bn
by the credit institutions involved in 2019, which, with the introduction
through securitization as the operational of lower thresholds for payment
provisions relating to the provisions times and the different methods of
analyzed herein do not envisage limits calculating past due amounts, may lead
to the assignment of receivables to the classification of approximately
and the related rights deriving from ¼ of exposures to companies as
the guarantees that assist them, deteriorated, with even more significant
notwithstanding some peculiarities impacts having regard to exposures
connected with the SACE guarantee. involving central and regional public
administrations.
Within this framework, a further issue
that could lead to a significant increase Likewise and in brief, with the write
in credit exposure classified as NPL is -off rules introduced by the UE through
given by the combined provisions of the so-called calendar provisioning
25The Italian NPL market
Italian NPL Market
Key Message
The Italian banking system,
in response to market and
regulatory pressure, has
experienced a significant
deleverage in the last five
years where the total stock
has fallen by more than half
(€ 135bn in 2019
vs € 341bn in 2015).
In H1-2020, due to the
COVID-19 pandemic,
it has experienced a
slowdown in the reduction
of total NPL stock (-€ 5bn
vs YE-2019).
For YE-2020 we expect this
amount to be around
€ 120bn, net of new inflows
and transactions closed in
the second half of the year.
26 | PwCItalian NPL Market
Asset Quality
Chart 13: Gross NPE trend
Chart 13 shows the trend in Italian
NPE stock. After peaking at
NP
€ 341bn in 2015, the trend has been EC
AG
decreasing, reaching € 130bn in % 326
341
324 R
20
0
H1-2020. +22. 12
14
7
15
20 15: -H
12
008- 283 264 02
R2 18 5 0:
Gross Bad Loans dropped by € 4bn AG 237 -1
9.2
EC
NP 194 %
vs YE-2019 and by € 31bn vs YE- 13
21 127 117 180
157 131 4
2018. Gross Unlikely to Pay showed 132 12 109 94 135 130
a slower decline, with € 59bn in H1- 85
16 91 4 5
74
2020 vs € 61bn at YE-2019. Gross 79
9 66
57 61 59
Past Due remained relatively stable. 33
42 59 78 107 125 156 184 200 200 165 97 70 66
The slowdown of the decreasing 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1-20
trend, compared to the same period Gross Bad Loans (€ bn) Gross UTP (€ bn) Gross Past Due (€ bn)
of 2019 (-€ 15bn in H1-2019 vs YE
2018), was caused by the lockdown Source: PwC analysis on Banca d'Italia "Banche e istituzioni finanziarie: condizioni e rischiosità
measures due to the COVID-19 del credito per settori e territori", September 2020.
pandemic.
Based on this trend and the current
health crisis, what do we expect for
YE-2020? Assuming € 20-25bn of
closed transactions in the second
half of the year and € 10-15bn of
new inflows (in line with previous
years), we expect a total net impact
of -€ 10bn on the total stock
registered in H1-2020 in banks’
balance sheets, bringing gross NPEs
to approx. € 120bn at YE-2020.
Chart 14: Net Bad Loans Trend
Chart 14 Shows how the volume of
net Bad Loans has experienced the
67.3%
same slowdown. The total amount 61.0%
62.2% 62.2%
decreased to € 25bn (-€ 2bn vs YE- 54.0%
55.6% 56.5%
50.3% 48.7%
2019) while the Bad Loans Coverage 43.7%
42.9%
Ratio for the Italian system (62.2%) 39.7%
34.0%
remained stable with respect to the
47 60 62 80 84 89 87 64
ratio registered at YE-2019. 39
32
24 37 25
3.5% 3.8% 5.0% 5.4% 5.7% 5.6% 4.3%
2.3% 2.8% 2.2%
1.4% 1.9% 1.7%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1-2020
Net Bad Loans (€ bn)
Net Bad Loans / Loans to Customers (%) Bad Loans coverage ratio (%)
Source: PwC analysis on ABI Monthly Outlook – November 2020 and Bank of Italy data - September 2020
Note: 2017 and 2018 data might include financial intermediaries.
27The Italian NPL market
Chart 15a: Gross Bad Loans ratio by region* (H1-2020)
Looking at the composition of gross
Bad Loans:
> 7%
2.0%
3.5%
• In terms of gross Bad Loans 6-7%
3.2% 3.8%
ratio the highest percentages 3.2% 3-6%
are recorded in Umbria (8.1%), 4.7%
3.6% < 3%
Abruzzo-Molise (7.9%), Sardinia 6.7%
6.2%
(6.9%) and Calabria (6.8%);
8.1%
overall, northern regions tend 7.9%
1.7%
to show lower gross Bad Loans
Source: PwC analysis on Banca
ratio compared to central and 6.6% d’Italia «Banche e istituzioni
southern regions; finanziarie: condizioni e rischiosità
6.9% 6.6% del credito per settori e territori»,
September 2020.
• Lombardy and Lazio account for 6.8% Note: Bad Loans ratio in the region of
Lazio is influenced by Cassa Depositi
respectively approx. 20.4% and e Prestiti, included in Bank of Italy
11.6% of total Italian Bad Loans, database; (*) Unique percentage for
6.3% 1. Valle d’Aosta and Piemonte.
while they show a relative low Bad 2. Abruzzo and Molise.
Loans ratio (3.2% and 1.7%); 3. Puglia and Basilicata.
• As shown in Chart 16, at H1-
Chart 15b: Breakdown of gross Bad Loans by region* (H1-2020)
2020 the “Corporate & SME”
sector still represents the greatest
> 10%
share (74.4%) of Italian gross Bad 1.3%
1.6%
Loans, followed by the Consumer 6-10%
20.4% 8.1%
loans (17.5%); 5.5% 2-6%
9.6%
1.7% < 2%
• The percentage of Secured Bad 3.4%
8.9%
Loans (45%) remained relatively
2.3%
stable compared to YE-2019 3.0%
11.6%
(44%). Most of Secured Bad
Loans (68%) is represented by 7.1%
“Corporate & SME” and 23% by
5.8% Source: PwC analysis on Banca
Retail (Chart 17). 2.6%
d’Italia «Banche e istituzioni
1.9% finanziarie: condizioni e rischiosità
del credito per settori e territori»,
September 2020.
Note: (*) Unique percentage for
5.3% 1. Valle d’Aosta and Piemonte.
2. Abruzzo and Molise.
3. Puglia and Basilicata.
28 | PwCItalian NPL Market
Chart 16: Breakdown of gross Bad Loans by counterparty** (H1-2020)
0.8% 0.9% 0.8% 0.9% 0.8% 0.9% 1.7% 1.8% 1.7% 1.6% 1.9% 1.9% 2.1%
20.4% 19.8% 19.9% 19.8% 19.4% 18.1% 16.2% 16.5% 17.2% 20.6% 21.1% 17.1% 17.5%
8.9% 8.2% 7.5% 7.4% 7.6% 6.0% 6.0%
12.0% 10.6% 9.7% 9.3% 8.2% 6.1%
66.8% 68.7% 69.6% 70.1% 70.9% 72.8% 74.5% 74.3% 73.5% 69.6% 70.9% 75.0% 74.4%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1-2020
Corporate & SME Family business Consumer Other
Source: PwC analysis on Banca d'Italia "Banche e istituzioni finanziarie: condizioni e rischiosità del credito per settori e territori",
September 2020 Note: (**) “Other” includes PA and financial institutions.
Chart 17: Secured gross Bad Loans trend (% on total Bad Loans)
Counterparty
50%
47% 48% 48%
45% 44% 45%
42%
39% Corporate & SME 68%
38% 38%
36% 36%
Family business 7%
Retail 23%
Other** 2%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1-2020
Source: PwC analysis on Banca d'Italia "Banche e istituzioni finanziarie: condizioni e rischiosità del credito per settori e territori",
September 2020 Note: (**) “Other” includes PA and financial institutions.
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