Italy Banks Expect Earnings Hurt by Funding Costs, Writedowns

Italian banks expect that their earnings will be hurt by rising costs of funding, lower revenue and higher writedowns, Bank of Italy officials said.

Executives at the country’s biggest banks met today in Rome with Bank of Italy Governor Ignazio Visco. Bankers expect modest profitability in the next few months because of the economic downturn, according to the officials.

The sovereign debt crisis has increased the funding costs for the banks, so they are reducing lending to customers and are providing loans at higher rates, they said. Bankers noted at the meeting that less rigid collateral requirements of the European Central Bank has helped ease the impact of higher funding costs.

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