UniCredit CEO Sees Time Running Out for Italy Bad Bank Deal

  • Italy's banks have more than $220 billion of bad debts
  • Matter will take `years' for lenders to resolve: Ghizzoni

Italy’s more than 200 billion euros ($220 billion) of non-performing loans will remain the biggest challenge for the country’s banking industry for years, according to Federico Ghizzoni, chief executive officer of UniCredit SpA, the nation’s largest bank.

“Bad loans are still increasing, this is a delicate issue that the whole industry has to face in coming years,” Ghizzoni said at a conference with the international press in Milan late Wednesday. “We decided to face the problem in our business plan, targeting a strong reduction of our NPL ratio, and increasing our coverage for bad loans,” he said.

Bad loans at Italian banks have climbed in recent years as the nation’s economy endured its longest recession on record. Italy is seeking to accelerate banks’ disposals of problem debts by creating an asset management company for such loans. The project has been blocked for months by the European Commission, which considers any state involvement in the disposals as possible state aid.

“If Italy’s bad bank solution isn’t found by the end of year, it doesn’t make sense to continue negotiations with the EU commission,” Ghizzoni said.

Italian banks’ gross non-performing loans rose 10.9 percent in October from a year earlier, the Bank of Italy said in a statement Thursday.

UniCredit plans to reduce gross loans at its non-core division by 33 billion euros in the next three years, as it targets a coverage ratio in 2018 at 51%. The measure is the percentage of bad debts covered by provisions.

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