Revenue Hit, Capital in Focus as Italy Banks Report: Four Charts

Spooked by the rescue of Banca Popolare di Vicenza SpA, investors are turning their attention to Italian banks’ first-quarter results. Though plagued by soured loans and capital holes, some may show they’ve been able to cut bad-debt provisions and increase deposits even as revenue drops.

First-quarter revenue will probably fall, hurt by volatile financial markets, faltering loan growth and record-low interest rates. Revenue may have slipped by 7 percent at UniCredit SpA and by 13 percent at Intesa Sanpaolo SpA, analyst estimates compiled by Bloomberg show.

Loan-loss provisions are expected to decline in the quarter as the rate of borrowings being classed as problematic slowed. New bad-loan rates decreased last year for the first time since 2011 and the trend is expected to gain speed over the next two years, according to a report by the Italian Banking Association and Cerved Group SpA.

Italian banks will probably report little progress in increasing capital buffers amid low profitability and stricter rules by regulators. Common equity Tier 1 ratios may have been affected by concerns of systemic risk, which pushed up credit-default swaps on sovereign debt in the period, according to Mediobanca SpA analysts including Riccardo Rovere and Andrea Filtri.

While deposits have continued increasing this year, some banks will benefit more than others. Executives at Banca Monte dei Paschi di Siena SpA, Banca Carige SpA and Banca Popolare di Vicenza said their banks faced deposit outflows at the beginning of the year as holders of larger accounts moved their money to lenders with less insolvency risk.

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