Italy, Spain Banks Are Main Takers of New ECB Loan Program

  • UniCredit, Intesa increased borrowings in ECB loan program
  • BBVA said to take net new money of 10 billion euros in TLTRO

Italian and Spanish lenders were the biggest participants in the European Central Bank’s latest new loan program, increasing their net borrowings by more than 25 billion euros ($28 billion).

Intesa Sanpaolo SpA said it increased borrowings by about 8 billion euros in the first of four targeted longer-term refinancing operations after paying back loans under a previous program, while UniCredit SpA took an additional 3 billion euros for its domestic business. Spain’s Banco Bilbao Vizcaya Argentaria SA used net new money of 10 billion euros, said a person with knowledge of the matter, asking not to be identified because the issue is private. CaixaBank SA borrowed an additional 6 billion euros, a bank official said.

“Considering that banks have no obligations to use funds for lending, it’s a good way for them to lower funding costs,” said Fabrizio Bernardi, an analyst at Fidentiis Equities. “Italian and Spanish banks’ cost of funding is still higher than European peers, making the TLTRO-II loans more attractive to replace other and more expensive sources of funding.”

Banks across the euro area took 399.3 billion euros in the ECB financing package, known as TLTRO-II, while opting to give back 368 billion euros of cash taken under the less-generous TLTR0-I program on June 29 under an early-repayment option. That amounts to a net borrowing of 31 billion euros.

The ECB’s lending program, which offers to pay banks to lend if they boost credit to real economy, is part of a range of measures to stave off deflation in the euro area and spur economic growth. The plan was announced in March as part of a wider stimulus package that also included interest-rate cuts and an expansion of quantitative easing.

UniCredit’s total borrowing in Friday’s auction amounted to 26.6 billion euros including 18.2 billion related to Italy, while Intesa took 36 billion euros. BBVA borrowed 24 billion euros, the person said. Banca Monte Paschi di Siena SpA, Unione di Banche Italiane SpA and Banca Popolare dell’Emilia Romagna SC also increased their net borrowings, while Banco Popolare SC, Bankia SA, Banco de Sabadell SA and Banco Popular Espanol SA rolled over previous loans into new program, without seeking additional funds.

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