Intesa Said Mulling Sale of Up to $2.2 Billion of Soured Loans

Intesa Sanpaolo SpA is considering a sale of bad loans with a face value of 1 billion euros ($1.1 billion) to 2 billion euros, according to two people with knowledge of the matter.

Italy’s second-largest lender is analyzing the debt to determine the final size and how to package loans for sale, said the people, asking not to be named because the plan is private. The lender may start the process in the fourth quarter and complete the transaction at the start of 2017, according to the people. The debt would include secured and unsecured loans to consumers and small firms, they said, although a final decision hasn’t been taken and the plan could change.

A spokesman for Milan-based Intesa declined to comment on plans for the sale. The bank said last month that gross non performing debt reduced 3 percent in the first half of this year to 61 billion euros, about 17 percent of its total loan book.

European regulators are stepping up pressure on Italian lenders to clean up their balance sheets, strengthen capital buffers and cut an estimated 360 billion euros of non-performing loans as the economy struggles to recover. Intesa created a unit, dubbed the Capital Light Bank, in 2014 to reduce non-core financial assets by 50 percent in three years.

Intesa is currently in the process of disposing three packages of bad loans totaling about 350 million euros, said the people. The deal is expected to be completed by the end of the year, taking sales of bad debt in 2016 to more than 1.1 billion euros, according to the people.

The bank’s common equity Tier 1 ratio, a measure of financial strength, stood at 12.9 percent on a fully loaded basis in August, confirming Intesa as one of the best capitalized lenders in the country. 

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