The recapitalization of Atlante 1 or the creation of an Atlante 2 fund solely for NPLs remains a hot topic, and Premier Matteo Renzi continues to express hope in “market-based solutions”. The problem is that funding will require moral suasion from the Government as the big banks, Intesa and Unicredit won’t commit further resources to such initiatives. For now only CDP seems ready to contribute 0,5 to 1 Bn euros. Participation by SGA, the ex-bad bank of Banca di Napoli is complicated as Brussels would consider it state aid. Pension funds might make some funds available for less liquid, riskier NPLs, but for now they fall under the Public Administration and the Government must first consider them private, rather than public, entities.
According to an IMF study, “A strategy for developing a Market for non-performing loans in Italy” by Jassaude and Kang, re-opening the securitisation market would be a way to potentially transact the stock of NPLs which have grown at 20%/year since 2008 to 333 Bn euros (gross), equivalent to 24% of GDP and 16,8% of total loans. Liquidity would be injected into the country’s asphyxiated economic and financial system. In 2014 Mario Draghi indicated the banks should use this route to recover capital and lend once more, thus overcoming the weak link in the recovery: in contrast to the US, Italian capital markets are less oriented to fund companies through bonds which therefore rely on bank credit. Banks thus need more capital to handle the demand for credit from small/ medium enterprises and consumers. A “securitisation comeback” is considered by financial authorities to be the way to avoid a new crisis. The solution presented by the Government together with the EU, the GACS, (or Guarantee for securitisation and non-performing loans) calls for a more innovative and professional management of NPLs in a virtuous circle to free up banks’ balance sheets. This was the purpose of creating the Atlante fund as a step to develop the NPL market potential. A large volume of traded credits would bring with them a greater demand for related services.
However, for now the market seems to be still stuck, with few transactions realised and many left incomplete or abandoned. The low level of actual deals is attributable to the bid-ask gap in prices, and to the asymmetry of information in the sector. The most active buyers are international funds such as Algebris, Cerberus, Fortress (who acquired Uccmb from Unicredit in 2015), Anacap, as well as Christofferson, Robb & Co (who bought consumer loans from Intesa). Banca IFIS is the lead Italian operator buying Interbanca and consumer loans. However most banks have backed off selling with the further write-downs required by investors price offers: Monte dei Paschi (MPS) recently froze an auction for a 220M secured package owing to uninteresting bids; Only half of the NPL portfolios (of some 900M Euros) offered for sale by Banca Popolare dell’Emilia Romagna (Bper) may actually change hands, and it had already turned down offers from Fortress and Blackstone for ITALEASE NPLs.
It seems that after the rescues of Popolare di Vicenza and Veneto Banca, all are now waiting to see what fresh funds Atlante collects in order to focus next on MPS’s large NPL stock. The Italian Government continues to say a precautionary measure to boost banks capital is imminent in the aftermath of Brexit-induced falls in bank share prices, while Brussels continues to warn Italy must stick to EU bail-in rules…
