In 2018, the decline in the non-performing entry rate of Italian companies continued, which - reduced to 2,5% - returned to the levels of 2009. The improvement concerned all economic sectors and territorial areas. The slowdown of the Italian economy in 2020 and 2021 could interrupt this process, leading to a stabilization of the flows of new bad debts
In 2018 and in the first quarter of 2019, the reduction in the stock of bad loans accumulated by Italian banks continued (-39%, in net terms, in the last year), with a decrease of approximately 21 billion compared to March 2018. The decrease is was generated not only by NPL disposal operations, but also by lower flows of new non-performing loans. A trend destined to stabilize on current values due to the slowdown in the Italian economy. These are the main evidences that emerge from the most recent “ABI-Cerved Outlook on non-performing loans by companies”, which analyzes the non-financial companies' entry into non-performing loans.
Over the last few years, the most significant improvements have been in the companies themselves, which are however also at the origin of most non-performing loans: the rate of deterioration for non-financial companies (ie the portion of performing loans passed to the status of impaired) fell to 2,4% since 2,6% of March 2018. This is due to economic factors linked to the last phase of the economic recovery cycle, but also to a more careful selection of credit. In 2018, the decline in non-performing entry rates also continued: from 2,8% of the 2017 to 2,5%, reaching the values of 2009.
According to the forecasts prepared on the basis of the ABI-Cerved models, however, the incidence of the flows of new non-performing loans on the total performing loans of non-financial companies will slightly increase again in 2019 and 2020, to then be reduced to 2,4% of 2021 , thus placing at the end of the forecast period at levels lower than the actual levels of the 2018 but still far from the pre-crisis levels (1,7% in the 2008). According to expectations, at the end of the forecast period, industrial companies (2008% against 2,0% in 1,8) and those in the North-East (2008% against 1,8%) will be closer to the percentages of 1,4. The distance with the 2008 will continue to be instead significant for micro-enterprises (2,6% against 1,8%), for the construction sector (3,2% against 1,8%) and in the South and Islands (3,3% against 2,2%).
Sectoral trends - While the industry seems to converge towards pre-crisis rates, continuing a decline that began in 2014, the flows of new bad loans in construction and services remain at still high levels. At the end of 2018, the non-performing entry rate in industry stood at 1,9% (it was 2,2%), close to 2008 levels (1,8%) in particular for small and medium-sized enterprises , which even surpassed them (1,4% and 1% versus 1,5% and 1,2%).
Even in construction the rates are falling, but we remain very distant from the 1,8% of the 2008: 4% in the 2018, down by 0,5 percentage points on the 2017. It is the small construction companies that show the strongest reduction, from the 4,7% of the 2017 to the 3,3% of the 2018, becoming the least risky size category. Medium-sized construction companies move from 4,7% to 4,0%, micro-constructions to 4,5% to 4,0%, while large construction companies show a smaller reduction. However, all construction companies remain far from pre-crisis levels (1,8% for micro, 1,9% for small, 1,8% for medium and 1,6% for large).
In the services sector, the decrease is less marked - from 2,6% in 2017 to 2,4% in 2018 - and the difference with the pre-crisis situation remains large for all size brackets.
Territorial trends - In 2018 the situation improved throughout the country, with the exception of the North-West where the values remained stable or slightly increasing (2,1%). The most marked reductions in new bad loans are recorded in the Center and in the South (from 4% to 3,5% in the South and from 3,6% to 3,1% in Central Italy), however still far from pre-crisis levels ( 2,2% and 1,8%) despite the sharp decline also in 2017. The North-East did well, going from 1,9% to 1,7% almost reached 1,4% in 2008 .
As for dimensions, for micro-enterprises the decline was more pronounced in Central and South (from 3,8% to 3,2%, and from 4,1% to 3,5%), although values remain far from pre-crisis levels (respectively 1,9% and 2,3% in the 2008). In the North-East it has gone from 2,2% to 1,9%, while in the North-West there are no improvements (2,4%). A similar trend is also found among small companies, which see the rates of bad debts falling more markedly in the South (from 3,6% to 2,7%) and in the Center (from 3,1% to 2,4%), less in the North-East ( from 1,4% to 1,2%) which in any case approaches 1,1% of the 2008, while in the North-West the 1,6% is confirmed.
Very similar situations also characterize medium-sized and large companies: the averages record sensitive drops in the Center (from 2,6% to 2,1%) and in the South (from 3,0% to 2,5%), more contained in the North-East, where the data it is low and close to the pre-crisis (0,8%), and even growth in the North-West, where the rate of bad debts passes from 1,2 to 1,3%. Between 2017 and 2018, large companies in the North-West and North-East stand on 0,9% and 0,8%, while in the Center they pass from 1,9% to 1,7% and in the South from 2,4% to 2,1%, but remain at above pre-crisis levels.
The forecasts for the 2021 - The macroeconomic forecasts for the next two years show a deceleration of the Italian economy, associated with a modest dynamic in public consumption, private consumption and investments and the resilience of exports, flanked by the increase in imports. Inflation is expected to pick up only slightly in the 2020-21, with interest rates picking up again only later.
Based on this scenario, it is expected that bad debts will remain at 2,5% in 2019 and then slightly increase in 2020 (2,6%) and improve again in 2021 (2,4%), without reducing the gap from pre levels -crisis (1,7%). The forecasts formulated last November for the 2019 and 2020 (2,3% in 2019 and 2,1% in 2020) are therefore slightly revised.
The flow of new non-performing loans is expected to resume growth in the coming months for medium-large companies, while between micro and small this will happen in the 2020, to then resume the decline in the 2021, albeit at a rather contained pace (2,6% for micro and 2,4% for small businesses). It is expected that in the 2021 the rates of non-performing loans remain higher than the pre-crisis rates in all the company size ranges.
As for the sectors, it is expected that in the next two years the rates of bad debts will tend to converge due to an improvement in construction (from 4% of 2018 to 3,2% of 2021) and of an arrest, or deterioration, in agriculture ( 2,0% in 2021), in industry (2,0% in 2021) and in services (2,4% in 2021).
The estimates for the 2019 and the forecasts for the 2020 and 2021 at the territorial level indicate different trends in the different macro areas. The decline of new suffering in the Center-South will continue slowly, with rates that in the 2021 will reach 3,3% in the South and 2,9% in the Center, while in the North we will maintain levels similar to the current ones.