For the second consecutive year, the bad loans accumulated by Italian banks decreased significantly in the 2018 (-39% in net terms), with a decrease of 25 billion compared to September 2017. On the one hand, this was favored by banks' disposal of NPLs and, on the other, by the confirmed reduction of new non-performing loans. At the same time, impaired loans decreased, ie expired or with a high probability of not being paid. The positive trend is mainly due to improvements in companies: the rate of deterioration for non-financial companies, which describes the portion of loans In bonis Passed to impaired status, it fell from 3,4% last quarter 2017 to 2,8% third quarter 2018 (it was 4% in the third quarter 2008). This reduction was partly driven by the favorable economic situation, but also by the more careful selection in the granting of loans to companies.
These are the main evidences that emerged from the new Abi-Cerved Outlook on bad loans of companies (December 2018 edition with data updated to 30 September 2018), which, thanks to the new information on balance sheets, defaults and the macroeconomic scenario, updates the 2017 data, provides estimates for 2018 and forecasts for the two-year period 2019-20.
The decline in non-performing entry rates also continued in 2018: from 2,8% in 2017 to 2,4% (estimated figure) in 2018, with a decrease that affected all company sizes, all economic sectors and all territorial areas. The forecasts drawn up on the basis of the ABI-Cerved models indicate that the decline will continue over the next two years throughout the economy, albeit at a slower pace than expected in the previous February 2018 Report: in 2020 the incidence of new bad loans it will stand at 2,1%, with rates close to pre-crisis levels for companies with at least 10 employees, for those operating in industry (in particular small and medium-sized manufacturing companies) and those located in the North. Micro-enterprises, Central-Southern companies and construction companies, however, will move away from the risk peaks reached in full crisis.
"Even in the event of a worsening of the economic situation, in the short term we expect limited effects on new bad debts arising from loans to companies. This - comments Gianandrea De Bernardis, CEO of Cerved - thanks to the strengthening of the fundamentals of the companies, which we have observed for some years and to the more careful selection of credit made by the banks after the crisis ".
"The data presented today confirm that the quality of the assets of banks operating in Italy is not stopped: not only the percentage of loans that migrate from year to year in NPL has now fallen below pre-crisis levels, but in the next two years we expect a further contraction also of the flows of new bad debts". This is, in short, the judgment of Giovanni Sabatini, Director General of Abi, who stresses that "this process is closely linked to the dynamics of the national economy, which, despite a series of downward revisions, is expected to remain on positive rates even in the next two years. Growth is therefore a key factor, on which everyone's greatest commitment is required. "
Non-performing loans originated from loans granted to companies
Therefore, the decline in the stock of bad loans accumulated by Italian banks continued in the 2018. From the latest data available (September 2018), the stock stood at gross 120 billion (-30,7% on an annual basis), with a marked decrease in loans originated by companies (-31,1%). Net non-performing loans, which take into account the adjustments already recorded by banks and which express the true residual risk in bank balance sheets, are even below 40 billion (-39,4% compared to 66 in September 2017 and -55% compared to the November peak 2015).
These improvements reflect the positive trend in non-financial corporations' non-performing entry rates: in terms of amounts, from 3,4% in mid-2017 to 2,6% in the second quarter of 2018; in terms of number of loans, from 3,3% to 2,6%. Although the rate of non-performing loans remains at higher levels than those before the crisis (1,5% in 2008), it should be emphasized that the flow of the total of loans entering the state of deterioration has now dropped below of 2008. This seems to indicate that we are in a tail phase of the credit deterioration process - in which, according to custom, overdue loans (net of those that return to performing well) are gradually transformed into non-performing loans, while the flow of outstanding loans that enter a state of insolvency (in the form of overdue loans or probable default). Overall, therefore, this is a positive scenario. In particular, on the basis of estimates, in 2018 the volume of new bad debts originating from loans to businesses should amount to € 14 billion, -25,8% compared to 19 in 2017 and about one third of the all-time high reached in 2013 (40 ). The number of non-performing loans also fell sharply: the estimated figure for 2018 is around 15 thousand, -18% on 2017 and -45% on 2014.
Official data on new bad debts include details by geographical area, production sectors and credit cut by banks, but not by size of company. Abi and Cerved have estimated these indicators on the basis of the individual risk scores that Cerved processes for Italian companies.
From the 2017 the bad entry rates have decreased in all the dimensional bands and in the 2018 the trend has continued, albeit less marked: in the micro and small enterprises are estimated at 2,6% and 1,9% (from 3% and 2,2% of the year before), in the medium and large sectors are hovered respectively on 1,4% and 1,1% (against 1,7% and 1,2%). In all cases, rates equivalent to or lower than the values of 2009 are reached or consolidated.
The forecasts for the 2020
On the basis of a macroeconomic scenario that for the next two years incorporates a growth of the Italian economy slightly higher than 1%, the rates of non-performing entry in the next two years are expected to fall further, even if at slower pace than experimented in the recent past, with a reduction from 2,4% to 2,3% in 2019, and then touch 2,1% share in 2020: a figure strongly decreasing from the 2016 peak but still higher than the pre-crisis levels (1,7%). These forecasts saw a slight deterioration of those formulated last February for 2019 (2,1%), reflecting less favorable macroeconomic conditions.
According to forecasts for the size range, the decline will continue at higher rates among micro-enterprises and small companies, while it will tend to stabilize at the minimum levels of the last decade for large companies. In all the dimensional bands, in the 2019 the bad entry rates will still be higher than the pre-crisis levels, while in the 2020 they are expected to 2,2% among the micro-enterprises, to the 1,7% among the small ones, to the 1,3% among the medium and to 1,2% among the larger companies.
In the 2020, the risk differentials between sectors will tend to decrease as a result of a convergence of trends, with 1,8-2% decay rates in industry, agriculture and services and a sharp decline in the construction sector (2,5% ). More detailed forecasts indicate that at the end of the period, rates will have returned to similar levels or below pre-crisis levels throughout the industrial sector, with the sole exception of micro-enterprises. The decline will also continue in construction and services.
In the 2019 all geographical areas will benefit from a widespread improvement; in the 2020 in the North, pre-crisis levels will almost be recovered, while in the Center-South there will be a gap with respect to the values of the 2008, albeit decreasing compared to the peaks of recent years. With a bad entry rate of 2,9%, the companies of the South will be confirmed as the most risky in the 2020, followed by those of the Center (2,6%), the North West (1,7%) and the North East (1,6%).