Lending to Italian households and companies stalled at the end of last year as domestic banks wrestled with rising bad loans and shrinking deposits, a report by Italian banking association ABI showed today.
The monthly report showed a rise in the cost of credit in the country. The weighted average rate on lending to households and non-financial companies edged up slightly to 4.25 per cent in December, well above a year-ago level of 3.62 per cent.
Gross non-performing loans rose by €1.6 billion in November from October to €104.4 billion. The figure marks a near 38 per cent annual increase.
Bad loans have been rising steadily over the past two years, and with the Italian economy expected to shrink significantly this year on the back of drastic austerity measures the picture is unlikely to improve.
The ABI report confirmed an annual fall in deposits at Italian banks already highlighted by European Central Bank and Bank of Italy's data.
ABI said deposits declined on an annual basis for a second month running. They fell 2.1 per cent year-on-year in December to €1,35 billion - despite an increase from the previous
month. In particular, ABI said that deposits from clients outside of Italy fell in November for the fifth month in a row. At around €419 billion, deposits from non-residents showed a 5.5 per ent annual decline.
The euro zone sovereign debt crisis has impaired the Italian banks' ability to raise funding abroad. ABI said that net funding from abroad -- the difference between deposits from non-resident and lending to them - had decreased by nearly a fifth in November from a year earlier.
Shut out of wholesale funding markets and increasingly reliant on European Central Bank funding, Italian banks are however able to tap their retail clients to sell bonds.ABI said that bonds issued by Italian lenders rose 7.8 per cent annually in December.
Lending to domestic households and non-financial companies stood at €1,520 billion in December, down slightly from the previous month. The annual growth rate slowed to 4.1 per cent last month from 4.9 per cent in November.
Reuters
