Italy's UniCredit, Banco Popolare prolong talks on sales of bad debt

MILAN, June 20 Fri Jun 20, 2014 9:21am EDT

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MILAN, June 20 (Reuters) - Planned sales of bad debt by UniCredit and Banco Popolare, Italy's No.2 and No.4 lenders by branches, are taking longer than expected, and talks are likely to drag on for weeks, sources familiar with the deals said.

Italian banks' non-performing loans (NPLs), those classified as least likely to be repaid after months of being in default, have risen to 166 billion euros ($226.3 billion) in April, more than double the level in 2010.

The Bank of Italy has repeatedly urged lenders to shed these assets, which force banks to set aside precious cash to cover possible losses, so that they can increase lending to companies.

Analysts say the prices that investors are willing to pay for the loans are in many cases below the values accounted for on bank books, which means lenders would be forced to take more writedowns. Deals are taking a long time as the two sides try to find a compromise on price.

A source familiar with the matter said UniCredit, which is in negotiations with a handful of potential buyers, had extended the deadline for binding offers to mid-July from end-June.

The bank aims to sell a portfolio of bad loans together with a majority stake in its debt collection unit, UniCredit Credit Management Bank (UCCMB), to make bad loan management more effective.

UCCMB manages soured loans with a gross value of more than 40 billion euros owned by UniCredit and third parties.

"The lender has prolonged negotiations by a few days to give the opportunity to all interested parties to submit their proposals," one of the sources said. "The bank is in any case aiming to close the transaction by July."

UniCredit declined to comment.

The sale of Banco Popolare's bad bank is also dragging on. Chief Executive Pier Francesco Saviotti said last month that four potential buyers had asked for more time to carry out due diligence and he expected to have more information for the market in the first 10 days of June.

No details have emerged so far, however. On Thursday, the chief executive of one of the potential bidders, real estate group Prelios, said Banco Popolare was expected to take a decision on the sale "by the end of summer".

Banco Popolare declined to comment.

The co-operative lender has put on the block a majority stake in Release, which owns and manages soured loans and real estate assets with a gross value of 3.2 billion euros.

Release had a book value of around 260 million euros as of end-2013.

Italy's banking association said on Tuesday the net value pf total non-performing loans rose to 76.7 billion euros in April from 75.7 billion in March after three months of decline as sales of bad debts by Italian lenders stalled. ($1 = 0.7336 Euros) (Reporting by Paola Arosio, Elisa Anzolin and Francesca Landini; editing by Jane Baird)

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