Italian bank lending drops the least in two years in June

MILAN, July 22 Tue Jul 22, 2014 3:04pm EDT

MILAN, July 22 (Reuters) - Bank lending to Italian households and businesses shrank last month at the slowest pace in two years, an industry report showed on Tuesday, pointing to an easing in a credit crunch that has stifled the country's economic recovery.

Italian banking association ABI said loans to households and companies fell 1.4 percent year-on-year in June, after a 2.4 percent drop the previous month. In November of last year, loans were shrinking at an annual rate more than three times the level recorded in June.

"It's the best result since July 2012," ABI said.

Overall bank lending fell 2.2 percent, compared with a 3.1 percent drop in May.

ABI said medium- and long-term loans suffered because banks had trouble raising funds with a comparable maturity. Bonds issued by banks fell 8 percent in June from a year earlier, a drop of nearly 44 billion euros, ABI said. Deposits, on the other hand, continued to rise.

Bank bond issuance in Italy has been hit by higher taxation introduced as part of austerity measures during the euro zone crisis.

ABI said bad loans in Italy stood at 8.9 percent of the total in May at 168.6 billion euros ($227 billion), a figure in line with that released by the central bank earlier this month. ($1 = 0.7426 Euros) (Reporting by Valentina Za; Editing by Larry King)

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