* Intesa Sanpaolo and UniCredit in talks with KKR - sources
* Preliminary talks concern restructured loans - sources
* The two had 11 bln euros gross restructured loans end-Sept
By Gianluca Semeraro
MILAN, Feb 6 Italy's top two banks, Intesa
Sanpaolo and UniCredit, are in preliminary
talks with U.S. investor KKR about setting up a fund to
hold some of the lenders' problematic loans, two sources close
to the matter said.
Such a vehicle would help both banks get rid of a chunk of
bad debts and clean up their balance sheets as European
regulators conduct a health check of euro zone lenders.
It would also potentially allow KKR to benefit from any
recovery in the Italian economy.
"There are preliminary talks about a possible plan to create
a fund between Intesa, UniCredit and KKR," said one of the
sources on Thursday, following a report in La Repubblica
newspaper. "There are no numbers yet and no documents have been
A second source said the initiative targeted so-called
restructured loans, which have already been renegotiated. At the
end of September, these totalled 8.1 billion euros ($11 billion)
at UniCredit and 2.5 billion euros at Intesa before writedowns.
La Repubblica said KKR would invest in the vehicle, while
the two banks would have a minority stake allowing them to take
the loans off their consolidated balance sheet.
Intesa and UniCredit declined to comment. KKR was not
immediately available for comment.
Both banks are seen leading a balance sheet clean-up by
Italian lenders, with a major focus on bad loans, which are a
big concern for banks as they grapple with the fallout from
Italy's longest post-war recession.
Italy has lagged behind Spain and Ireland in restructuring
its banks, analysts say, but the looming asset quality review by
the European Central Bank is stinging lenders into action.
Non-performing loans at Italian banks, the ones least likely
to ever be repaid, have reached 150 billion euros and are
expected to keep rising through 2016 even as the economy shows
the first signs of a pick up, according to think tank Prometeia.
A source close to the situation said earlier this week that
Intesa, Italy's biggest retail lender, was working on plans to
set up an internal "bad bank" for its souring loans. On the same
day, UniCredit announced the sale to a private equity fund of a
batch of bad loans, its second such deal since December.
Analysts say that separating problematic assets from good
ones will help investors gauge the underlying profitability of
core businesses and also make it easier to sell the
Both the Bank of Italy and the International Monetary Fund
have said Italy does not need a system-wide bad bank like the
ones set up in Ireland and Spain at the height of the euro zone
debt crisis, so analysts expect individual banks to engineer
their own solutions to tackle souring loans.