* Italian banks trying to shed bad loans to help balance
* PM Letta denies report he is against a "bad bank"
* Non-performing loans have risen during long recession
By Gavin Jones
ROME, Feb 10 Italy's Economy Ministry on Monday
backed initiatives by lenders to offload their bad debts but
said it saw no need to set up a "bad bank" using either public
or European Union funds.
Italian banks are trying to improve their balance sheets as
European regulators conduct a health check of the sector.
Data on Monday showed bad loans surged at an annual rate of
almost 25 percent in December, as companies and families
strained to pay their debts and Italy struggled to emerge from a
long economic crisis.
The ministry said in a statement that it supported all
efforts by banks to "lighten their load" of non-performing
loans, but it believed there was "no need for the use of public
resources, either at the national or EU level".
Central bank governor Ignazio Visco on Saturday urged
Italy's lenders to take "ambitious" steps to get bad loans off
their books, fuelling speculation that Italy might set up a "bad
bank," like Spain and Ireland. He gave no details, but a Bank of
Italy spokeswoman said he was referring to private-sector action
or possible joint public and private action.
Deputy Governor Salvatore Rossi told Reuters that Italy's
strained public finances meant it could not afford a publicly
funded bad bank.
The ministry's statement followed a report in the Financial
Times on Monday that Prime Minister Enrico Letta had rejected
the idea of a public bad bank because he feared it could prompt
downgrades of Italy's sovereign credit ratings. The report was
denied by Letta's spokesman, who said Letta "has never expressed
any opposition to a bad bank".
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 their bad
debts, sources close to the matter have told Reuters.
Italy's longest post-war recession has made it tough for
companies to keep up loan payments.
UniCredit has already sold 700 million euros ($953
million)of non-performing loans to Anacap Financial Partners and
950 million euros to private equity fund Cerberus European
Intesa Sanpaolo, Italy's largest retail bank, is working on
plans to create an internal "bad bank" for problem loans,
according to a source close to the situation.
And Mediobanca is studying setting up funds for
the bad loans of smaller banks that may not have enough capital
to deal with the problem by themselves.
Italy has lagged behind Spain and Ireland in restructuring
its banks, analysts say, but an asset-quality review by the
European Central Bank is pushing 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, according to think tank