* UniCredit, Intesa, KKR in talks over plans to set up
vehicle for restructured loans
* UniCredit CEO says decision must be taken by mid-2014
* Bad bank debate rages in Italy as souring debts mount
MILAN, Feb 11 Italy's top two banks, UniCredit
and Intesa Sanpaolo, are in talks over a joint project to deal
with their restructured loans, the head of UniCredit said, as
the country's lenders strive to tackle their large stock of
UniCredit CEO Federico Ghizzoni confirmed the
discussions with Intesa and U.S. fund KKR,
after sources said last week the three were in preliminary
contact about setting up a vehicle to hold the two banks'
"It's a project concerning (loans to) restructured
companies, so it's not a bad bank," Ghizzoni said. "There is
also the possibility of injecting equity into these companies,"
he said, adding that a decision would have to be taken by
As of September 2013 Intesa and UniCredit had a combined
10.6 billion euros ($14.5 billion) in gross restructured loans.
A string of initiatives by Italian lenders to deal with bad
loans, which have soured during the country's longest post-war
recession as companies struggle to pay back debts, has emerged
over the past week.
The government has said it sees no need for a publicly
funded bad bank to hold the riskiest loans. An EU Commission
source told Reuters the crux of the matter was the writedowns
that the lenders were prepared to make on the problematic loans
they were separating in ad-hoc vehicles.
"The real issue is the price at which the assets are
transferred to the bad bank," said the source, speaking on
condition of anonymity.
"If the price reflects the losses then there is no problem
because the losses will be then absorbed by the transferring
If, by contrast the transfer price is higher, then it means
that losses are not recognised by the transferring bank but by
the bad bank. This is not ideal because finally those losses
will be absorbed by the state or by the rest of the banking
system," the source added.
Ghizzoni said he had not discussed the option of a systemic
bad bank with Prime Minister Enrico Letta, who attended the
inauguration of UniCredit's new Milan headquarters on Tuesday.
He also said he was not aware of such a plan nor of the
possibility the state may offer some guarantees to help banks
offload bad debt.
"These could perhaps be solutions that are useful for banks
with a different size (than ours), we think we can manage on our
own. If there are any proposals we will listen to them," he told
Bank of Italy Governor Ignazio Visco urged Italian lenders
at the weekend to take ambitious steps to get bad loans off
their books while European regulators conduct a health check of
A spokeswoman said he was referring to private sector action
or possible joint public and private initiatives.
UniCredit has already sold 700 million euros 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.
Investment bank Mediobanca is studying setting up
funds to hold 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.
Gross non-performing loans at Italian banks, the ones least
likely ever to be repaid, rose by nearly 25 percent in December
to 155.8 billion euros, double their level at the end of 2010,
according to Bank of Italy data. Think-tank Prometeia expects
these bad debts to keep rising through 2016.