March 25, 2019 / 4:20 PM / a month ago

Renewal of Italian guarantee scheme credit positive for banks - Moody's

MILAN, March 25 (Reuters) - A two-year extension of a public guarantee scheme on bad loan securitisations is positive for Italian lenders despite stricter conditions, Moody’s Investors Service said on Monday.

Italy’s Treasury last week renewed the scheme designed at helping banks shed bad debt.

* The scheme’s two-year extension is credit positive for Italian banks because they can continue to cut their stock of bad loans, Moody’s says

* Under the new scheme, senior notes in bad loan securitisations tapping the state guarantee must be rated at least ‘Baa2’ versus ‘Baa3’ previously

* Banks have so far completed 21 transactions using the GACS state guarantee scheme, securitising more than 62 billion euros ($70 billion) in bad loans

* Of the 14 GACS-backed bad loan securitisations rated by Moody’s, eight have senior notes carrying a ‘Baa3’ rating, below the current minimum ‘Baa2’ level

* Italian banks’ bad loans as a percentage of gross loans fell below 11 percent last year from 14.5 percent at the end of 2017

$1 = 0.8828 euros Reporting by Alessia Pe; Editing by Mark Potter

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