May 9, 2018 / 6:32 PM / 7 months ago

UPDATE 1-Banco BPM's debt recovery business attracting interest-CEO

* May go beyond target for bad loan reduction

* Interested in seizing favourable market momentum

* Will assess options after closing 5 bln euro sale in H1 (Recasts after conference call)

By Valentina Za

MILAN, May 9 (Reuters) - The debt recovery business of Banco BPM has attracted interest from potential buyers following a landmark deal by rival Intesa Sanpaolo, the head of Italy’s third-largest bank said.

Intesa last month agreed to sell 51 percent of its loan recovery unit to Swedish loan collector Intrum Justitia , shedding 11 billion euros in bad debts as part of the deal and reaping a 400 million euro capital gain.

Banco BPM Chief Executive Giuseppe Castagna said on Wednesday the bank had received several inquiries about its bad loan unit in the wake of Intesa’s transaction.

“We’ll see what to do,” Castagna told analysts after the bank published first-quarter earnings.

Sources had said the generous valuation seen in the Intesa deal may encourage rivals such as Banco BPM or UBI Banca to consider similar deals.

Castagna said Banco BPM was interested in seizing “potential opportunities and the very favourable situation” on Italy’s bad loan market, potentially topping a target to sell a further 8.5 billion euros by the end of 2020.

“We could go beyond our de-risking plan’s targets,” he said.

A first five billion euro securitisation sale will be completed by the end of June tapping a state guarantee scheme, Castagna said, adding the bank was already in touch with 10-15 potential buyers.

Italy’s 285 billion euro market for soured bank loans, Europe’s biggest, is high on the radar of international investors. Billions of euros in writedowns booked by banks in recent years have eased disposals, which are now gaining steam helped by a recovering economy.

Banco BPM said it would write down bad loans by 1.2 billion euros following the introduction this year of a new accounting rule requiring banks to book expected and no longer actual losses.

The bank said its net profit nearly doubled in the first quarter from a year earlier thanks to the sale of insurance assets to Cattolica Assicurazioni and a rise in its interest income, partly driven by the new accounting rule.

Fees instead fell 7.6 percent from the first quarter of last year, when Banco BPM was officially born from the merger of Popolare di Milano and Banco Popolare. ($1 = 0.8438 euros) (Editing by William Maclean)

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