April 19, 2018 / 4:37 PM / a year ago

UPDATE 1-Italy's Pop Bari sets aggressive bad loan target -sources

* Seen as one of Italy’s last problem banks

* Southern roots a hurdle to capital-raising

* Aims to cut soured loan ratio to 15 pct from 22 pct -sources (Adds second source)

By Valentina Za and Giuseppe Fonte

MILAN, April 19 (Reuters) - Italy’s Popolare di Bari has set an ambitious target to reduce its soured debt this year, two sources familiar with the matter told Reuters, in a move likely to heighten concerns it will need fresh capital.

Italian banks, laid low by a mountain of bad loans left behind by a deep recession, have been raising capital in recent years and shed some 80 billion euros ($99 billion) in soured debt from a peak of 360 billion euros.

The partial clean-up and recent successful cash calls by smaller lenders such as Creval suggest the industry is turning a corner after a crisis that culminated in last year’s state rescue of Monte dei Paschi di Siena.

However, three bankers speaking on condition of anonymity said that Popolare di Bari could still struggle to raise cash to strengthen its finances.

One banker said investors may be reluctant to put money in a bank rooted in Italy’s underdeveloped south and facing competition from rival Popolare di Puglia e Basilicata, BancApulia, now part of the Intesa SanPaolo group, and Popolare Pugliese in its own region.

“It is one of the last banking problems that Italy needs to fix. Not a huge one, but a problem nevertheless,” the banker said.

A source close to Popolare di Bari denied that the bank might need to raise capital.

The bank, one of only two large “popolari” yet to comply with a law requesting they shed cooperative status granting shareholders one vote each, had planned to raise 300 million euros in cash as it turned into a joint-stock company.

Both moves were put on hold pending an appeal against the reform. The appeal was rejected by Italy’s top court last month.


After disposing of 800 million euros in insolvent loans over the past two years, Popolare di Bari still holds problematic debt equivalent to 22 percent of its total lending - well above a national average of about 14 percent.

The bank aims to cut that ratio to 15 percent this year, said one of the sources without elaborating. The second source said that about 1 billion euros in soured loans would need to be shed to achieve the target.

To speed recoveries Popolare di Bari has struck a partnership with debt collector Cerved Credit Management . However, the slow-moving nature of Italy’s judicial system means that sales of bad debt remain the most expeditious option, though lenders usually make a loss on such deals.

In the first disposal of a large portfolio at book value, Intesa Sanpaolo this week shed 11 billion euros in bad debt at 29 percent of its face value.

By comparison, Popolare di Bari held defaulted loans on its books last year at 38 percent of face value.

To minimise the hit in previous disposals, Popolare di Bari has offloaded bad debts repackaged as securities, tapping a state guarantee scheme that expires in September.

The bank reported a 1 million euro profit for 2017, down 81 percent year on year, hit by goodwill impairments.

Total capital stood at 12.7 percent of assets, against a regulatory requirement of 11.2 percent, a buffer of around 130 million euros, according to one analyst’s calculation. ($1 = 0.8081 euros) (Editing by David Goodman)

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