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MILAN, April 17 (Reuters) - Intesa Sanpaolo’s board on Tuesday approved a 3.6 billion euro deal with Swedish credit management company Intrum that will help the Italian bank to cut its bad loan ratio below a 10 percent threshold.
Italian banks still hold some 285 billion euros in troubled loans four years after the country’s deep recession that pushed problem loans as high as 360 billion euros.
Such risky assets, which normally yield double-digit returns, are high on the radar of international investors who have been buying up bad loan portfolios in Italy along with debt collection companies.
As part of the Intrum deal, announced on Monday, Intesa will offload 10.8 billion euros ($13.35 billion) in bad loans, reducing their share in terms of the bank’s total lending to 9.6 percent from 12 percent at the end of last year.
Yielding to regulatory pressure to speed up the reduction of soured debts, Intesa in January said it was in talks with Intrum over its bad loan business. For years the bank had bet on recovering bad loans internally, building a dedicated business that employs 600 people.
As part of the agreement, Intrum will control 51 percent of a company which will be made up of Intesa’s debt recovery business and Intrum’s Italian operations.
The new company will manage around 40 billion euros in soured debts, becoming a major player in the Italian debt servicing market, one of Europe’s biggest.
By 1156 GMT shares in Intesa rose 1.8 percent in line with the sector as the deal’s favourable terms lifted other Italian banking stocks.
Intesa is offloading the bad loans at 28.7 cents on the dollar, in line with their book value and stands to book a 400 million euro capital gain from the overall deal.
Rival Italian bank UniCredit had to raise 13 billion euros in capital to offset the hit from writedowns needed to pave the way for a 16 billion euro bad loan sale last year at a price of just 13 cents on the dollar.
($1 = 0.8092 euros)
Reporting by Valentina Za. Editing by Jane Merriman