MILAN, Feb 10 (Reuters) - Non-performing loans at Italian banks grew at a much sharper annual pace in December as Italy struggles to emerge from a deep economic crisis and lenders are cleaning up their balance sheet in light of a European asset quality review.
Lenders also cut their holdings of domestic government bonds ahead of a year-end deadline for balance sheet data that the European Central Bank will use it its review of the euro zone banking sector.
Bank of Italy data showed on Monday that non-performing loans at Italian banks rose 24.6 percent year-on-year in December, accelerating from a 22.7 percent increase in November.
Holdings of Italian government bonds at Italy-based banks stood at 387.4 billion euros ($527.6 billion) in December, down from 402.9 billion euros the previous month, according to data that are partly calculated at market value.
Italian banks are expected to have lowered their sovereign holdings ahead of a Dec. 31 snapshot of balance sheets the European Central Bank will use in its review of euro zone lenders this year.
$1 = 0.7343 euros Reporting by Valentina Za