December 9, 2013 / 9:37 AM / 4 years ago

Italy banks cut lending in October as bad loans continue to rise

MILAN, Dec 9 (Reuters) - Italian banks cut back further on lending to companies in October as non-performing loans continued to rise at an unchanged annual pace of 22.9 percent, central bank data showed on Monday.

The Bank of Italy said loans to companies fell 4.9 percent year-on-year in October, the biggest contraction since July 2011. Loans to company had shrunk 4.2 percent in September.

High credit risks curb bank lending in Italy even as the Italian economy slowly emerges from its longest post-war crisis. The Bank of Italy has urged banks to start selling their bad loans to free up capital for new lending as appetite among specialised investors for these assets grows.

Overall lending to the private sector shrank 3.7 percent in October after a 3.5 percent fall in September.

In a positive development for lenders, private sector deposits picked up in October with a 5.4 percent annual rise after a 3.6 percent increase the previous month.

Bonds issued by bank continued to fall at annual pace of 7 percent, little changed from a month earlier. (Reporting by Valentina Za; Editing by Lisa Jucca)

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