MILAN, March 11 (Reuters) - The positive trend in Italian corporate bond issuance is set to continue as banks remain selective about who they lend to, Moody’s said on Monday.
Refinancing and investment needs, together with continuing stress in the banking system, will fuel further bond market growth, the credit rating agency said in a report.
Italian corporate bond issuance set a record in 2012, with a total of 29.8 billion euros ($38.8 billion)worth of bonds issued.
Moody’s said in the report it expected large, publicly rated and well-known issuers to continue to enjoy good access to capital markets going forward.
But it warned that smaller companies or family-owned businesses might experience difficulties in accessing the bond market for the first time.
Two sources told Reuters on Monday the Bank of Italy has told some of Italy’s biggest banks to hike bad-loan provisions after a sector audit showed they were vulnerable to defaults from small firms struggling in a deep recession.
Bad loans at Italian banks have risen sharply in recent months as the economic slowdown takes its toll on businesses and households.
In January they rose by 17.5 percent from a year earlier, compared to 16.6 percent rise for December.
“We also expect continued investor appetite for corporate bonds compared to financial institution ones, which are perceived as more directly correlated with sovereign risk,” the author of the Moody’s report Paolo Leschiutta said.
Moody’s warned political and macroeconomic uncertainties could constrain growth in Italian corporate bond issuance.
Elections in February left Italy in a state of limbo by producing a hung parliament, with a centre-left coalition winning the lower house but falling short of control of the Senate.
Last Friday Fitch cut Italy’s credit rating due to the political uncertainty after last week’s election, deep recession and rising debt. ($1 = 0.7684 euros) (Reporting By Stephen Jewkes; Editing by Michael Roddy)