REFILE-Carige eyeing state guarantee in 900 mln euro bad loan sale-sources
reuters.comMonday September 26, 2016 5:38 AM
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MILAN, Sept 26 (Reuters) - Banca Carige is considering using a state guarantee to sell 900 million euros ($1 billion) in bad loans, two sources close to the matter said on Monday, as Italian banks seek to tackle a major source of weakness for their balance sheets.
Carige targets selling 1.8 billion euros in bad loans by the end of 2017 under its business plan. Its chief executive said in June roughly half that amount would be sold this year. The Genoa-based bank is working with adviser Banca IMI on the bad loan sale, the sources said, confirming a press report.
There is not yet a formal decision on tapping the guarantee which banks can buy from the Italian state for the least risky portion of their securitised bad debts -- provided the notes achieve an investment-grade credit rating.
Italy introduced earlier this year the GACS state guarantee scheme to help lenders offload loans to borrowers deemed insolvent, which have risen to 200 billion euros - nearly one fifth of overall corporate loans - after a prolonged recession.
The state guarantee lowers the risk of the securitised notes and hence the return required by investors, so that banks can achieve a better price when selling the loans.
So far, sales of soured debts in Italy have stalled as banks would need to write down further these assets to be able to sell them, but they are reluctant to book fresh losses.
Only small lender Banca Popolare di Bari has made use of the GACS scheme, but a crucial test will be a record 28 billion euro bad loan securitisation Italy's third-largest bank Monte dei Paschi di Siena is working on.
Carige posted a 206 million euro loss for the first six months after writing down risky loans for 345 million euros following an inspection by European Central Bank supervisors. ($1 = 0.8905 euros)
(Reporting by Valentina Za, editing by Francesca Landini)
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