Why Europe’s big banks still scare investors – CNBC

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Italian lenders are among the hardest-hit by this year’s bank rout, following the European Central Bank’s request in January for information on their still-large portfolios of bad debts. Investors are concerned about how these banks will deal with their non-performing loans, given that they are unlikely to be repaid.

The banks under scrutiny include UniCredit, Italy’s second-biggest bank by market capitalization and the 21st largest in Europe. That is in addition to Banco Popolare and Banca Popolare di Milano, which are set to merge to become Italy’s third-largest bank, and Banca Monte dei Paschi di Siena.

However, Intesa Sanpaolo, Italy’s biggest bank with market cap of $46.39 billion, escaped scrutiny, as did Mediobanca and UBI Banca.

On Monday, the chief executive of Intesa Sanpaolo told CNBC that his bank’s stock of bad debts had declined and suggested investors focused on net rather than gross non-performing loans.

“If you have, like Intesa SanPaolo, 40 billion euros ($45 billion) of gross bad loans, but you have 15 billion euros net — because we posted 25 billion euros of provisions — and you have 30 billion euros of collateral facing the 15 billion euros, you are in a situation of having a proxy of zero risk,” he told CNBC.

On Wednesday, the Italian government approved a package of measures that included a guarantee scheme to help its bank sell off bad loans.

Why Europe’s big banks still scare investors – CNBC