ROME: Italian banks are finally starting to clean up their balance sheets as plunging asset yields encourage investors into corners of the market they previously shunned. About 250 investors are in Venice to attend Banca Ifis SpA’s non-performing loan conference, twice as many as last year, said Giovanni Bossi, chief executive officer of the financial services firm. The host said on Thursday that it bought bad loans with a face value of 420 million euros ($472 million), part of the 2 billion euros it plans to purchase by the end of the year.
Some of the biggest buyers of distressed assets, from Apollo Global Management LLC to AnaCap Financial Partners LLP, are also looking to soured Italian loans as yields across Europe tumble to records. At the same time, the European Central Bank is increasing pressure on the country’s lenders to reduce their pile of more than 360 billion euros of troubled loans, equal to about a quarter of Italy’s gross domestic product. “Investors know that bad debt can provide returns you can’t find in any other asset class at the moment,” Bossi said before the conference. “While international buyers were initially looking at 20 percent yield on Italian portfolios, now they may be happy with 10 percent or even less.”
Italian lenders have lagged behind their European counterparts in reducing bad loans since the 2008 financial crisis as the country’s longest recession since World War II left businesses and households struggling to repay debt. That’s starting to change as it becomes harder for investors to make money. Average yields on European junk debt dropped to a record 3.8 percent last week from 11.5 percent five years ago, according to Bloomberg Barclays index data.
