ROME: For a change, vast holdings of government bonds didn’t hurt Italy’s biggest banks during the worst market selloff since 2012.
Against the predictions of some analysts that UniCredit SpA, Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA would suffer a capital hit in the second quarter because of a plunge in Italian debt, buffers grew. Lower loan losses, declines in risky assets and hedging helped strengthen finances.
The results were a positive surprise, with the best news coming from capital,” said Karim Bertoni, who helps manage more than $6 billion at Bellevue Asset Management AG in Switzerland. “Past financial crises and tougher rules by regulators forced lenders to reduce leverage and return on equity, but at the same time contributed to reinforcing capital.”
Improving profits cushioned the impact of the bond-market rout as Greece teetered on the brink of exiting the euro-region. European Central Bank President Mario Draghi’s unprecedented economic stimulus is helping to nudge Italy out of recession just as lenders cleaned up their books and some banks increased lending.
The pickup let Intesa and Monte Paschi reduce funds put aside for bad loans by 29 percent in the quarter, while UniCredit cut provisions by 9 percent. All three also trimmed their assets weighted by risk.
