Later this week, the Bank of Italy had issued a statement saying that a number of Italian lenders should brace for more than €9 billion ($11 billion) combined in loan losses in fiscal 2021 and the next, as an unprecedented scale of pandemic-led economic damage, which had led to a double-digit contraction last year and plagued the world’s eighth-largest economy by nominal GDP, became more evident.
In point of fact, although the share of corporate loans stood at an only 1.5 per cent as of the end of fiscal 2020, a large chunk of debt-burdens which are unlikely to be repaid, stemmed off a growing share of loans which had still been flagged as “stage 2” according to international accounting standards.
Debts classified as “stage 2”, which require the lenders to sidestep an additional amount, soared in Italy by 11 per cent over the second half of 2020 and accounted for roughly 10.7 per cent of overall loans in the country, while as of the end of fiscal 2020, the proportion of delayed or suspended loans rose much higher compared to other eurozone economies with “stage 2” loans accounting for roughly 29 per cent of entire debts.
Italian lenders set to lose more than €9 billion in loan-defaults
Aside from that, delayed or suspended loans in Italy surged to an eye-popping €147 billion at the end of fiscal 2020, accounting for nearly a tenth of debts disbursed by larger lenders, ludicrously higher than a euro zone average of 2.6 per cent.
More importantly, Such proportion of delayed or suspended loans in Italy, resulting from the pandemic’s fiscal fallouts, meant that the Italian lenders currently have more “stage 2” classed loans than any of its euro zone peers including Greece which had put 14 per cent of its debts under moratorium last year compared to a nearly 29 per cent debts put under moratorium by the Italian lenders, raising the stakes higher of losing a substantial scale of capitals in loan-defaults, said the analysts.