Analysts at Citigroup have stated that with the capital ratios and asset quality getting better the stressed banking sector of Italy is improving bit by bit. This month has seen Italy’s economy which is the third largest in the euro zone, coming sharply into focus, following internal strife among public in the Italian government and qualms of financial trouble in Greece spreading to Italy.
Since the introduction of the Euro, Italian bond yields and shares in Italian banks have plunged their highest level. The first half of this week saw the biggest bank of the country, Uni Credit, being compelled to adopt suspension of trading in shares for a brief period the reason being- price hitting limit down.
The debt pile of the country has amounted to 1.8 trillion Euros ($2.6 trillion), the ratio of debt to GDP (gross domestic product) being the highest in the euro zone, which is prior to September end refinancing of debt worth over 100 billion Euros is required
Banking analyst at Citi, Azzurra Guelfi, believes that long-term value can be seen emerging in its banking sector with ratification of new reforms and materialization of early indications of economic improvement.
What she also wrote was that with improvement in capital and asset quality, cost control remaining a focal point, the NII (Net Interest Income) margins are still pressurized by provided the sovereign situation.
Guelfi also added that there were a few indications of economic improvement in certain (North) areas of the country with improvements noted in export-related data as well. Improvements have also been noted in the corporate sector, as the growth in lending has been approximately 6% year-on-year.
