Italy's banks face higher rates, taxes – Moody's

Business | Economy 12/6/2018, 2:47 PM
Italy's banks face higher rates, taxes – Moody's

"Rising funding costs and potential tax increases" are the main headwinds in a report prepared by Moody's Investors Service for Italian lenders. The credit appraiser said on Thursday that it maintained its negative outlook for the sector despite the forecasted decline in nonperforming loans.

The firm's analysts noted the €240 billion in liabilities for the country's financial institutions in 2020 and 2021 from the support provided in the framework of the European Central Bank's targeted long-term refinancing operations (TLTROs). Fabio Ianno, vice president and senior credit officer, stressed the authorities would probably tighten regulations for bailout provisions and "increase Italian lenders' reliance on more expensive market funding, unless they raise retail bonds and additional deposits."

The rating agency acknowledged the entities in the segment aren't as dependent on capital markets as other peers, but added profitability is still seen facing challenges including higher yields on domestic sovereign bonds. It forecast real economic growth of 1% and 1.3% for this year and next, respectively.

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