77% of the non-performing loans on the market at the end of June 2020 were attributable to non-financial companies. Only 15% related to consumers.
In recent years, including following the 2008 financial crisis, the issue of non-performing exposures (NPE) has been a strategic topic for the banking sector and, in all likelihood, this will continue in the coming years due to the impacts of the COVID-19 pandemic.
With the aim of providing an overall and constantly updated view of the Italian market with regard to credit risk and the dynamics of legal proceedings, CRIBIS Credit Management – the CRIF Group company specializing in outsourced collection management and NPL management processes – has issued the first edition of the NPE Survey.
The first area studied by the Survey is the origination phase of NPEs, characterized by credit risk. Specifically, the analysis of default rates between June 2016 and June 2020 shows a downward trend, to a limited extent for natural persons, more marked for legal persons, and even more pronounced for corporations. In particular, in the latest study, legal entities have a default rate of between 2.5% and 3.5%, while for consumers this is less than 2%, albeit growing under the pressure of the economic shock caused by the pandemic.
Default rate trend
Source: CRIBIS Credit Management NPE Survey based on CRIF and CRIF Ratings data.
Considering the trend in NPE stocks between December 2015 and June 2020, there is a decreasing trend in non-performing positions, going from around € 300 billion to just over € 110 billion, with a more substantial reduction between 2017 and 2018.
The most significant decrease can be seen in the bad debt stock, which has more than halved compared to the initial findings in 2015 (mainly due to the significant sale of large lots of bad debts that characterized the period), with a much smaller decline in the Past Due/Overdrawn and Unlikely to Pay stocks
NPE banking stock in Italy
Source: CRIBIS Credit Management NPE Survey.
A specific analysis of market trends shows the significant sale of loans by the Italian banking system to investors, amounting to about 60% of the initial stock (€ 210 billion out of € 341 billion).
The Survey also shows that 77% of the non-performing loans on the market as of June 2020 can be attributed to non-financial companies (i.e., corporations, partnerships, and simple partnerships or de facto companies with more than 5 employees), with a stock in sharp decline compared to December 2015, mainly due to the reduction of bad debts.
Small businesses (which include sole proprietorships and simple partnerships) account for 8% of the NPE stock found in June 2020, while consumers account for the remaining 15% of the stock. For this latter category, the share of Past Due/Overdrawn is more significant, accounting for about 11% of the total non-performing positions recorded in June 2020.
